HanesBrands, the US-based apparel maker, has reported a 12 percent decline in its net sales for the fourth quarter of 2023, compared to the same period last year. The company’s Champion brand, which offers activewear and casualwear, saw a sharp drop of 23 percent in its global sales, and 30 percent in its US sales.
HanesBrands faces challenging market conditions
HanesBrands, which owns brands such as Hanes, Bali, Playtex, Maidenform, and L’eggs, said that its net sales for the fourth quarter were 1.3 billion dollars, down from 1.5 billion dollars in the previous year. On an organic constant currency basis, net sales decreased by approximately 10 percent.
The company attributed the decline to several factors, such as the divestiture of its US hosiery business, the unfavorable impact of foreign exchange rates, the challenging consumer environment, especially in the US activewear market, and the difficult macroeconomic situation in Australia.
The company’s innerwear segment, which includes underwear, socks, and intimates, saw a slight decrease of 1 percent in its sales, while its activewear segment, which includes sportswear, loungewear, and outerwear, saw a significant decrease of 24 percent in its sales. The company’s international segment, which includes its operations in Europe, Asia, Latin America, and Canada, saw a 9 percent decrease in its sales on a reported basis, and a 7 percent decrease on a constant currency basis.
Champion brand struggles to maintain growth
One of the most disappointing results for HanesBrands was the performance of its Champion brand, which had been a key driver of its growth in the past. The brand, which was founded in 1919 and is known for its iconic logo and products, saw a 23 percent decline in its global sales on a reported basis, and a 24 percent decline on a constant currency basis, compared to the prior year.
The brand’s US sales, which account for more than half of its total sales, saw a 30 percent decline, driven by the combination of challenging activewear apparel market dynamics and the expected topline headwinds from the strategic actions HanesBrands is taking to strengthen the brand and position it for long-term profitable growth.
The brand’s international sales, which account for the rest of its sales, saw a 14 percent decline on a reported basis, and a 15 percent decline on a constant currency basis, compared to the prior year. The brand’s sales increased in China and Latin America, but this was more than offset by the decreases in Europe, Japan, and Canada.
HanesBrands said that it is implementing a global Champion performance plan, which includes actions and related charges regarding the company’s accelerated and enhanced strategic initiatives to further streamline operations and position the brand for long term profitable growth. The plan involves optimizing the brand’s product portfolio, distribution channels, pricing strategy, and marketing investments.
HanesBrands remains optimistic for 2024
Despite the disappointing results, HanesBrands said that it is confident that it has reached a positive inflection point in its margins and leverage, and that it is making progress on its strategy to simplify its business, reduce inventory, cut costs, and reignite its innerwear segment.
The company said that it exceeded its year-end goals in all four key 2023 performance metrics, including gross margin, inventory, operating cash flow, and debt reduction. The company’s gross margin increased by 400 basis points to 38.1 percent, its inventory decreased by 17 percent to 1.8 billion dollars, its operating cash flow increased by 18 percent to 843 million dollars, and its debt decreased by 11 percent to 3.5 billion dollars.
The company also provided its outlook for 2024, expecting net sales of 5.35 billion dollars to 5.47 billion dollars, representing a 4 percent decline compared to the previous year on a reported basis, and a 2 percent decline on an organic constant currency basis. The company expects its innerwear sales to grow by low single digits, its activewear sales to decline by high single digits, and its international sales to decline by low single digits.
The company’s CEO, Steve Bratspies, said in a statement: “Our fourth quarter performance did not meet our expectations as the sales environment proved to be more challenging than expected. However, we saw several positive indicators that give us confidence margins and leverage have reached a positive inflection point and demonstrate progress on our strategy to simplify our business, reduce inventory, cut costs, and reignite Innerwear. For 2024, we believe we’re well positioned for continued margin improvement, another year of strong cash generation and continued debt reduction.”
