Hanesbrands Q2: Is Reduced Inventory, Market Upheaval Shaping the Future?
2023.08.23 04:06
- Hanesbrands EPS -$0.01, beats by $0.01; GAAP EPS $0.06 up by $0.01; revenue misses by $17.08M.
- Q2 2023: Innerwear sales up 2.92%, Activewear down 18.98%; Inventory reduced 12%, cash flow $ 88M.
- Next Qtr: EPS forecast $0.12, GAAP EPS $0.14; revenue projected at $ 1.58B.
- Full Potential plan in action; Champion eyes $ 3B by 2024; Barington challenges HanesBrands’ strategy.
Earnings Beat
In its recent report, Hanesbrands Inc (NYSE:) surpassed expectations with an EPS of -$0.01, beating estimates by $0.01. The GAAP EPS of $0.06 also exceeded expectations by $0.01. However, the company’s revenue of $1.44 billion fell short of market expectations by $17.08 million.
Upcoming Growth Projections
Next quarter anticipates higher EPS estimates at $0.12, with projected GAAP EPS at $0.14 and revenue expected to slightly increase to an average of $1.58 billion.
Revenue Breakdown Analysis
Revenue Breakdown Analysis
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In the second quarter ending July 2023, the company experienced varied segment performances. Innerwear demonstrated a positive net sales growth of 2.92% in Q2 2023 compared to the same period in 2022. Despite a slight decrease in operating profit, the segment maintained a robust operating margin of 17.56%. Activewear experienced a notable decline in net sales by 18.98%, which impacted its operating profit, resulting in a negative operating margin of -1.15% in Q2 2023. Although the International segment faced a decline of 3.88% in net sales, it maintained a relatively healthy operating margin of 8.00% due to effective cost management and operational efficiencies. Hanesbrands has successfully decreased inventory by 12% annually and 7% sequentially by using focused working capital techniques. This effort has resulted in an operational cash flow of $88 million for the quarter and $132 million for the first half of 2023.
Strategic Appointments and Partnerships
Hanesbrands appointed Scott Lewis as Chief Financial Officer throughout the quarter, leveraging his 17 years of financial expertise. Strategic mega-deals with the University of Minnesota and Penn State boost the company’s growth. These partnerships give Hanesbrands a competitive edge and ensure long-term success. Hanesbrands increases awareness, consumer loyalty, and product variety by exclusively designing, manufacturing, and distributing fanwear via mass and campus retail channels.
Transformation Plan Pillars and Developments
The four strategic pillars of the 2021-launched HanesBrands Full Potential plan outline a dynamic development roadmap. The strategy entails elevating the Champion brand, revitalising U.S. innerwear, adopting a consumer-centric approach, and optimising operations. Execution of the plan is evident in the U.S. Innerwear segment, where innovative products such as the Hanes Originals line bolstered revenue by 30 percent, aided by effective marketing. The impending introduction of “M by Maidenform” demonstrates the brand’s allure to younger demographics. This comprehensive innovation pipeline stretches through 2025, ensuring future growth and market presence.
Should You Invest?
The Full Potential plan aims to boost operating margins and revenue through brand expansion, new product creation, supply chain optimisation, and cost-cutting. Hanesbrands has managed finances well by reducing inventories and increasing operating cash flow. The company’s long-term development strategy focuses on gross margin expansion and brand growth. Champion wants to become a $3 billion worldwide brand by 2024 by investing in key countries, expanding its product portfolio, and improving its online experience.
CEO Steve Bratspies had to modify the second-half outlook owing to the tough apparel market, which is affecting activewear in Australia and the U.S. In this context, activist investor Barington Capital Group voiced concerns about the company’s trajectory, demanding changes to reduce costs and debt and questioning the efficacy of the current leadership.
While Bratspies highlighted progress in a number of segments, he acknowledged that certain areas were falling behind schedule. In the face of market volatility and investor scepticism, HanesBrands finds itself at a crossroads, seeking to navigate uncertainty while attempting to meet investor expectations and ensure sustainable growth.
Based on the chart we’ve seen, this stock has been hovering at lows not seen in years. Personally, we’d be hesitant to jump in right now unless there’s a clear sign of things taking a turn for the better. But if you’re eyeing those turnaround stories, you might want to think about entering only if it crosses the $6 mark.
