Hanesbrands Inc (HBI, Financial) released its 8-K filing on May 9, 2024, disclosing its financial performance for the first quarter of the fiscal year 2024. The company, a global leader in iconic apparel brands, reported net sales of $1.16 billion, meeting the midpoint of its expected range but reflecting a 17% decrease from the previous year. This performance aligns closely with analyst expectations, which projected a slightly higher revenue of $1.344 billion.
Hanesbrands, known for its portfolio including Hanes, Champion, and Maidenform, operates a vertically integrated business model, producing over 70% of its products in company-controlled factories across more than three dozen nations. Despite facing a challenging market environment, the company managed to report a gross margin of 39.9%, significantly higher than the previous year, driven by lower input costs and successful cost-saving initiatives.
Financial Performance Breakdown
The company's adjusted operating profit stood at $84 million, surpassing the high end of company forecasts. This improvement was supported by a 750 basis point increase in both GAAP and adjusted gross margins compared to the previous year. However, net sales saw a decline due to factors like the U.S. Sheer Hosiery divestiture and unfavorable foreign exchange rates.
Despite the sales dip, Hanesbrands demonstrated strong inventory management, reducing inventory by 28% year-over-year and generating $26 million in operating cash flow during a typically cash-negative period. The company's leverage also improved, with net debt-to-adjusted EBITDA reducing to 5.0 times from 5.4 times at the end of the first quarter of 2023.
Segment Performance and Market Position
The U.S. Innerwear segment, although slightly below expectations due to aggressive inventory management by retailers, continued to gain market share, adding 50 basis points in the quarter. This was attributed to enhancements in the operating model and new product innovations. Conversely, the Activewear segment faced a 31% decline in sales, impacted by strategic shifts and challenging market conditions.
Internationally, Hanesbrands experienced mixed results. While it saw growth in markets like Japan, China, and Latin America, sales were dampened by economic headwinds in Europe and Australia.
Looking Ahead
For the second quarter of 2024, Hanesbrands anticipates net sales between $1.335 billion and $1.375 billion, and adjusted earnings per share ranging from $0.07 to $0.11. The full-year guidance remains unchanged, projecting strong profit growth and a commitment to reducing debt by over $300 million.
CEO Steve Bratspies expressed confidence in the company's strategic direction, emphasizing the multi-year initiatives aimed at accelerating earnings and strengthening shareholder returns despite ongoing consumer caution.
Conclusion
While Hanesbrands aligns closely with analyst revenue projections amidst a challenging economic landscape, its robust margin performance and strategic cost management highlight its resilience. Investors may find reassurance in the company's clear strategy for debt reduction and profitability enhancement moving forward.
Explore the complete 8-K earnings release (here) from Hanesbrands Inc for further details.
