HanesBrands Shares Surge on Q3 Adjusted Earnings Beat

HanesBrands Inc. (NYSE: HBI) shares jumped on Tuesday after the company reported adjusted earnings and net sales that topped analysts' estimates for the third quarter. The apparel manufacturer's strategic actions to reduce costs and improve processes have driven a step-function change in its cost structure, with savings expected to build over the next several quarters.

In the third quarter, HanesBrands' adjusted earnings per share from continuing operations came in at $0.39, compared to the consensus estimate of $0.35. Net sales from continuing operations were approximately $3.61 billion, including projected headwinds of approximately $50 million from last year's U.S. Sheer Hosiery divestiture and approximately $42 million from changes in foreign currency exchange rates. This represents an approximate 4% decrease as compared to prior year on a reported basis and an approximate 2% decrease on an organic constant currency basis.

The company's strategic actions, such as reducing corporate headcount and overhead, have driven a step-function change in its cost structure. These actions have lowered fixed costs and freed up resources for growth-related investments in its brands. HanesBrands expects the savings from these actions to continue building over the next several quarters, indicating a long-term positive impact on its financial performance.



HanesBrands' supply chain optimization actions have significantly improved inventory levels and customer service. The company has reduced inventory levels while maintaining or even enhancing customer service, as indicated by the increase in gross margin and adjusted gross margin by approximately 530 and 525 basis points, respectively, to 41.7% and 41.8% in Q3 2024. This improvement demonstrates the company's ability to manage its supply chain effectively, reducing fixed costs and increasing efficiencies.



HanesBrands' strategic plan involves accelerating actions to improve processes, reduce corporate headcount, and lower fixed costs. The company expects these actions to drive a step-function change in its cost structure, with savings building over the next several quarters. This aligns with its long-term growth objectives, as the savings will fund growth-related investments in its brands. The company's focus on cost optimization and brand investment suggests a commitment to sustainable growth and value creation for shareholders.

In conclusion, HanesBrands' Q3 adjusted earnings and net sales beat analysts' estimates, driven by strategic actions to reduce costs and improve processes. The company's supply chain optimization actions have improved inventory levels and customer service, while its long-term strategic plan focuses on cost optimization and brand investment. With a strong balance sheet and cash flow generation, HanesBrands presents an attractive investment opportunity for those seeking undervalued opportunities with strong growth potential and solid fundamentals.