Hanesbrands Delivers Strong Q1 Results Amid Supply Chain Shift and Margin Gains

Hanesbrands Inc. (NYSE: HBI) has demonstrated resilience in its latest earnings report, reporting a 240% year-over-year surge in EPS to $0.07 and a 2% revenue increase to $760 million in Q1 2025. These results not only beat analyst expectations but also underscore the apparel giant’s progress in executing strategic initiatives, from supply chain optimization to margin expansion. With a focus on cost discipline and geographic diversification, HanesBrands appears positioned to navigate macroeconomic headwinds while capitalizing on shifting trade dynamics.

Margin Expansion Fuels Outperformance

The quarter’s standout performance stemmed from significant margin improvements. Gross margin rose to 41.6%, up 165 basis points YoY, while operating margin expanded to 10.7%, a 390-basis-point jump. These gains reflect the benefits of HanesBrands’ streamlined supply chain, which now sources 85% of U.S. products from owned facilities in the Dominican Republic, El Salvador, Honduras, Vietnam, and Thailand—a shift that has eliminated reliance on China. This strategic move not only reduces geopolitical risks but also improves cost predictability, a critical advantage as trade tensions and tariffs loom.

Navigating U.S. and Global Markets

Despite a 1% decline in U.S. sales due to soft consumer spending in intimate apparel, HanesBrands found growth in key segments. Its Basics and Active divisions saw low to mid-single-digit sales growth, while international sales rose 4% on a constant currency basis. Notably, the company’s new business ventures, including partnerships with retailers seeking non-China-sourced products, grew 60% YoY. This momentum positions HanesBrands to capitalize on demand for diversified supply chains, a trend likely to persist as global trade policies evolve.

Tariffs and the Path Forward

Executives emphasized that tariffs—expected to impact results starting in Q4 2025—will be mitigated through pricing adjustments, supply chain flexibility, and exemptions for U.S.-content products. CFO Scott Lewis highlighted a strengthened balance sheet, with net debt to adjusted EBITDA dropping to 3.6x, down 1.4 turns YoY. This deleveraging supports HanesBrands’ ability to invest in brands and innovation while weathering near-term pressures.

Risks and Market Reaction

While the stock rose 3.06% pre-market to $5.04, HanesBrands’ $1.76 billion market cap remains constrained by a net loss over the past 12 months. Risks include continued U.S. consumer weakness, challenges in mid-tier department stores, and global economic volatility (25% of sales are international). Cash flow from operations dipped to -$108 million due to seasonal inventory builds, a typical Q1 pattern, but the company maintained full-year guidance, projecting $970 million in Q2 sales and $0.18 EPS.

Conclusion: A Resilient Play on Supply Chain Agility

HanesBrands’ Q1 results validate its transition to a leaner, more profitable model. With margin improvements, reduced China exposure, and strong international growth, the company is well-positioned to sustain its trajectory. The 240% EPS surge and 390-basis-point operating margin expansion signal operational efficiency, while the 85% self-sourced U.S. supply chain mitigates external risks. Though near-term tariff impacts and U.S. consumer trends pose challenges, HanesBrands’ proactive strategies—coupled with a deleveraged balance sheet—support its outlook for full-year margin expansion and incremental revenue opportunities. Investors should monitor execution against Q2 guidance and the timing of tariff-related headwinds, but the stock’s current valuation leaves room for upside if macro conditions stabilize.