Hanesbrands (HBI) 7 Nov 24 2024 Q3 Earnings call transcript

Hanesbrands, a leading global apparel manufacturer and marketer, delivered a robust third quarter performance, showcasing impressive results in sales, margins, and cash flow generation. CEO Steve Bratspies and CFO Markland Lewis provided insights into the company's strategic actions, financial health, and future outlook during the recent earnings call.

Strategic Actions and Financial Health

Hanesbrands has undergone significant changes in recent years, with a focus on strengthening operational and financial foundations. The company's strategic actions include simplifying the business, focusing on consistent topline growth, and delivering sustainable margins. These initiatives have led to improved sales trends, higher gross margins, and increased brand investments. Hanesbrands has also streamlined processes and optimized its supply chain, resulting in a lower fixed cost structure and increased operating efficiencies.

Financial Performance and Outlook

The company reported strong financial performance, with sales improving around the globe and exceeding expectations in terms of gross margin, operating profit, and earnings per share. Hanesbrands has generated significant cash flow and lowered its leverage, positioning itself for continued growth and value creation. The company expects to deliver a step-function change in its cost structure and achieve an operating margin of more than 15%.

Sales and Market Positioning

Hanesbrands' sales trends have improved, with revenue growth expected in the fourth quarter driven by holiday and global brand programs, increased distribution in the Americas, and a rebounding Australian wholesale business. The company's focus on innovation has been instrumental in driving market share gains, particularly with young consumers. Hanesbrands' competitive advantage is evident in its ability to deliver structurally higher margins while supporting increased growth-related investments.

Investor Perspective

Investors and analysts have been closely monitoring Hanesbrands' strategic actions and financial performance. Brandon Cheatham, an analyst from Citi, asked about the company's gross margin performance and expectations for future quarters. Hanesbrands executives provided detailed insights into the structural changes driving margin improvements and their confidence in achieving year-over-year margin expansion.

Paul Kearney, an analyst from Barclays, inquired about the right level of brand investments to drive growth above market rates. Hanesbrands executives emphasized the importance of strategic brand investments and their commitment to maintaining a 5% investment level.

Investor and Analyst Questions

During the earnings call, analysts also asked about inventory levels, holiday load-in, and debt repayment. Hanesbrands executives provided reassuring responses, highlighting their strong inventory management and visibility into holiday programs. The company's debt repayment plan is progressing as expected, with a goal of paying down $1 billion in the second half of the year.

Conclusion

Hanesbrands' third quarter earnings call highlighted the company's strategic actions, financial health, and optimism for the future. With a focus on operational efficiencies, brand investments, and strategic cost savings, Hanesbrands is well-positioned for continued growth and value creation. The company's ability to navigate market challenges and deliver strong financial performance demonstrates its resilience and adaptability. Investors and analysts remain optimistic about Hanesbrands' potential for double-digit earnings growth and continued debt reduction.