Hanesbrands (HBI) 7 Nov 242024 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Hanesbrands Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, T.C. Robillard, Vice President of Investor Relations. Please go ahead.

welcome Hanesbrands and call investor everyone, webcast. and day, to quarterly the conference Good

website. to of today release, call of on be update pleased issued of to are We here this release news document our progress has a Investors we the the and review everyone replay the on today. The to found after third FAQ Hopefully, can quarter news hanes.com be XXXX. earlier had section chance updated our an provide the

current the all Company update environment. continuing time the These with and detailed speak not our in which those in to risks well on news include references to may in exclude any only website in associated results are On we to other execute consumer which our and to also statements, speak that filings anticipated prepared or action-related today's question-and-answer as on actual statements our our ability releases. forward-looking certain time either strategic dynamics, today, inflationary made. be our undertake as items, which action-related macroeconomic forward-looking deleverage statements subject uncertainties and conditions, operations. to at restructuring various restructuring our results otherwise financial materially. These are our expectations related to may call make guidance or These differ and and may current successfully and noted, the charges demand remarks the based cause are the frame including SEC, Unless risks risks initiatives, revise our they to consolidated our include to other the beliefs found or does on ability session. to those and

Financial GAAP reconciliation and today Chief and on be our Chief call the can Officer. the me Lewis, performance on found are to of measures Scott quarter's a our Executive Steve information Additional Officer; today's in release. With other and non-GAAP news these our including guidance, results Bratspies,

For and now will it provide some Steve. Scott remarks, your today's questions. I'll the call, turn over brief open to we'll to then call Steve and up

Thank fourth year our further and we're quarter exceeded Sales cost strong our of per welcome strengthened to with and costs, the per we our you, outlook to balance thank input around globe, and guidance range operating visibility and quarter midpoint gross of we our Hanesbrands margin, T.C. results. associates Good Hanesbrands cash morning, range, earnings cash our continue debt operating of as the generated leverage. high savings world. sheet earnings for everyone, to profit, around the delivered and full all continue the quarter to call. and at want and profit and improve raised another strong share. We third our earnings reduction, the reduce end also And for we to flow. I share

our replatformed consumers Over and the quarterly and our the Through change. last value the we months, and strengthened several and of team's work significantly stakeholders, last the Hanesbrands we've results XX to significant business, retail delivered hard our and we years, have the future. adaptability, foundations for for undergone delivered in financial partners, dedication, have our operational particular,

simplified We're highlighted strong unlock quarter, revenue sequentially generation, have value basis, continue strong benefits on trends fourth constant shareholder and positioned well On we're flow cash in in global several the a factors. We're strategic executing by strengthen brand the Americas. the our the sales results and driven programs. of consistent with were margins, And create distribution the these higher continued to of gained topline, was and wide moat to number holiday year. the visibility this We prior fundamentally improve improvement the currency we seeing actions quarter years. growth, we've over business. competitive and deliver incremental several As topline in next company more an year we progressing to taken to consistent quarter, actions to in profit for a last and more expected. and focused, cash a multiple incremental One as as growth beyond. We're organic levers revenue

Our business rebounding. is Australian wholesale

quarter, higher launched and and our have levels We XXXX, our Bonds, fourth Maidenform brands. simultaneously increasing addition the primarily shipments all optimization margin investment In anniversary in of margins the last of Bali. In challenging U.S. advantage. brand With while and sales. The a innovation year's than well more major will assortment margin innovation. behind management, as increasing Hanes, XX.X% XX%, competitive are sustainable of structural we've quarter. We're we're our In higher we reduction operating and structurally brand the of increased as space to gross improvement efforts gross and of initiatives. the Innovation our delivered of year. driven year-to-date, success enabling XX% management consumers. and supporting record as over of levels We're to with another it's an growth-related young by respect assortment is gains savings permanent permanent for from gains, margins market particularly investments. margin to is X% cost and it's margin-accretive on while investments we're retail benefits up SKU continued driving delivering seeing pace and share innovation

fundamentally driving increased fixed assets while champion above chain operating simplicity our stranded in-stocks all processes, streamlining this operating is with focus. changing utilization, lower this we a our cost beyond our goes service This cost levels and of turn, simply with savings costs. about It's is and work. In improving structure, and amounts way about of terms removing optimizing In and lower and efficiencies the initiatives, supply inventory.

our deliver our XX%. margin cost step we to detailed and operating structure drive we of place quarter, last function plans highlighted more to a change in than target have in As

leverage. head sheet Year-to-date, million our balance divestiture, debt flow an and generated cash organization, Specifically, the the we distribution and as year. We're rightsize debt in Champion operating of quarter closing third networks. our of approximately across the lowered rebalance of the on of and full well manufacturing quarter, to $XXX down paying quarter, of in the cash the third and us additional which end turn. Since continue also of our of the and we reduced corporate nearly we've goal we leverage count end debt billion $X to $XXX costs and down of generating delivering half in of million the reducing paid month way October, and a the the paydown our puts with of second the

our So another to strong strategic continued our and margin in visibility we and we have XXXX and the seeing my future to We're paydown and cash for delivered of and improvement, debt beyond. grow. the quarter results of continues enthusiasm of benefits Hanesbrands confidence generation and closing, in results, actions

growth We I'll call are drive to and the deleverage Scott. balance with now turn flywheel sheet to over increased faster next of accelerate even shareholder better earnings of the increased years. And value that, over our positioned to several the

over Steve. funding Thanks, the want continued continued are that to our several We've debt the margin change expected we've several foundation and growth. The simplified are thanks work, build our business, benefits actions generation giving global drive accelerated strong next quarters. balance and their step savings taken us financial to investments I and structure. lowering have improvement, cash cost our for changes the to results and strengthened made reduction. function line add unlock Hanesbrand's over the visibility top and team increased hard past quarters, into to cost my dedication continued a we've These sheet and our further

profit We and I'll third all to For increase the debt interest expected. levels on expense strong cash XX% we and decreased today's due then pay call, which in Operating improvement lower which down highlights our additional EPS. drove I'll of provide XXX% of quarter, continued quarter from prior October, an increased on in on outlook, thoughts the the touch our year over as saw sequential guidance. Overall, provide delivered in debt, raising trends flow results. topline details include some and profit

the an sequential points overlap net in hosiery of last trends. FX year, basis decrease This from of a organic were quarter at prior headwinds. On constant improvement For versus the with our midpoint year's prior currency coming million and basis consistent represents representing X.X% another net basis, of from U.S. divestiture sales sales with year-over-year XX of $XXX year points of outlook. XXX quarter, was the

net Looking compared our investments, market product environment, X% consumer. Touching and our continuing retail working, currency are our marketplace, drive last the International actions year our with essentially segments win we're briefly the a our by trends year-to-date. In on constant outlook. and consumer our line increased mitigating our the assortment over in flat sales the decreased have Australian strategy year Americas increased Despite the With year, is in with our to to brand business, buying and at last prior sales the in Asia. environment, align segment. growth we our in launch to as innovation, of driven X% outperformed behavior U.S. challenging current incremental engagement business, on to programs, point-of-sale net challenging the the sales and consumer were other respect with innovation, through basis, strategic

as decrease in last our previously agreement as was quarter our third European chain was the due of our our the owned transition of divestiture quarter the business. the well hosiery service Innerwear of between which All year-over-year sales year supply in sold to completion the and business,

guidance. gross of in and above high Turning saw both to of in We our came the improvement margins. our end significant year-over-year operating which margins,

to sustainable results. save in to benefits this of also evident While benefit the allowing we while assortment we peak a higher the us seeing anniversary was margins our we're see supporting year-over-year permanent as initiatives from and and continue investment. increased from cost input levels is management. This our from brand structurally inflation, And drive impact cost

margin high to an For XXX of XX.X%. the points our quarter, gross all-time basis increased

in on to focus our from we lower our drove visibility year-over-year and as fourth and the more through cost interest operating points margin higher paying And respect beyond. last basis $X.XX, margins quarter to expansion coupled and continue and With XXX than gross EPS EPS, we're quarter savings XXXX The can input our reduction debt of million in increased of year. $X.XX. costs yielded the year's initiatives, our for up compared confident with profit expense, loss last of margins expense margin operating with to Our down to $X XX%. of to deliver interest a

generated in $XX capital performance cash we of and to Turning better-than-expected quarter million operating disciplined cash million $XXX flow year-to-date. the balance working and the sheet. flow nearly profit management, With and

end the quarter comments October, also was forward last X.Xx. a net adjusted a paid to to debt in year's full will of strengthen at balance refer now our million in billion And results. half more down my turning confidence us debt this to Leverage on guidance, down $X further X.Xx low deliver $XXX which adjusted the and debt of EBITDA our basis, year. And We than of to visibility continue giving where we turn of second sheet. paying was to the than goal all of

profit consumer positioned discerned we continues as As said full began of come and a and guidance to to the cash raised fourth we costs globe, both which on expected, while in year. cost given progression quarter full margins, and year a midpoint in the year, year-over-year range full year flow for our savings in we sales our as we by in growth EPS to outlook play year. Touching quarter outlook. visibility we expect our of expect sales as to our And were But specifics. a of the including and trends each the year end growth well at prior input margin profit for we is quarter, year-over-year terms expansion environment around The in each out the quarter well fourth remained we evident to net and our our results the our the guidance and return guidance new for initiatives.

currency On constant sales growth year. We million quarter. expect X% a the approximately of net basis, this fourth for over represents last $XXX an organic

to Turning operating profit.

to basis to expect XX.X%. margin XXX last XX% $XXX points We expand approximately quarter fourth profit million over to approximately increase to operating year and

our and improvement, to commitment we expect EPS $X.XX margin X.Xx year approximately our payments leverage, at to cash $XXX we our EPS cash we to increase fourth down next generation, and approximately flow approximately to we debt on date outlook raised year-end than And end Xx approximately with believe basis. internal EPS, to well to for growth year. continued full our positioned year-over-year and at with Looking to outlook expect more cash our leverage pay are our for we to on the respect continue for million. With outlook quarter double-digit flow net XXX% debt and and ratio decrease EBITDA debt-to-adjusted a operating to XXXX

closing, in in trends am higher structurally and of is us. strategy increase confident years We debt. driving are as to improving. earnings sustainable are and year the and margins, returns the value call believe front So opportunities double-digit in shareholder unfolding down We're through Sales our unlock aggressively expected, continued creation to turn the we're paying growth over with positioned combination a reduction. And to debt over we well of next that, several T.C. I'll I

Thanks, begin over turn time will to allows. I'll taking We'll to Scott. now call That continue our remarks. questions as back concludes prepared session. the begin the question-and-answer Operator? and the operator your

Our Instructions] with Lejuez Paul question first [Operator comes from Citi.

Brandon It's for Paul. Cheatham on

would to quarter. gross third than the lower in margin slightly seem a the guidance fourth your imply So rate quarter

be overachieve to of might think that like expand is XXXX have you some you than historically, gross going changed. think things some then And Were you typically fourth quarter what also you I had that a in margin can obviously, think normal but comments beyond. XQ lot there factors and forward? higher versus allowed that XQ,

So get should a just quarter a that trend years. that and we of in record expect of trying to the sense to context gross a in the quarter. third next How in was the over couple margin high

question, call. the appreciate your joining Brandon. you for Thanks Yes. I

prepared on this third margin fact, have margins, over we've pleased seeing. we're very year, margin and how we'd had in all-time that the growth the in gross with high exactly And expansion we XX.X%. an We was the mentioned year, our the we began So that's quarter performance and knew remarks our year.

pretty QX similar where roughly to it look to beyond. thinking 'XX about so back gross we're approaching think actually for how And around QX, our at forward, about and actually let margin operating me rest and be we're step year and and so the we our were frame this XX.X%, guiding as you we're of help how going flat. QX, margins up you over that and As margin

we're X of phases So this how and as It's look you in sustainable at we thinking are more about about the forward. going going driving think margins expansion way structural is -- forward, really it about margins. a we

pre-pandemic was and high year. first, of over this to seeing that the at the you've first we The level And already that gross margins range, our back achieved XX% year, getting gross last last been the margin that phase actually right? quarter in fourth

and that we have peak and past and the the around never The now recall price hyperinflation. costs we that we're Now of inflation. for stabilized expect input levels we priced for

our and you about that margin-dilutive innovations call, so innovation as X we in different And management, really SKUs that's we've driving about about talking SKUs, management, and in been that forward the you we're this. that been And this margin-accretive And areas as our into life doing about we SKU cycle scaling primarily reduction XX% move range. since of actually and that innovation. low targeting be taken year, the assortment anticipate as talked benefit SKUs, last to to underperforming we've margin benefit. One also growing think this talking of really think is on XX% been -- will you gross margins. We're we're they're the about, around eliminating focused the we've a attacking, been we've our out and we've driving the

So part that's the And standpoint. favorable second savings a is cost mix also a then from product program. driving the

in the change function about performance as only we margin mentioned remarks, not stranded cost. and place a but that as above SG&A. We do And this that sales, what goes earlier from a can cost And you champion driving have really the step of beyond also in plans spans are detailed think Steve standpoint.

and lot into the processes. chain the changing optimizing and with being way initiatives We're moving on expect So really doing actions and of accelerated really focused vast the work, XXXX. our We completed the majority we're pace. of we in streamlining a we're supply are those we XXXX,

going again, this forward. structural So sustainable about a to back margin about it thinking is that's -- the goes we're change how

savings the so faster. And getting you're

So our see have out great as we just like this said costs. through year, as year, this you you -- play we next visibility think

deliver expansion We know year years deal margin confidence to great of and can next have we come. we year-over-year that a the

Got super helpful. X it. follow-up. just And That's

Shell's Now that you. Is separating contemplated there and maybe any that Champion officially synergies manufacturing that that to of sales fully behind from XX%. Are uncovered? capacity that the this EBIT you've like getting margin

we start back there When in where capacity business, other facilities that about. Steve. a it's are talked the lot of parts you Scott Brandon, that And portion where dedicated a you to and those Champion out of Champion of out are taking directly areas all this out really was are to to are cost but some some there other there were clearly facilities. that have addition Champion costs obviously, identified

opportunity only think costs. as what of So for define to us this take as stranded would an you potentially not out

will year, than plans going those to underway. structural about anticipated. talked further the And We we change. middle it's originally but that out have actually, out. And playing also by That's be all get next Those faster of than out Scott we're that.

go as margin. So in those just we're our accelerating we said, actions it seeing And you're as gross forward. Scott

we're pretty coming any expect view. this. We improve a we don't out to and holistic So expect actually, of hangover

Swartz Our next with from question Morningstar. David comes

you improving trends. seeing you're that's your wholesale the for and data discussions we improving mentioned both? are wondering trends seeing there? on point-of-sale your some with You some I'm or partners that maybe confidence based What if gives that expectation sales

there's look you there at inflection that and to certainly number year the in then QX. and the would the it. number And anticipated drivers David, thanks into I and that everybody that sales the seeing in we sequentially, question. back throughout I'd at a think things that us There's we're that, remind that to of go of year, of of continue things for your QX. When positive a improve are get flip leading we'll beginning

of the investment is -- little are a brand to our bit seeing and is Some got we going and make brand taking have incremental Australia is year last I that starting programs we've we're rebound space we're working. and actions to our it think holiday that gains, difference. The that that wholesale didn't business a

So you pivoting frankly, put all growth. see in together you quite last QX those with, us challenge to a year, overlapping

the to directly, that talking trend better, on improve In challenging of a getting POS starting consumer we've have terms or it's we there, throughout been and environment, but of slightly not come out year. it's about

for a But I continue we're we go share. in think up into improve think performance will in as that like guide continue showed and that our set factored the that all and while we forward. year we throughout to take QX continue market to the to

next Barclays. comes from Our question with Kearney Paul

brand increased X% growth what sales. you term the investments as investments more line? in mentioned the above right of You level brand to just longer than market the view on to the curious, top I'm order rate drive do of

X% Yes. investment were where Thank We've been is quarter. which you, level, a roughly Paul. we targeting this

brands, we the As segments, we right X% all business, footprint, number. is think different the that roll at all the up. our look global we And our different

X% profit cost be X% little might perspective, now. that a Now we quarter? be those as a little a lower, about incremental locked might number going right level. of and into And a we're it at think be already from now to are margin it we're will be all savings that because single you are it every No, where higher. kind But

level. to to save get to money So have that we don't

we're on feel investment. getting where and pretty returns the that we So good we that about are

could just inventory you follow up. your visibility I into Could the on and partners that? and holiday at retail on order replenishment your just briefly If comment levels

different takes pretty about puts feel and There's We good inventory levels. always Sure. retailers. across

partners. been and with our in All holiday our of shipped retail are loaded programs have for

is slightly We've We've holiday, So good inventory we up intimate pretty that particularly up. got in are inventory shape. year-over-year. our space. got incremental programming. Retail And shipments think for is of

of the space Our up. share is

the feel holiday So reducing rebalancing our quarter, and while XX% in and our about with are we're inventory, load-in. we're really retailers year-over-year down good we

comes question Bank with Our William Reuter from of next America.

freight could wanted I Bill just This costs costs. wondering into costs cotton outlook single is your discuss maybe ocean for you year. [ Region Rob as well Reuter. next if ] I for for as to was click

that update on your that. had had think I that wondering any XX% XXXX last call you was of just if on the you you purchases. mentioned hedged I

the pressure Freight. that. When next little ocean there's really of on We're The in our of you and think Sure. majority discussion obviously, when think are the Western Western our Eastern vast the what the well lot of running having Hemisphere, Western our contracts. lower X we're about And total, about rates actually for a a moves several running about freight for positioned inside of freight, And real now. Hemisphere Hemisphere in quarters Ocean benefits with versus our year. you bit below we it's and supply we of plans Eastern the have benefit, is of expected actually Hemisphere right an chain

see because that input and pretty for almost for to good basically bought a really of freight we we're so expect any to offsetting up whole good about got there. all costs and So our we've year cotton don't we're year feel fluctuation next next And year, visibility.

you if feel gross back, about really good step margin. our we So

improvement You've the seen throughout that year.

see into it in high and gross improvement strong we next see this quarter, to go really year. margin as expect we all-time You

what comment of helpful. October? pacing Just maybe X future That's did super then you could in second would thoughts I be debt if you magnitude debt it. any Great. helpful. on repay And wondering repayment appreciate your And from then super the us, around that.

[indiscernible] thanks for your Yes, question. ,

was some So champion the a cash generation. it of is we combination of internal majority, debt pay a debt. and down, October in $XXX And which we vast have million proceeds, paid the also

about mix. And in As $X Term puts really place really the billion. of far around be going when then we're pay the turns with down and mix leverage. year-over-year profit payment the you A about track about of rest we next going next our factor year, paid, the think talked be as for Xx on good Term that that as was of end then B you we're the on leverage. billion we year, we of going B -- heavier a to really And a little year, into And about improvement, and and the $X what talked loans, growth, Term margin us down. loan to the growth That a debt flow margin the by on cash X.X in it we're the

feel So good about really it. really We progress. good

question-and-answer to concludes turn remarks. like for I'd T.C. call session. That to the back today's Robillard closing

We'd look thank our like and with soon. to speaking everyone Have call for today, great we forward to attending a you day.

today's Thank concludes This call. for you participating. conference

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