Hanesbrands Inc. (NYSE:HBI) Q1 2023 Earnings Conference Call May 3, 2023 8:30 AM ET TC Robillard - Vice President, Investor Relations Steve Bratspies - Chief Executive Officer Scott Lewis - Chief Accounting Officer and Interim Chief Financial Officer Jay Sole - UBS Ike Boruchow - Wells Fargo Paul Kearney - Barclays Tom Nikic - Wedbush Securities Jim Duffy - Stifel Carla Casella - JPMorgan Good day and thank you for standing by. Welcome to the Hanesbrands First Quarter 2023 Earnings Conference Call. At this ...

Sales Performance - In 2022, net sales from the Innerwear segment were $2.4 billion, representing approximately 39% of total net sales[34]. - The Activewear segment generated net sales of $1.6 billion in 2022, accounting for about 25% of total net sales[36]. - The International segment reported net sales of $1.9 billion in 2022, which is approximately 31% of total net sales[37]. - Approximately 69% of total net sales were generated in the United States in 2022[39]. - Sales to mid-tier and department stores in the United States accounted for approximately 8% of total net sales in 2022[41]. - Consumer-directed sales in the United States represented about 17% of total net sales in 2022[42]. - Sales to other customers in the United States made up approximately 25% of total net sales in 2022[43]. - Internationally, 56% of net sales were wholesale sales to retailers, while 44% were consumer-directed sales through owned retail stores and e-commerce sites[44]. - The company’s top 10 customers accounted for approximately 45% of total net sales in 2022, with Walmart alone representing 16%[102]. - In 2022, net sales from the International segment were $1.9 billion, representing approximately 31% of total net sales[130]. Strategic Initiatives - The company completed the sale of its European Innerwear business on March 5, 2022, as part of its Full Potential plan[15]. - In June 2022, the company purchased the Champion trademark for footwear for $103 million, enhancing its brand portfolio[17]. - The company aims to grow the Champion brand globally and enhance e-commerce excellence as part of its multi-year growth strategy[14]. - The company is implementing a significant number of strategic initiatives focused on building a consumer-centric company and enhancing capabilities[79]. - The company is focusing on growing the Champion brand globally and enhancing e-commerce capabilities as part of its Full Potential plan[208]. Sustainability Goals - The company has established 2025/2030 global sustainability goals to enhance transparency and track progress on key metrics[21]. - By 2030, the company plans to reduce greenhouse gas emissions by 50% and indirect emissions by 30%[70]. - The company aims to improve the lives of at least 10 million people through health and wellness programs and diversity initiatives by 2030[73]. - The company has set a goal to eliminate all single-use plastics and reduce packaging weight by 25% by 2030[73]. - The company earned an A- score in the 2022 CDP Climate Change Report, placing it in the top 11% of nearly 15,000 rated companies[70]. Operational Insights - The company operates its own manufacturing facilities, with over 60% of apparel units sold produced in-house or by dedicated contractors[19]. - The company operates 30 manufacturing facilities, with most cutting and sewing operations located in Asia, Central America, and the Caribbean Basin[46]. - The company distributed products from 45 distribution centers as of December 31, 2022, including 16 in the United States[49]. - The company has approximately 51,000 employees, with over 88% located outside the United States[71]. - The company’s largest manufacturing facility is approximately 1.1 million square feet located in San Juan Opico, El Salvador[176]. Financial Performance - Advertising and promotion expenses were approximately $209 million in both 2022 and 2021, representing 3.4% of total net sales in 2022[56]. - The company has $1 billion in a revolving loan facility and $1 billion in a term loan facility, along with $900 million in senior notes due 2024 and 2026[112]. - The pension plans experienced a loss of approximately 10% in 2022, with a funded status of about 96% as of December 1, 2022[125]. - The company holds approximately $1.1 billion in goodwill and $1.3 billion in intangible assets, representing 36% of total assets[124]. - The company estimates net sales for 2023 to be approximately $6.05 billion to $6.20 billion, with an unfavorable foreign exchange impact of about $42 million[198]. Market Challenges - The basic apparel market is highly competitive, with significant competition from brands like Fruit of the Loom, Nike, and Adidas[57]. - The company operates in a highly competitive market, facing challenges from both domestic and foreign competitors, as well as online retail[80]. - Economic uncertainties, including inflation and geopolitical conflicts, may adversely affect consumer discretionary spending and sales[111]. - Pricing pressure from competition and consumer demand changes may negatively impact margins and profitability[126]. - The company faces potential penalties and legal liabilities due to non-compliance with various privacy and data protection regulations, including GDPR and CPRA[88]. Risks and Compliance - The company is subject to various legal and regulatory risks, including compliance with the U.S. Foreign Corrupt Practices Act and other international laws[135]. - The company's reputation and financial results could be adversely affected by improper conduct by employees or business partners[144]. - The company actively protects its intellectual property rights, but infringement or counterfeiting could diminish brand value and adversely affect business[148]. - Negative publicity from labor law violations by third-party manufacturers could tarnish the company's brand image and result in a loss of sales[150]. - The company faces risks associated with international operations, including compliance with foreign laws and unexpected changes in tariffs and taxes[130]. Future Outlook - The company anticipates restructuring and other action-related charges totaling $60 million, including $54 million related to the Full Potential plan[198]. - Diluted earnings per share from continuing operations are expected to be approximately $0.14 to $0.25[198]. - The company expects gross and operating margin pressure to continue in the first half of fiscal 2023 due to higher-cost inventory, with expectations of easing in the second half[196]. - The company may incur additional costs to protect employee health and safety in response to the ongoing pandemic[96]. - The implementation of a new global enterprise resource planning system (ERP) requires significant investment and may lead to increased costs and operational risks[90].

Financial Data and Key Metrics - The company expects to generate approximately $500 million in operating cash flow in 2023, with a focus on debt reduction [23] - Adjusted gross margin for Q1 2023 is expected to decline by approximately 300 basis points due to commodity and freight inflation [50] - Full-year adjusted operating profit is projected to range between $500 million and $550 million, with Q1 adjusted operating profit expected to be between $50 million and $70 million [51] - Adjusted EPS for the full year is expected to range from $0.31 to $0.42, while Q1 adjusted EPS is projected to be a loss of $0.09 to $0.04 [52] Business Line Data and Key Metrics - The company has reduced global SKUs by 45% since 2019 and exited unproductive facilities, leading to high single-digit savings rates in sourcing and procurement operations [24] - The activewear business is undergoing operational streamlining, including global coordination of product design and merchandising, increased speed to market, and portfolio simplification [24] Market Data and Key Metrics - The company expects net sales to decline by 1% in constant currency or approximately 2% on a reported basis for the full year 2023, with easing comparisons beginning in Q2 [49] - The U.S. market is expected to remain challenging due to inflation, while Asia shows mixed results with improving traffic in Japan and China reopening post-COVID [124] Company Strategy and Industry Competition - The company is shifting its capital allocation strategy to focus on debt reduction, eliminating the dividend, and committing to reducing leverage to a range of 2-3x net debt to adjusted EBITDA [75] - The company is implementing cost-saving initiatives, including exiting unproductive facilities, consolidating sourcing vendors, and aggressively managing SG&A [22] - The company is confident in achieving its long-term financial targets, including $8 billion in sales and a 14% operating margin, despite a shifted timeline to 2026 [70] Management Commentary on Operating Environment and Future Outlook - Management expects macroeconomic challenges, including inflation and consumer demand pressures, to persist in 2023, particularly in the first half [38] - The company anticipates margin improvement in the second half of 2023 as lower-cost inventory begins to impact the P&L and inflationary pressures ease [21] - Management is optimistic about the company's ability to improve cash flow and margins as the year progresses, driven by cost-saving initiatives and operational efficiencies [44] Other Important Information - The company has recorded a non-cash reserve against its deferred tax asset, which will increase accounting tax expense and the effective tax rate in 2023 but will not impact cash taxes [28] - The company expects to refinance approximately $1.4 billion of its 2024 maturities in Q1 2023, subject to market conditions [29] Q&A Session Summary Question: Confidence in Business Improvement and Debt Refinancing [55] - Management expressed confidence in the business's foundational capabilities and expects margin improvement in the second half of 2023 as lower-cost inventory rolls through the P&L [56][57] - The company is prioritizing debt reduction and has eliminated the dividend to focus on improving shareholder returns in the long term [58] Question: Top-Line Progression and Retailer Inventory Actions [61] - Management expects a muted consumer demand environment in 2023, with retailer inventory actions likely to continue into Q1, leading to a conservative top-line outlook [62] Question: Inventory and Cost Dynamics [65] - Inventory dollars are up 25%, with unit costs increasing in the low to mid-teens due to inflation and mix [65] Question: Tax Rate and Inventory Cash Flow [67] - The effective tax rate for 2023 is expected to be 40%-45%, with deferred tax accounting expected to normalize over several years [68] - The company expects to release working capital and drive operating cash flow back to historical levels in 2023 [80] Question: SG&A Savings and Full Potential Plan [101] - The company has realized significant SG&A savings in 2022 and expects further savings in 2023 and 2024, while continuing to invest in technology and brand growth [102] Question: Champion Brand Recovery and Dividend Reinstatement [131][145] - Management is confident in the Champion brand's recovery, citing new leadership, product innovation, and channel segmentation as key drivers [132][133] - The company has no immediate plans to reinstate the dividend, focusing instead on debt reduction and long-term shareholder returns [149] Question: Interest Expense and Inventory Management [92][94] - The company expects adjusted interest and other expenses to be nearly $300 million for the full year, driven by higher variable rate debt and refinancing costs [51] - Inventory management is expected to drive working capital benefits in 2023, with units down 6% compared to the prior year [91]

Hanesbrands Inc. (NYSE:HBI) Q3 2022 Earnings Conference Call November 9, 2022 8:30 AM ET Company Participants T.C. Robillard - Investor Relations Steve Bratspies - Chief Executive Officer Michael Dastugue - Chief Financial Officer Conference Call Participants Michael Binetti - Credit Suisse Tom Nikic - Wedbush Peter McGoldrick - Stifel Will Gaertner - Wells Fargo Jay Sole - UBS Brandon Cheatham - Citi Paul Kearney - Barclays Operator Good day and thank you for standing by. Welcome to the HanesBrands Third Q ...

Hanesbrands Inc. (NYSE:HBI) Q2 2022 Earnings Conference Call August 11, 2022 8:30 AM ET Company Participants TC Robillard - Vice President, Investor Relations Steve Bratspies - Chief Executive Officer Michael Dastugue - Chief Financial Officer Conference Call Participants Michael Binetti - Credit Suisse Susan Anderson - B. Riley Will Gaertner - Wells Fargo Jim Duffy - Stifel Jay Sole - UBS Paul Kearney - Barclays Tom Nikic - Wedbush Operator Good day, and thank you for standing by. Welcome to the Second Qua ...

Hanesbrands Inc. (NYSE:HBI) Q1 2022 Earnings Conference Call May 5, 2022 8:30 AM ET Company Participants Steve Bratspies - Chief Executive Officer Michael Dastugue - Chief Financial Officer TC Robillard - Vice President, Investor Relations Conference Call Participants Omar Saad - Evercore Michael Binetti - Credit Suisse Susan Anderson - B. Riley Jim Duffy - Stifel Jay Sole - UBS Brandon Cheatham - Citi Paul Kearney - Barclays David Swartz - Morningstar Operator Good day and thank you for standing by. Welcom ...

Hanesbrands Inc. (NYSE:HBI) Q4 2021 Earnings Conference Call February 3, 2022 8:30 AM ET Company Participants Steve Bratspies - Chief Executive Officer Michael Dastugue - Chief Financial Officer TC Robillard - Vice President, Investor Relations Conference Call Participants Omar Saad - Evercore Susan Anderson - B. Riley Rick Patel - Credit Suisse Ike Boruchow - Wells Fargo Jim Duffy - Stifel Jay Sole - UBS Carla Casella - JP Morgan Tom Nikic - Wedbush Steve Marotta - CL King Operator Good day and thank you f ...

Hanesbrands Inc. (NYSE:HBI) Q3 2021 Earnings Conference Call November 4, 2021 8:30 AM ET Company Participants Thomas Robillard - Investor Relations Officer Steve Bratspies - Chief Executive Officer & Director Michael Dastugue - Chief Financial Officer Conference Call Participants Omar Saad - Evercore Susan Anderson - B. Riley Michael Binetti - Crédit Suisse James Duffy - Stifel Frederick Gaertner - Wells Fargo Carla Casella - JPMorgan Operator Good day, and thank you for standing by. Welcome to the Third Qu ...

Hanesbrands Inc. (NYSE:HBI) Q2 2021 Earnings Conference Call August 5, 2021 10:00 AM ET Company Participants T.C. Robillard – Chief Investor Relations Officer Steve Bratspies – Chief Executive Officer Michael Dastugue – Chief Financial Officer Conference Call Participants Omar Saad – Evercore Susan Anderson – B. Riley Michael Binetti – Credit Suisse Jim Duffy – Stifel Ike Boruchow – Wells Fargo Jay Sole – UBS Paul Lejuez – Citigroup David Swartz – Morningstar Carla Casella – JPMorgan Michael Binetti – Credi ...

Hanesbrands Inc. (NYSE:HBI) 2021 Investor Day May 11, 2021 8:30 AM ET Company Participants TC Robillard – Chief Investor Relations Officer Steve Bratspies – Chief Executive Officer Jon Ram – Group President, Global Activewear Joe Monahan – Senior Vice President-Finance Joe Cavaliere – Group President, Global Innerwear Jane Newman – Chief Design Officer-Global Innerwear Greg Hall – Chief Consumer Officer Mike Faircloth – Group President, Global Operations Kristin Oliver – Chief Human Resources Officer Scott ...