Hanes(HBI) - 2024 Q4 - Annual Results

Introduction and Context The company reclassified its Champion and U.S. outlet businesses as discontinued operations and realigned its reportable segments - Hanesbrands Inc. has reclassified its global Champion business (excluding Japan initially, then including Champion Japan) and U.S.-based outlet store businesses as discontinued operations, reflecting a single strategic exit plan[4] - The company realigned its reportable segments into two operating segments: U.S. and International. The 'Other' segment comprises the U.S. Sheer Hosiery business (sold September 29, 2023) and certain sales from supply chain and short-term support/transition services agreements for disposed businesses[5] Financial Tables Overview This section provides an overview of the company's financial performance through various GAAP and non-GAAP statements and segment data Condensed Consolidated Statements of Operations (As Reported GAAP) This table presents the company's consolidated statements of operations as reported under GAAP, with the Global Champion, U.S.-based outlet store, and Champion Japan businesses reclassified as discontinued operations for all periods presented (Fiscal Year 2022 through Fiscal Year 2024) Consolidated Financial Performance (As Reported GAAP, in thousands) | Metric | FY2022 | FY2023 | FY2024 | | :------------------------------------------------ | :----- | :----- | :----- | | Net sales | $3,862,809 | $3,639,386 | $3,507,438 | | Gross profit | $1,347,035 | $1,291,890 | $1,359,524 | | Operating profit | $267,371 | $266,278 | $185,948 | | Income (loss) from continuing operations before income taxes | $127,344 | $14,330 | $(57,394) | | Income (loss) from discontinued operations, net of tax | $193,341 | $(46,874) | $(222,436) | | Net income (loss) | $(127,204) | $(17,726) | $(320,431) | | Diluted EPS (Continuing Operations) | $(0.92) | $0.08 | $(0.28) | | Diluted EPS (Discontinued Operations) | $0.55 | $(0.13) | $(0.63) | | Diluted EPS (Net Income) | $(0.36) | $(0.05) | $(0.91) | - Net sales decreased by 3.6% from $3,639,386 thousand in FY2023 to $3,507,438 thousand in FY2024[7] - Operating profit decreased by 30.1% from $266,278 thousand in FY2023 to $185,948 thousand in FY2024[7] - Net income (loss) significantly worsened from $(17,726) thousand in FY2023 to $(320,431) thousand in FY2024[7] - Diluted EPS from continuing operations declined from $0.08 in FY2023 to $(0.28) in FY2024[7] - Diluted EPS from discontinued operations worsened from $(0.13) in FY2023 to $(0.63) in FY2024[7] Condensed Consolidated Statements of Operations - Continuing Operations (As Adjusted) This table provides the adjusted financial results for continuing operations, excluding the impact of restructuring and other material non-core initiatives, offering a clearer view of the company's core operating performance Continuing Operations Financial Performance (As Adjusted, in thousands) | Metric | FY2022 | FY2023 | FY2024 | | :------------------------------------------------ | :----- | :----- | :----- | | Net sales | $3,862,809 | $3,639,386 | $3,507,438 | | Gross profit, as adjusted | $1,360,680 | $1,294,043 | $1,450,703 | | Gross profit % of net sales | 35.2% | 35.6% | 41.4% | | Operating profit, as adjusted | $322,013 | $289,077 | $415,171 | | Operating profit % of net sales | 8.3% | 7.9% | 11.8% | | Income (loss) from continuing operations, as adjusted | $147,863 | $(26,079) | $140,640 | | Diluted EPS (Continuing Operations, as adjusted) | $0.42 | $(0.07) | $0.40 | - Gross profit, as adjusted, increased by 12.1% from $1,294,043 thousand in FY2023 to $1,450,703 thousand in FY2024, with margin improving from 35.6% to 41.4%[9] - Operating profit, as adjusted, significantly increased by 43.6% from $289,077 thousand in FY2023 to $415,171 thousand in FY2024, with margin improving from 7.9% to 11.8%[9] - Income from continuing operations, as adjusted, turned positive from $(26,079) thousand in FY2023 to $140,640 thousand in FY2024[9] - Diluted EPS from continuing operations, as adjusted, improved from $(0.07) in FY2023 to $0.40 in FY2024[9] Reconciliation of GAAP to Non-GAAP Measures - Continuing Operations This section details the reconciliation of GAAP reported results to non-GAAP adjusted results for continuing operations, outlining specific restructuring and other action-related charges that are excluded to provide a supplemental view of core performance - Types of Restructuring and Other Action-Related Charges: * Supply chain restructuring and consolidation (related to global Champion business sale and U.S.-based outlet store exit) * Corporate asset impairment charges (contract termination, headquarters impairment) * Headcount actions and related severance * Professional services (consulting and advisory fees) * Technology (modernization initiative, ERP platform) * Gain/loss on sale of business and classification of assets held for sale (U.S. Sheer Hosiery business) * Loss on extinguishment of debt (term debt paydown, Senior Notes redemption) * Gain on final settlement of cross currency swap contracts * Discrete tax benefit/expense * Tax effect on actions[12] Impact of Adjustments on Key Metrics (Continuing Operations, in thousands) | Metric | FY2022 GAAP | FY2022 Adj. | FY2023 GAAP | FY2023 Adj. | FY2024 GAAP | FY2024 Adj. | | :------------------------------------------------ | :---------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Gross profit | $1,347,035 | $1,360,680 | $1,291,890 | $1,294,043 | $1,359,524 | $1,450,703 | | SG&A expenses | $1,079,664 | $1,038,667 | $1,025,612 | $1,004,966 | $1,173,576 | $1,035,532 | | Operating profit | $267,371 | $322,013 | $266,278 | $289,077 | $185,948 | $415,171 | | Income (loss) from continuing operations before income taxes | $127,344 | $181,986 | $14,330 | $44,225 | $(57,394) | $181,241 | | Income tax expense (benefit) | $447,889 | $34,123 | $(14,818) | $70,304 | $40,601 | $40,601 | | Income (loss) from continuing operations | $(320,545) | $147,863 | $29,148 | $(26,079) | $(97,995) | $140,640 | | Diluted EPS from continuing operations | $(0.92) | $0.42 | $0.08 | $(0.07) | $(0.28) | $0.40 | - Significant Adjustments in FY2024: * Supply chain restructuring and consolidation: $80,748 thousand added to gross profit, $(90,781) thousand removed from SG&A, resulting in $171,529 thousand added to operating profit[13][14] * Corporate asset impairment charges: $10,395 thousand added to gross profit, $(9,712) thousand removed from SG&A, resulting in $20,107 thousand added to operating profit[13][14] * Total adjustments to operating profit in FY2024 were $229,223 thousand[13][14] Reconciliation of GAAP to Non-GAAP Measures - Discontinued Operations This table reconciles GAAP reported results to non-GAAP adjusted measures for discontinued operations, which include the Global Champion, U.S.-Based Outlet Store, and Champion Japan businesses, detailing the impact of restructuring and other action-related charges on their financial performance Discontinued Operations Financial Performance (in thousands) | Metric | FY2022 GAAP | FY2022 Adj. | FY2023 GAAP | FY2023 Adj. | FY2024 GAAP | FY2024 Adj. | | :------------------------------------------------ | :---------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Net sales | $2,370,841 | $2,370,841 | $1,997,137 | $1,997,137 | $1,404,277 | $1,404,277 | | Operating profit (loss) | $252,174 | $257,390 | $22,504 | $115,609 | $(166,632) | $85,123 | | Income (loss) from discontinued operations, net of tax | $189,376 | $194,592 | $(46,874) | $46,231 | $(222,436) | $29,319 | | Diluted EPS from discontinued operations | $0.54 | $0.56 | $(0.13) | $0.13 | $(0.63) | $0.08 | - Net sales from discontinued operations decreased by 29.6% from $1,997,137 thousand in FY2023 to $1,404,277 thousand in FY2024[20] - GAAP operating profit from discontinued operations significantly declined from $22,504 thousand in FY2023 to a loss of $(166,632) thousand in FY2024[20] - Adjusted operating profit from discontinued operations decreased by 26.4% from $115,609 thousand in FY2023 to $85,123 thousand in FY2024[20] - GAAP net income from discontinued operations worsened from a loss of $(46,874) thousand in FY2023 to a loss of $(222,436) thousand in FY2024[20] - Adjusted net income from discontinued operations decreased by 36.5% from $46,231 thousand in FY2023 to $29,319 thousand in FY2024[20] - Total charges for discontinued operations were $251,755 thousand in FY2024, significantly impacting GAAP results[20] Supplemental Financial Information by Business Segment - Continuing Operations This table provides a breakdown of net sales and operating profit for the company's continuing operations by its realigned reportable segments: U.S. and International, offering insight into the performance of each geographical segment Segment Net Sales (Continuing Operations, in thousands) | Segment | FY2022 | FY2023 | FY2024 | | :-------------- | :----- | :----- | :----- | | U.S. | $2,692,175 | $2,636,656 | $2,581,137 | | International | $1,010,541 | $933,067 | $908,433 | | Total Segment Net Sales | $3,702,716 | $3,569,723 | $3,489,570 | Segment Operating Profit (Continuing Operations, in thousands) | Segment | FY2022 | FY2023 | FY2024 | | :-------------- | :----- | :----- | :----- | | U.S. | $402,697 | $404,273 | $548,852 | | International | $144,373 | $108,833 | $106,506 | | Total Segment Operating Profit | $547,070 | $513,106 | $655,358 | - U.S. net sales decreased by 2.1% from $2,636,656 thousand in FY2023 to $2,581,137 thousand in FY2024[22] - International net sales decreased by 2.6% from $933,067 thousand in FY2023 to $908,433 thousand in FY2024[22] - U.S. operating profit increased by 35.8% from $404,273 thousand in FY2023 to $548,852 thousand in FY2024[22] - International operating profit decreased by 2.1% from $108,833 thousand in FY2023 to $106,506 thousand in FY2024[22] Impact of Foreign Currency - Continuing Operations (2024 Quarters) Foreign currency fluctuations had a negative impact on reported net sales, gross profit, and operating profit for continuing operations in Q1, Q2, and Q3 2024. When adjusted for currency, the underlying performance (constant currency) showed different trends, particularly in operating profit Q1 2024 (Quarter Ended March 30, 2024 vs. April 1, 2023) | Metric | As Reported | Foreign Currency Impact | Constant Currency | % Change (As Reported) | % Change (Constant Currency) | | :------------------------------------------------ | :---------- | :---------------------- | :---------------- | :--------------------- | :--------------------------- | | Net sales (GAAP) | $744,675 | $(11,369) | $756,044 | (12.3)% | (11.0)% | | Gross profit (GAAP) | $297,433 | $(7,710) | $305,143 | 10.8% | 13.7% | | Operating profit (GAAP) | $35,414 | $(2,862) | $38,276 | 44.3% | 56.0% | | Diluted loss per share (GAAP) | $(0.09) | $(0.09) | $(0.01) | (40.0)% | (93.3)% | | Net sales (Adjusted) | $744,675 | $(11,369) | $756,044 | (12.3)% | (11.0)% | | Gross profit (Adjusted) | $297,636 | $(7,710) | $305,346 | 10.3% | 13.1% | | Operating profit (Adjusted) | $50,383 | $(2,862) | $53,245 | 82.9% | 93.3% | | Diluted loss per share (Adjusted) | $(0.05) | $(0.04) | $(0.01) | (58.3)% | (91.7)% | Q2 2024 (Quarter Ended June 29, 2024 vs. July 1, 2023) | Metric | As Reported | Foreign Currency Impact | Constant Currency | % Change (As Reported) | % Change (Constant Currency) | | :------------------------------------------------ | :---------- | :---------------------- | :---------------- | :--------------------- | :--------------------------- | | Net sales (GAAP) | $973,927 | $(12,270) | $986,197 | (3.9)% | (2.7)% | | Gross profit (GAAP) | $298,343 | $(7,771) | $306,114 | (14.0)% | (11.8)% | | Operating profit (GAAP) | $(63,203) | $(3,451) | $(59,752) | (190.6)% | (185.6)% | | Diluted loss per share (GAAP) | $(0.39) | $(0.38) | $(0.01) | 1,200.0% | (66.7)% | | Net sales (Adjusted) | $973,927 | $(12,270) | $986,197 | (3.9)% | (2.7)% | | Gross profit (Adjusted) | $386,964 | $(7,771) | $394,735 | 11.4% | 13.7% | | Operating profit (Adjusted) | $125,831 | $(3,451) | $129,282 | 45.5% | 49.5% | | Diluted EPS (Adjusted) | $0.15 | $0.16 | $(0.01) | 650.0% | (150.0)% | Q3 2024 (Quarter Ended September 28, 2024 vs. September 30, 2023) | Metric | As Reported | Foreign Currency Impact | Constant Currency | % Change (As Reported) | % Change (Constant Currency) | | :------------------------------------------------ | :---------- | :---------------------- | :---------------- | :--------------------- | :--------------------------- | | Net sales (GAAP) | $900,367 | $(6,652) | $907,019 | (2.8)% | (2.1)% | | Gross profit (GAAP) | $373,477 | $(1,299) | $374,776 | 11.5% | 11.9% | | Operating profit (GAAP) | $94,037 | $(206) | $94,243 | 21.3% | 21.6% | | Diluted EPS (GAAP) | $0.07 | $0.07 | $0.00 | (333.3)% | (100.0)% | | Net sales (Adjusted) | $900,367 | $(6,652) | $907,019 | (2.8)% | (2.1)% | | Gross profit (Adjusted) | $374,594 | $(1,299) | $375,893 | 11.3% | 11.7% | | Operating profit (Adjusted) | $112,982 | $(206) | $113,188 | 40.8% | 41.1% | | Diluted EPS (Adjusted) | $0.12 | $0.12 | $0.00 | (500.0)% | (100.0)% | Organic Constant Currency - Continuing Operations (2024 Quarters) This table reconciles reported net sales from continuing operations to an organic constant currency basis for the first three quarters of 2024, isolating the impact of foreign currency and other sales (like the U.S. Sheer Hosiery business sale) to show underlying organic growth Q1 2024 (Quarter Ended March 30, 2024 vs. April 1, 2023) | Metric | As Reported | Foreign Currency Impact | Less Other Sales | Organic Constant Currency | % Change (As Reported) | % Change (Organic Constant Currency) | | :-------- | :---------- | :---------------------- | :--------------- | :------------------------ | :--------------------- | :----------------------------------- | | Net sales | $744,675 | $(11,369) | $773 | $755,271 | (12.3)% | (8.1)% | Q2 2024 (Quarter Ended June 29, 2024 vs. July 1, 2023) | Metric | As Reported | Foreign Currency Impact | Less Other Sales | Organic Constant Currency | % Change (As Reported) | % Change (Organic Constant Currency) | | :-------- | :---------- | :---------------------- | :--------------- | :------------------------ | :--------------------- | :----------------------------------- | | Net sales | $973,927 | $(12,270) | $700 | $985,497 | (3.9)% | (0.8)% | Q3 2024 (Quarter Ended September 28, 2024 vs. September 30, 2023) | Metric | As Reported | Foreign Currency Impact | Less Other Sales | Organic Constant Currency | % Change (As Reported) | % Change (Organic Constant Currency) | | :-------- | :---------- | :---------------------- | :--------------- | :------------------------ | :--------------------- | :----------------------------------- | | Net sales | $900,367 | $(6,652) | $(388) | $907,407 | (2.8)% | 0.1% | - Definition of Other Sales: Consist of the U.S. Sheer Hosiery business (prior to Sept 29, 2023 sale) and certain sales from supply chain and short-term support/transition services agreements for disposed businesses[28]