Hanes(HBI) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Hanesbrands reported first quarter sales of $1.58 billion, a 5% increase year-over-year, with a 7% increase on a constant currency basis [35] - Adjusted gross margin declined 305 basis points to 37.1%, impacted by inflation and strategic investments [41] - Operating profit was $175 million with an operating margin of 11.1%, both exceeding expectations [34][43] - Cash flow from operations guidance lowered to approximately $400 million due to inventory investments and inflation impacts [47] Business Line Data and Key Metrics Changes - Champion brand sales increased 6% in constant currency, with a two-year growth rate of 28% [36] - Innerwear sales in the U.S. increased 1.5%, positively comping last year's strong growth [38] - International Innerwear sales grew at a mid-single digit rate, driven by brands like Bras N Things in Australia [40] Market Data and Key Metrics Changes - Champion sales in the U.S. were up 2%, primarily due to strong growth in the collegiate channel, despite supply challenges [37] - Internationally, Champion sales increased 10% in constant currency, driven by growth in Europe and Latin America [36] Company Strategy and Development Direction - The company is focused on its "full potential plan," aiming for a 6% CAGR to reach $8 billion in total revenue by 2024 [13] - Investments are being made to simplify the business and drive growth, including a $90 million increase in brand marketing over the past five quarters [22] - The company is committed to product innovation and expanding its market presence, particularly in the Champion brand [19][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging global operating environment, including inflation and supply chain issues, but remains confident in the company's strategies [11][12] - The company expects to achieve its 2024 financial targets despite short-term challenges, with a robust product pipeline for Innerwear and Champion [31][32] Other Important Information - The company has realized approximately $60 million in cost savings through various initiatives [27] - A new President of Global Activewear, Vanessa LeFebvre, has been appointed to drive growth in the Activewear segment [28] Q&A Session Summary Question: Insights on revenue guidance and Innerwear business strength - Management expressed confidence in the Innerwear business, noting strong consumer demand and retail space gains, with expectations for continued growth [60][64] Question: Champion brand opportunities with new management - Vanessa LeFebvre's experience in merchandising and e-commerce is expected to enhance the Champion brand's growth strategy [66] Question: Impact of inflation on consumer behavior - Management indicated that consumer demand remains strong, with no significant impact from inflation observed yet [70] Question: Growth rates and visibility for Champion in the second half - Management is optimistic about the back half of the year, citing improved service levels and inventory management [75][78] Question: Performance in the digital business - The company sees significant growth potential in its digital channels, with plans to enhance consumer experience and product visibility [95]