Hanes(US:HBI)2024-05-09 15:03Financial Data and Key Metrics Changes - Net sales for Q1 2024 were $1.16 billion, a decrease of $233 million or nearly 17% compared to the prior year, with adjustments accounting for approximately 10% decline year-over-year [24][25] - Gross margin improved to 39.9%, up 720 basis points from the previous year, driven by lower input costs and cost-saving initiatives [27][28] - Operating margin for the quarter was 7.3%, an increase of 270 basis points over last year [28][29] - Earnings per share for the quarter was a loss of $0.02, which was better than expected [29] Business Line Data and Key Metrics Changes - U.S. Innerwear sales decreased by 8% compared to the prior year, with a 50 basis point market share gain [25][16] - U.S. Activewear sales decreased approximately 31%, with two-thirds of the decline attributed to timing-related items from the previous year [26] - Global Champion sales decreased 25% on a constant currency basis, with the transition of the kids' business to a license model accounting for a significant portion of the decline [17] Market Data and Key Metrics Changes - International sales decreased by 9% in constant currency, with growth in Latin America, Japan, and China offset by declines in Europe and Australia [27] - The U.S. e-commerce business was up 12% in the first quarter, indicating a positive trend in that channel [84] Company Strategy and Development Direction - The company is increasing brand marketing investments to support innovation and build relevance with younger consumers [9][10] - A focus on the Champion brand's performance enhancement plan is underway, with strategic collaborations and new product offerings [10][11] - The company aims to reduce debt and enhance shareholder value through a lower fixed-cost structure and improved operating models [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the full-year operating profit guidance of $500 million to $520 million, despite a challenging consumer environment [32][39] - The macro consumer environment is expected to remain challenging, but management anticipates a gradual improvement in sales trends throughout the year [31][32] - Management believes the underlying financial model is strong, with healthy margins and consistent cash generation expected to drive future growth [18][20] Other Important Information - The company has taken out more than $200 million in fixed costs over the past three years, contributing to improved financial flexibility [18] - The process of evaluating strategic alternatives for the Global Champion business is ongoing, with strong interest from various parties [11][67] Q&A Session Summary Question: Can you elaborate on the visibility into the company's profit recovery? - Management expressed high confidence in the operating profit guidance, expecting year-over-year improvement in margins despite a challenging environment [39] Question: What are the expectations for gross margin for the rest of the year? - Management is confident in maintaining a gross margin of 38.5% to 39% for the remainder of the year, with good visibility on input costs [44] Question: Are there differences in trends in Australia? - Management noted some improvement in Australia, particularly in the wholesale business, and expects the business to rebound in the second half of the year [65] Question: What are the brand marketing investments focused on? - The company is concentrating marketing investments on innovation and brand strengthening, with a significant increase in advertising for new product launches [71] Question: What is the outlook for the U.S. Innerwear segment? - Management expects a moderating trend in the U.S. Innerwear segment, guiding for a 3% to 4% year-over-year decline in Q2 [60] Question: Will the company maintain control of Champion? - Management confirmed that the evaluation process for Champion is ongoing, with no announcements regarding a sale at this time [67]