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Hit by negative sales trends and ransomware attack, HanesBrands Q2 sales drop

By Prachi Singh

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Management

Image: Hanes Brands

HanesBrands Inc. net sales of 1.51 billion dollars decreased 238 million dollars or 14 percent, over prior year.

Adjusting for the 38 million dollars unfavourable impact from foreign exchange rates, net sales decreased 11 percent on a constant currency basis, while net sales, excluding PPE, increased 75 percent on a two-year stack basis.

The company attributed lower-than-expected sales performance to the impact from the ransomware attack as well as softer-than-expected point-of-sale trends.

“Our second quarter results fell below our expectations as a result of unexpected events and the difficult global operating environment,” said Steve Bratspies, CEO, HanesBrands.

Review of HanesBrands Q2 results

The company said global Champion brand sales decreased 20 percent over prior year in constant currency or 23 percent on a reported basis with similar declines in both the U.S. and internationally. On a two-year stack basis, constant-currency Champion brand sales increased 96 percent globally.

Gross profit of 572 million dollars declined 16 percent as compared to prior year, while gross margin was 37.8 percent, down from 38.9 percent in the prior year. Adjusted gross profit was 573 million dollars compared to 684 million dollars last year and adjusted gross margin of 37.8 percent declined approximately 120 basis points compared to prior year.

Innerwear sales decreased 12 percent compared to last year. On a two-year stack basis, Innerwear sales increased 50 percent in the quarter. Operating margin of 20.7 percent decreased approximately 320 basis points compared to prior year.

Activewear sales declined 18 percent over prior year. The company added that it experienced continued growth in the collegiate channel in the quarter, which was more than offset by declines in its other channels due to headwinds from point-of-sales trends, retailer inventory levels and the impact from the cyber event.

By brand, Champion sales within the activewear reporting segment decreased 25 percent as compared to prior year and increased more than 115 percent on a two-year stack basis. Sales of other activewear brands within the activewear reporting segment decreased 8 percent over prior year in the quarter and increased approximately 130 percent on a two-year stack basis.

Operating margin for the segment of 6.9 percent decreased approximately 325 basis points compared to prior period.

International sales, on a constant currency basis, decreased 3 percent compared to prior year. Sales declined at a low-single digit rate in Europe and Australia, which more than offset growth in the Americas. Constant currency sales in Asia were consistent with prior year. Including the 38 million dollars impact from unfavourable foreign exchange rates, International sales decreased 11 percent on a reported basis.

HanesBrands reveals muted outlook

The company further said that it has taken a more prudent view of its second-half net sales and profit outlook to reflect the changes in foreign currency exchange rates; short-term costs associated with actions to reduce inventory by year-end; and an assumption that slow consumer demand continues and the retail environment remains challenging.

For third-quarter 2022, which ends on October 1, 2022, the company currently expects net sales of approximately 1.73 billion dollars to 1.78 billion dollars, which includes a projected headwind of approximately 58 million dollars from changes in foreign currency exchange rates. At the midpoint, this represents 1 percent growth over prior year on a constant currency basis, or a 2 percent decline on a reported basis.

GAAP operating profit in the range from approximately 129 million dollars to 149 million dollars and adjusted operating profit to range from approximately 160 million dollars to 180 million dollars .

GAAP earnings per share to range from approximately 20 cents to 25 cents and adjusted earnings per share to range from approximately 27 cents to 32 cents.

For fiscal-year 2022, which ends on December 31, 2022, the company currently expects net sales from continuing operations of approximately 6.45 billion dollars to 6.55 billion dollars. At the midpoint, this represents an approximate 2 percent decline as compared to prior year on a constant currency basis and a 4 percent decline on a reported basis.

GAAP operating profit to range from approximately 570 million dollars to 620 million dollars and adjusted operating profit from approximately 630 million dollars to 680 million dollars.

GAAP earnings per share from continuing operations from approximately 97 cents to 1.09 dollars and adjusted earnings per share from approximately 1.11 dollars to 1.23 dollars.

Champion
HanesBrands