Introduction
Hanesbrands Inc. (HBI) is a socially responsible global leader in everyday iconic apparel, operating across the Americas, Australia, and Asia. The company owns a portfolio of some of the world's most recognized apparel brands in the core basic and innerwear apparel categories, including Hanes, Bonds, Bali, Maidenform, Playtex, Bras N Things, Berlei, Wonderbra, Zorba, JMS/Just My Size, and Comfortwash.
Hanesbrands' History of Transformation and Growth
Hanesbrands was founded over 120 years ago as a small hosiery company and has since evolved into a global apparel powerhouse. The company went public in 2006 after being spun off from its parent company, Sara Lee Corporation. This transition brought about changes in the company's leadership, operations, and strategic direction. Over the next decade, Hanesbrands worked to integrate its acquired businesses, streamline its supply chain, and strengthen its brand portfolio through investments in innovation and marketing.
In 2016, Hanesbrands made a strategic move to expand its global footprint by acquiring the Champion Europe and Hanes Australasia businesses. This broadened the company's international presence and diversified its product offerings beyond innerwear. However, managing the integration of these acquisitions proved challenging at times, as the company worked to align operations, systems, and corporate cultures.
More recently, in 2021 and 2023, Hanesbrands made the decision to divest its European Innerwear and U.S. Sheer Hosiery businesses as part of a broader effort to simplify and focus its portfolio on its core Innerwear and Activewear categories. These divestitures allowed the company to streamline its operations and redirect resources to its strongest brands and growth opportunities.
Throughout its history, Hanesbrands has demonstrated resilience in the face of industry changes and economic cycles. The company has navigated periods of industry consolidation, evolving consumer preferences, global supply chain disruptions, and the COVID-19 pandemic. By focusing on its iconic brands, innovation, and operational excellence, Hanesbrands has established itself as a leader in the basic apparel market.
Financial Snapshot and Key Ratios
Financials
As of the company's most recent fiscal year ended December 28, 2024, Hanesbrands reported total revenue of $3.51 billion, a decrease of 4% compared to the prior year. Net income from continuing operations was a loss of $98.0 million, with a net loss of $320.4 million including discontinued operations. The company generated $264.2 million in operating cash flow and $226.4 million in free cash flow during the year.
For the fourth quarter of 2024, Hanesbrands reported revenue of $888.5 million, representing a 4.5% increase year-over-year. The net loss for the quarter was $12.9 million. The increase in net sales was primarily due to a 175 basis point benefit from transition services revenue and a 110 basis point headwind from foreign exchange rates.
Liquidity
Hanesbrands' financial ratios paint a mixed picture. The company's current ratio of 1.37 and quick ratio of 0.68 suggest moderate liquidity, while its debt-to-equity ratio of 75.02 indicates a highly leveraged capital structure. However, the company's return on assets of -8.34% and return on equity of -218.75% raise concerns about its profitability and efficiency.
As of the latest reporting period, Hanesbrands had $214.9 million in cash and cash equivalents. The company also has access to $996.7 million under its $1 billion Revolving Loan Facility, $31.7 million under its $175 million Accounts Receivable Securitization Facility, and $5 million under other international credit facilities.
Simplifying for Growth, Focusing for Impact
Hanesbrands' strategic transformation has been guided by three key principles: simplifying for growth, focusing for impact, and continuously improving to win. By streamlining its portfolio and operations, the company has been able to elevate its iconic brands and deliver quality and value to consumers through innovative brand and product experiences.
The company's operations are organized and managed in two reportable segments: U.S. and International. The U.S. segment, which includes core apparel products such as men's underwear, women's panties, children's underwear, and socks, as well as intimate apparel, remains the largest contributor to Hanesbrands' revenue, accounting for approximately 74% of total net sales in 2024. The International segment, which includes innerwear and home goods products sold outside the United States, primarily in Australia, Latin America, and Asia, generated the remaining 26% of net sales.
In 2024, net sales from the U.S. segment were $2.58 billion, while the International segment contributed $908.4 million. The company's largest international markets are Australia, Mexico, Canada, and Latin America. In Australia, Hanesbrands is the category leader in men's underwear and holds the number one market share in intimate apparel.
Hanesbrands' Competitive Advantages and Growth Opportunities
Hanesbrands' key competitive advantages include its strong iconic brands with leading market positions, industry-leading innovation capabilities, high-volume core products focus, significant scale of operations and breadth of distribution, world-class global supply chain, and strong customer relationships.
The company is leveraging these strengths to capitalize on several growth opportunities, including continued market share gains in its core innerwear categories, expansion into new revenue streams such as scrubs and Hanes apparel, and international expansion, particularly in emerging markets. Hanesbrands is also focused on driving margin expansion through its cost savings initiatives and strategic supply chain management.
Navigating Macroeconomic Headwinds and Restructuring Efforts
Hanesbrands has navigated a challenging macroeconomic environment in recent years, characterized by significant cost inflation, market disruption, and consumer-demand headwinds. To address these challenges, the company has implemented aggressive cost-saving programs and restructuring initiatives, including supply chain optimization, corporate cost reductions, and headcount actions.
In 2024, Hanesbrands incurred $229.2 million in restructuring and other action-related charges, primarily related to supply chain consolidation, asset impairments, and severance costs. These initiatives are expected to generate ongoing cost savings and margin improvements, positioning the company for sustainable growth and profitability in the years ahead.
Performance and Outlook
In 2024, Hanesbrands delivered strong results across all key metrics including sales, margins, EPS, operating cash flow, and debt reduction. The company's sales trends improved throughout the year, reaching an inflection point in margins and leverage. For the full year 2024, Hanesbrands reported improved sales trends each quarter, with Q4 pivoting to 4% year-over-year growth. Gross margin improved 580 basis points to 41.4%, operating margin expanded 390 basis points to 11.8%, and EPS increased 670%. The company also paid down over $1 billion in debt, reducing leverage by nearly 2 turns.
For the fiscal year 2025, Hanesbrands expects to deliver positive organic constant currency sales growth, with net sales of approximately $3.5 billion. The company also forecasts a 10% increase in operating profit and more than 30% growth in earnings per share, driven by continued margin expansion and debt reduction efforts. Operating margin is expected to expand approximately 125 basis points to 13.1%, and the company aims to generate approximately $350 million in operating cash flow.
For the first quarter of 2025, Hanesbrands expects net sales to increase 1% to approximately $750 million, with organic constant currency sales flat year-over-year. Operating profit is expected to increase nearly 30%, and operating margin is forecast to expand approximately 190 basis points. EPS is expected to be approximately $0.02 compared to a loss of $0.05 in the prior year.
Key Catalysts
Key catalysts for Hanesbrands' future growth include the successful execution of its strategic initiatives, continued innovation across its iconic brands, further optimization of its global supply chain, and successful penetration of new revenue streams and international markets. The company's ability to navigate macroeconomic challenges and effectively manage its balance sheet will also be critical to its long-term success.
Risks and Uncertainties
Hanesbrands faces several risks and uncertainties that could impact its future performance. These include intense competition in the basic apparel market, continued volatility in input costs and commodity prices, potential disruptions to its global supply chain, and the evolving retail landscape and changing consumer preferences.
The company's highly leveraged capital structure and the potential for further macroeconomic headwinds also pose risks to its financial stability and profitability. Hanesbrands' success in executing its strategic transformation and deleveraging its balance sheet will be crucial in mitigating these risks and positioning the company for sustainable growth.
Conclusion
Hanesbrands' transformation into a simpler, more focused business has been a challenging but necessary journey. By simplifying its portfolio, focusing on its core innerwear and basic apparel categories, and continuously improving its operations, the company is positioning itself for long-term success.
While Hanesbrands faces a range of risks and uncertainties, its strong brand portfolio, innovative capabilities, and optimized global supply chain provide a solid foundation for growth. If the company can successfully navigate the ongoing macroeconomic pressures and effectively execute its strategic initiatives, it could emerge as a stronger, more profitable, and better-positioned player in the global apparel market.