US' HanesBrands reports Q3 2024 profit gains amid sales dip

The operating profit of the company increased by 27 per cent to $103 million, with an operating margin rise of 255 basis points to 11.0 per cent. Adjusted operating profit surged by 46 per cent to $122 million, and adjusted operating margin increased by 435 basis points to 13.0 per cent.

The company’s gross profit improved to $390 million, representing a 12 per cent year-over-year increase, while adjusted gross profit stood at $392 million, an 11 per cent rise. Gross margin climbed by approximately 530 basis points to 41.7 per cent, supported by lower input costs, effective cost-saving measures, and strategic assortment management initiatives.

Selling, general and administrative expenses of HanesBrands were reported at $287 million (30.7 per cent of net sales), a 7 per cent rise from the prior year, mainly driven by a 150-basis-point increase in brand investments. Adjusted SG&A expenses were $269 million (28.7 per cent of net sales), showing a slight increase of nearly 1 per cent from the previous year.

Interest and other expenses totalled $58 million, an $8 million reduction from the previous year, driven by lower debt balances. Tax expense dropped to $13 million, with an effective tax rate of 27.9 per cent, significantly lower than the 139.1 per cent recorded in the third quarter of 2023. The adjusted tax rate was 19.5 per cent, compared to 141.8 per cent last year.

Its income from continuing operations totalled $32 million ($0.09 per diluted share), compared to a loss of $6 million ($0.02 per diluted share) in the third quarter of 2023. Adjusted income reached $52 million ($0.15 per diluted share), recovering from an adjusted loss of $8 million in the prior year.

In Q3 2024, the company reported a 1 per cent decrease in US net sales compared to the previous year, despite an overall market decline. Its consumer-focused strategy led to stronger year-to-date point-of-sale trends, supported by increased brand investment and product innovation, especially in Hanes, Maidenform, and Bali, appealing to younger consumers. Operating margin rose to 22.1 per cent, up by 665 basis points, due to lower input costs, favourable product mix, and cost-saving measures that funded a 55 per cent boost in brand investments.

Internationally, HanesBrands’ net sales rose by 1 per cent, despite a $7 million loss from unfavourable exchange rates, and by 4 per cent on a constant currency basis. Growth was noted in the Americas and Asia, with stable performance in Australia amidst challenging economic conditions. The operating margin for international operations improved to 14.2 per cent, an increase of 465 basis points, driven by reduced input costs and cost-saving initiatives.

“We delivered another strong quarter with operating profit, earnings per share, and cash flow results that exceeded our expectations. In addition, we have further reduced our leverage, expect a return to revenue growth in the fourth quarter, and raised our full-year outlook for profit and cash flow,” said Steve Bratspies, CEO. “Our strategic actions to create a more focused, simplified business are working. We are driving a step-function change in our cost structure, increasing operational efficiencies, reducing inventory, and freeing up capital to invest in growth. We expect the benefits of these actions to ramp over the next several quarters, giving us visibility and confidence to deliver continued margin improvement, cash generation, and debt reduction through 2025.”

For the full year 2024, the company expects net sales from continuing operations to be approximately $3.61 billion, reflecting a 4 per cent decline compared to the previous year. This includes a $50 million headwind from the hosiery divestiture and an additional $42 million impact from changes in foreign currency exchange rates. GAAP operating profit is projected at approximately $174 million, while adjusted operating profit is expected to be around $417 million, factoring in an $8 million currency-related impact. The company anticipates restructuring and action-related charges of approximately $243 million and both GAAP and adjusted interest expenses of $195 million, supported by debt reduction through proceeds from the Champion sale and internal cash generation.

For the fourth quarter of 2024, it anticipates net sales from continuing operations to be approximately $900 million, representing a 2 per cent year-over-year increase, including a $4 million foreign currency impact. GAAP operating profit is projected at approximately $95 million, while adjusted operating profit is expected to reach $115 million, with a $1 million currency impact. The company forecasts restructuring charges of $20 million and both GAAP and adjusted interest expenses at $45 million. GAAP other expenses are expected to be around $24 million, including $10 million in accelerated amortisation, with adjusted other expenses at $14 million. GAAP and adjusted tax expenses are projected at $5 million, with a net tax benefit included.

GAAP earnings per share from continuing operations are anticipated to be approximately $0.06 in Q4, with adjusted earnings per share at approximately $0.14. The number of fully diluted shares outstanding is expected to be about 357 million.

Fibre2Fashion News Desk (KD)