Winston-Salem - Hanesbrands is exploring strategic options for its European innerwear business, part of a wider restructuring and cost saving plan that will see the activewear and hosiery giant streamline its global portfolio. The company has also taken steps to significantly reduce its inventory and has confirmed that it no longer sees PPE as a long-term growth opportunity.
Reporting its fourth quarter results, Hanesbrands said it had recently completed a comprehensive business assessment and had begun implementing its Full Potential plan, which focuses on four pillars to drive growth and enhance long-term profitability.
The four pillars are: to grow the Champion brand globally; to drive growth in Innerwear with brands and products that appeal to younger consumers; to build e-commerce excellence across channels; and to streamline its global portfolio.
Overall, Hanesbrands says it has identified 20 strategic initiatives under these four key pillars to unlock growth and has launched a multi-year cost savings program intended to substantially self-fund the investments necessary to achieve the Full Potential plan’s objectives. The company expects to provide a comprehensive overview of the Full Potential plan at its virtual Investor Day in May.
“We are implementing our Full Potential plan with the goal of creating a consumer-centric company that delivers long-term growth and higher profitability,” said chief executive officer Steve Bratspies. “I’m encouraged by our rapid progress as we work to simplify our business and transform our organization to move faster, lower costs and focus on our highest-return growth opportunities.”
As part of the implementation of its Full Potential plan, the company has determined that it no longer views PPE as a long-term growth opportunity. In addition, as the result of a comprehensive strategic inventory review, the company is reducing its SKUs by 20 per cent to enable greater focus on its highest-volume, fastest-growing, and most profitable products.
As a result of these decisions, during the fourth quarter the company recorded US$611 million in inventory charges consisting of a $400 million write-off of its entire PPE inventory-related balance and an inventory valuation write-down of approximately $211 million related to the company’s SKU reduction program.
In addition, the company has announced plans to explore strategic alternatives for its European Innerwear business in order to further simplify its operations and focus resources on its strategic growth opportunities.
Net sales for the fourth quarter ended January 2, 2021, were US$1.8 billion, compared with $1.75 billion for the comparable period ended December 28, 2019. The company recorded $28 million in revenue from personal protective garments (PPE) globally in the fourth quarter. Excluding net sales of $88 million from the exited C9 Champion mass program and DKNY intimate apparel license recorded in the prior year period, and the effect of changes in foreign exchange rates, total net sales increased 6%.
For the full year, net sales were $6.7 billion, including net sales of $959 million of PPE, compared to $6.97 billion in the prior year, which included net sales of $419 million from the C9 Champion mass program and DKNY intimate apparel license.
“I’m extremely proud of the HanesBrands team for all it accomplished in 2020 under very challenging conditions, and I thank our global associates for their hard work and dedication,” said Bratspies. “We delivered solid sales growth in the fourth quarter, with continued revenue momentum in our largest businesses and strong market share performance in our Innerwear and Activewear segments.”
