COVID-19 Effect: Hanesbrands Q1 '20 sales down to $1.32 bn

Excluding the exited programmes, the impact of COVID-19, and foreign exchange rates, total constant-currency net sales for the first-quarter 2020 would have increased 1.6 per cent.

Prior to the pandemic’s late-quarter disruption of economies around the world, the company experienced strong revenue and profit trends. In the last two weeks of the quarter, the company experienced an unprecedented drop in sales and profit.

Due to disruptions to retailer operations and the unpredictability of consumer confidence, HanesBrands’ pandemic response is focused on several initiatives: serving channels of trade that are generating sales, preserving cash and enhancing liquidity, and developing a product line of personal protective garments, including face masks, to meet emerging commercial and consumer demand.

“We were on a pace to deliver a strong first quarter above our expectations until the late quarter impact of the COVID-19 pandemic,” said Hanes chief executive officer Gerald W Evans Jr. “Prior to the pandemic impact, sales for our US Innerwear business were significantly better than our expectations. Champion was a driver of better-than-planned US Activewear growth, and our International businesses were in line with expectations.

“The effects of the pandemic changed those trajectories. In response, we prioritised operational protocols for the safety of our employees, consumers and communities. I am proud of the terrific effort and achievements of our global teams. We quickly pivoted to preserve cash, create balance sheet flexibility, and build strong liquidity. We used our large-scale global supply chain to manage inventory, continue to serve key channels, including mass retail and online, and seize the opportunity to expand our manufacturing capability to include cotton face masks.

“The COVID-19 pandemic is proving to be a significant challenge for every aspect of society to navigate. As a 120-year-old business enterprise, we feel confident that we have the right plans, the consumer-trusted brands and products, and a superior workforce to not only overcome these short-term business challenges but to thrive over the long term.”

For the first-quarter ended March 28, 2020, the effects of the COVID-19 pandemic are reflected in both GAAP and adjusted measures that exclude actions. The company estimates the late-quarter impact of the pandemic reduced revenue by approximately $181 million, operating profit by approximately $86 million, and EPS by approximately $0.20.

The International segment sales declined 14 per cent while operating profit decreased 48 per cent. On a constant-currency basis, net sales decreased 11 per cent and operating profit decreased 47 per cent.

Sales and profit were affected by the global COVID-19 pandemic. In addition to wholesale business declines, approximately 1,000 of the company’s 1,200 brand stores, which closed in March, are located in international geographies. Prior to the impact of the pandemic, International segment constant-currency sales were in line with expectations.

Prior to mid-March, US Innerwear segment sales and profit were trending significantly better than expected with net sales down less than a percentage point. Strong performance for both basics and intimates in that period, including market share gains, highlighted strong underlying fundamentals for the ongoing Innerwear revitalisation. As reported for the full quarter, net sales decreased 11 per cent while operating profit decreased 22 per cent, both affected by the pandemic and exit of the C9 Champion mass retail programme.

The US Activewear segment first-quarter sales decreased 29 per cent, or $117 million, as a result of the COVID-19 impact and $85 million of C9 Champion sales in mass retail in the year-ago quarter. Prior to mid-March, the segment had higher-than-expected performance with continued consumer demand for Champion brand products and increases for other activewear brands in the sports licensing business’ mass and midtier channels and seasonal activewear in the online channel.

Operating profit decreased 81 per cent as reported and decreased 66 per cent on a rebased basis.

The company continues to generate sales through channels of trade that have remained open during the pandemic, including online, mass retail, dollar store, and food and drug. The company generates online sales through its own e-commerce websites, retailer websites, large Internet pure-plays, and business-to-business customers. Total online sales increased 5 per cent globally in the first quarter. Online growth rates accelerated in the last two weeks of the quarter and have continued to accelerate in April.

HanesBrands is making more than 320 million cloth face coverings and more than 20 million medical gowns for the US government. In addition, the company is also ramping up production to launch a cotton face mask business for consumers and business-to-business customers, including large employers seeking to reopen business operations.

The company expects to create an ongoing product line of basic personal protective garments to serve the consumer, commercial and governmental markets. Sales in 2020 are expected to be more than $300 million, and the company believes the business has the potential to expand further in future years.

Due to the uncertainty and unpredictability of the COVID-19 pandemic, HanesBrands withdrew its first-quarter and full-year guidance on March 25, 2020. Until visibility of the pandemic’s effect on global economies improves, the company will not provide quarterly and full-year guidance and expectations.

The fiscal year ending January 2, 2021, includes a 53rd week in the fourth quarter. The company expects foreign currency exchange rates to reduce net sales and operating profit in 2020.

Fibre2Fashion News Desk (PC)