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Hanesbrands Inc. HBI, +24.97% stock soared 23.8% in Tuesday trading after the underwear and activewear maker offered details from its new multi-year plan to grow the business and reduce costs, including an exit of the personal protective equipment business and a focus on the Champion brand.
The news came alongside the company’s fourth-quarter results. Net loss totaled $332.2 million, or 95 cents per share, after net income of $185.0 million, or 51 cents per share, last year. Adjusted EPS was 38 cents ahead of the FactSet consensus of 29 cents.
Sales of $1.80 billion was up from $1.75 billion last year and also ahead of the FactSet consensus of $1.64 billion.
Hanesbrands has identified 20 initiatives as part of its “Full Potential” plan. The company says PPE is no longer seen as a long-term growth opportunity.
In the fourth quarter, PPE revenue totaled $28 million. For the year, sales were about $1 billion.
See: ‘New normal’ grows more likely as vaccine acceptance, stimulus spending increase: Stifel data
Hanesbrands reported EPS included a $1.33 charge for the PPE business and a plan to reduce merchandise SKUs by 20%. Hanesbrands took a $611 million inventory charge, including $400 million to write-off its inventory-related balance and $211 million for the SKU reduction.
Hanesbrands is also exploring strategic alternatives for its European underwear business.
The company instead plans to focus its energy to grow the Champion brand, target younger customers with brands and merchandise in its U.S. underwear business and build out its e-commerce business.
“It was clear from our analysis of the business that simplification is critical to our future growth,” said Chief Executive Stephen Bratspies on the Tuesday earnings call, according to FactSet.
With vaccines rolling out and competition high in the PPE category, Bratspies says future sales opportunities have diminished.
Hanesbrands will go into further detail about its “Full Potential” plan during its virtual investor day, planned for May.
Hanesbrands declared a dividend of 15 cents per share to be paid on March 9 to shareholders of record as of Feb. 19.
For the fiscal first quarter, Hanesbrands forecasts sales of $1.485 billion to $1.515 billion and EPS in the range of 24 cents to 27 cents. The FactSet consensus is for sales of $1.470 billion and EPS of 22 cents.
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Wells Fargo analysts highlight a number of challenges that Hanesbrands is facing, including the possible waning of the retro brand trend that fueled recent growth in the Champion business and business volatility as a result of store closures and the shift to e-commerce.
Champion has a new Coach x Champion collaboration that released this week. Wells Fargo noted that Hanesbrands has a new partnership, though the partner was not named and financial details weren’t disclosed.
Coach is part of the Tapestry Inc. TPR, +0.07% portfolio.
“[W]e remain concerned about the set-up for the balance of the year,” wrote analysts led by Ike Boruchow.
“Further, we believe encroachment of private label on market share on the U.S. innerwear [underwear] business may crimp revenue growth and margin expansion over the long-term… We think the pandemic could add more risk to long-term business fundamentals. “
Wells Fargo rates Hanesbrands stock underweight with a $13 price target.
Hanesbrands shares have run up 39.5% over the past year while the benchmark S&P 500 index SPX, -0.11% is up 17.6% for the period.
