HanesBrands Inc. – Financial Analysis FY 2024 Q4

Key Metrics (Historical Comparisons)

Executive Summary

HanesBrands Inc. reported FY 2024 with significant strategic portfolio adjustments, including the divestment of the global Champion business and exit from U.S.-based outlet stores and Champion Japan. Revenue declined modestly by 3.6% YoY, primarily reflecting the impact of these divestitures and ongoing operational realignment. Despite challenges, gross profit margins improved slightly, indicating better cost management and product mix. However, net loss widened compared to FY 2023, driven by restructuring costs, impairment charges, and one-time transaction expenses. The companyu2019s asset base contracted substantially, primarily due to the sale of key assets and businesses, while debt reduction efforts improved liquidity and leverage ratios. Overall, HanesBrands navigates a transitional phase with a focus on core brands, operational efficiencies, and deleveraging, but faces long-term risks related to market competition and global supply chain pressures.

Management Discussion and Analysis (MD&A)

Portfolio Restructuring and Strategic Initiatives

During FY 2024, HanesBrands accelerated its strategic portfolio realignment, including the sale of the global Champion brand assets to Authentic Brands Group and exiting the U.S.-based outlet store and Champion Japan businesses. These actions were aimed at sharpening focus on core innerwear brands and improving financial flexibility. The divestitures resulted in a non-cash loss of approximately USD 50.8 million and significantly reduced assets and liabilities.

Operational Performance

Despite revenue challenges, margins in core product lines improved slightly due to cost efficiencies and SKU rationalization. U.S. domestic sales performance improved, balancing prior declines, driven by new product launches and marketing investments. International sales remained resilient, although the segment faced currency headwinds. The companyu2019s gross profit margin increased marginally to approximately 38.8% from 35.6% last year, reflecting better cost control.

Liquidity and Capital Structure

Debt reduction was a key focus, with approximately USD 1.1 billion of debt repaid in FY 2024, including proceeds from the Champion brand sale. As of December 28, 2024, total debt stood at USD 2.19 billion, with improved leverage ratios (debt/EBITDA approximately 4.5x). Cash and cash equivalents increased to USD 215.4 million, providing liquidity for ongoing operations and strategic investments. The company remains committed to deleveraging and enhancing financial stability over the next 12 months.

Income Statement Analysis

Revenue and Gross Profit

FY 2024 net sales declined by USD 132 million (-3.6%), mainly due to divestitures. Gross profit increased by USD 67.6 million (+5.3%) to USD 1.36 billion, aided by better product mix and cost management. Gross margin expanded marginally to 38.8%, indicating improved operational efficiency.

Operating and Net Income

Operating income fell sharply to USD 185.9 million from USD 266.3 million, reflecting restructuring charges, impairment losses, and transaction costs. Net loss widened to USD 320.4 million from USD 177.3 million last year, mainly due to non-recurring expenses and impairments during portfolio restructuring. Adjusted EPS remains negative at USD -0.91, with ongoing efforts to stabilize earnings through cost control and portfolio focus.

Balance Sheet Analysis

Assets and Liabilities

Total assets declined by 31.8%, mainly due to asset sales related to the Champion transaction and exit from non-core businesses. Cash increased to USD 215.4 million, while trade receivables decreased slightly. Total debt reduced by 34.5% to USD 2.19 billion, reflecting active debt repayment. Stockholders’ equity sharply decreased to USD 34 million, impacted by losses and accumulated other comprehensive loss, primarily from currency translation and pension liabilities.

Liquidity and Leverage

Liquidity improved with USD 215.4 million in cash and USD 1.1 billion of debt repayment during FY 2024. The leverage ratio (Debt/EBITDA) improved to approximately 4.5x from over 6x, indicating progress in deleveraging efforts. The company maintains a strong focus on maintaining at least USD 1 billion of borrowing capacity under its credit facilities.

Cash Flow Analysis

Operating Cash Flows

Net cash from operations was USD 264.2 million, down from USD 561.7 million in FY 2023, impacted by working capital changes and restructuring costs. Cash flow was used to fund debt repayments and capital expenditures.

Investing and Financing Activities

Investing activities included USD 81.3 million cash inflow from business disposals, mainly the Champion sale, and USD 37.9 million capex. Financing activities involved USD 1.05 billion debt repayment, including accelerated debt reduction, and minimal share repurchases. The company paid no dividends in FY 2024, aligning with strategic deleveraging priorities.

Ratios & DuPont Analysis

Net profit margin remains negative at approximately -9.1%, primarily due to non-recurring charges. Return on assets (ROA) stands at around -8.3%, reflecting asset write-downs and losses. Return on equity (ROE) is highly negative at about -944%, due to accumulated losses and asset impairments. Asset turnover is approximately 0.91, indicating modest efficiency in asset utilization. Equity multiplier is around 113, highlighting high leverage but improved from prior periods. The DuPont analysis underscores the need for sustained profitability and asset efficiency improvements.

Risk Factors

• Market Competition: Intensified competition in innerwear and apparel segments could pressure margins.
• Global Supply Chain Risks: Disruptions, inflation, and geopolitical tensions may impact costs and delivery timelines.
• Portfolio Transition Risks: The exit from core businesses involves integration, brand management, and potential impairment risks.
• Operational Risks: Restructuring costs, asset impairments, and integration challenges may affect profitability.
• Regulatory and Legal Risks: Ongoing legal proceedings, compliance requirements, and potential tariffs could impact operations.
• Foreign Currency Fluctuations: Currency translation effects, especially from international markets, can cause volatility in reported results.
• Financial Risks: High leverage and interest rate fluctuations pose refinancing and liquidity challenges.
• Macro-economic Risks: Inflation, recession concerns, and consumer demand variability may influence future sales.

Notes & Additional Commentary

Significant one-time charges include non-cash goodwill impairment of USD 2.5 million, transaction-related losses of USD 50.8 million, and restructuring costs. The portfolio adjustments, including the Champion sale, are part of a strategic shift to focus on core innerwear brands. Currency translation impacts continue to be material, especially for international assets and liabilities. The companyu2019s financial statements reflect ongoing efforts to deleverage and streamline operations, but long-term margin recovery remains uncertain amid market challenges.

Investment Implications

In the short term, HanesBrands offers opportunities for debt reduction and asset monetization, which could improve liquidity and reduce leverage. However, the net losses and restructuring costs suggest ongoing operational challenges. The divestiture of non-core brands reduces diversification but allows focus on core innerwear segments. Long-term risks include competitive pressure, currency risks, and macroeconomic headwinds, but strategic portfolio realignment and cost control initiatives position the company for potential stabilization and future growth if market conditions improve. Investors should monitor debt levels, margins, and global supply chain developments for a clearer outlook.