Hanesbrands Gets Comfy, Boosts Full-Year Outlook

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4 days ago

Hanesbrands (HBI) has raised its full-year 2025 outlook for net sales, operating profit and earnings per share (EPS) in a move reflecting the Maidenform owner's expected impact from the United States' escalating trade tensions—thanks to its better-than-expected second quarter.
'For the third consecutive quarter, Hanesbrands delivered better-than-expected sales, gross margin, operating profit and earnings per share,' outgoing CEO Steve Bratspies said on the Aug. 7 earnings call. 'Our strong performance underscores the continued success of our growth strategy and is why we're raising our full year guidance.'
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HBI reported net sales of $991.3 million, up 1.8 percent year-over-year, with a gross profit of $412 million—up 38 percent YoY—as selling, general and administrative expenses improved. The company also booked an operating profit of $234.6 million, reversing the earlier $27.8-million loss for the six months ended June 29, 2024. Concurrently, its net profit increased to $72.2 million from a loss of $337.5 million for the comparable six-month period.
'This strong performance over the first half of the year is a direct result of our growth strategy and transformation work and gives us the confidence to raise our full year guidance,' Hanesbrands chief financial officer Scott Lewis said during the call. 'With respect to cash flow and the balance sheet, we reported $36 million of operating cash flow in the quarter, driven by strong profit performance and disciplined working capital management.'
HBI's operating profit increased 345 percent over the prior year to $155 million, while the adjusted operating profit increased 22 percent to $153 million. The operating margin expanded 255 basis points over the previous year to 15.5 percent (adjusted).
'If you go back and you look, June was better than May, July has been better than June, so headwinds are still there, but we're starting to see momentum in the business. And we feel good about that,' Bratspies said. 'Whether it's us continuing to invest in our brands, leveraging the new assortment capabilities we have, the new businesses—which are really starting to gain traction—we feel good about top line and continue to perform as we've been performing.'
To that end, the basic apparel manufacturer also gave its balance sheet some breathing room, paying down $1.5 billion of debt and reducing leverage by nearly 2.5 turns over the past two years, per Bratspies. This reduction follows the $1.2 billion deal that Hanesbrands cut with Authentic Brands Group last summer for the sale of its global Champion brand.
'Our transformation work and the execution of our growth strategy are generating tangible results,' he continued. 'We're operating on a stronger foundation. We're leveraging our competitive advantages and we're delivering strong financial performance.'
On the topic of tariffs, HBI won't really feel the cost(s) until Q4, Bratspies told investors, given the company's inventory levels and how 'cost flows off' of the balance sheet.
'We're very confident that we will mitigate the tariffs at the rates that we're experiencing today,' Bratspies continued. 'We have very clear plans to do that.'
Those clear plans include leveraging the meaningful U.S. content within HBI's offerings—thus exempt from reciprocal tariffs—and maintaining the supply chain's East-West balance, plus taking 'proactive and extensive' actions to reduce overall costs and implementing surgical pricing actions.
'We feel really good about where we are,' Bratspies said. 'The transformation work that we're doing, we're a simpler business; that positions us well to operate in this environment.'
The North Carolina innerwear giant also reported an EPS of 24 cents—exceeding the 18 cents expectation—with an adjusted EPS increase of 60 percent YoY. Gross margin was up 1,100 basis points (41.6 percent) with adjusted gross margin up 145 basis points (41.2 percent).
'Putting some context on the assumptions within our full year outlook, as we have all year, we continue to take a conservative view in the muted consumer environment,' Lewis said. That said, HBI now expects its full-year sales to hit about $3.53 billion—with an operating profit of $485 million (up 17 percent) and an EPS to hit 66 cents (up 65 percent).
'Our outlook reflects what we know about tariffs today,' he added. 'We continue to believe we are well positioned to manage through the current tariff environment and remain confident that we can fully mitigate the cost headwinds, both in the short and long term.'