HanesBrands Plunges On Gloomy Outlook, Dividend Cut

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  • HanesBrands Inc HBI reported a fourth-quarter FY22 sales decline of 16% year-on-year to $1.473 billion, beating the consensus of $1.46 billion.
  • The constant currency sales decline of 13% was due to the macro-driven slowdown in consumer spending in the U.S. and certain international markets.
  • Innerwear sales decreased 19% Y/Y due to macroeconomic pressures that weighed on consumer spending as well as the impact from retailer actions to manage inventory. Activewear sales declined 16%.
  • Global Champion brand sales decreased 18% on a reported basis, with a 21% decline in the U.S. and a 13% decline internationally.
  • Gross margin contracted 400 basis points Y/Y to 34.1%. Operating margin contracted 480 basis points to 4.1%, and operating income for the quarter fell 61.5% to $60 million.
  • Inventories increased 25% Y/Y to $1.97 billion. The company held $238.4 million in cash and equivalents as of Dec. 31, 2022. Cash flow from operations for the quarter was $132.8 million.
  • Adjusted EPS of $0.07 was in-line with the analyst consensus.
  • HanesBrands' Board eliminated the company's quarterly cash dividend as it shifted its capital allocation strategy to focus all its free cash flow on reducing debt. 
  • Outlook: HanesBrands expects FY23 sales of $6.05 billion - $6.20 billion versus an estimate of $6.23 billion. It sees FY23 adj EPS of $0.31 - $0.42 versus the $0.98 estimate.
  • For Q1, it anticipates sales of $1.35 billion - $1.40 billion, with an estimate of $1.43 billion. It sees FY23 adjusted loss per share of $(0.09) – $(0.04) against an estimate of $0.14.
  • The company continues to expect to achieve its long-term financial targets of approximately $8 billion in net sales and an approximate 14.4% operating margin. The company now expects to achieve these targets at the end of 2026.
  • Price Action: HBI shares are trading lower by 22.85% at $6.72 on the last check Thursday.
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