• Net Sales: Increased 4.5% over prior year to $888 million.
• Gross Margin: Improved 400 basis points to 44.1%.
• Operating Margin: Expanded 300 basis points to 14.2%.
• Earnings Per Share (EPS): Increased 240% to $0.17.
• Operating Cash Flow: Generated $264 million for the year.
• Debt Reduction: Paid down over $1 billion of debt, reducing leverage to 3.4 times net debt to adjusted EBITDA.
• Fourth Quarter Sales Growth: 4% year-over-year growth.
• Full Year Sales Growth: 1% growth on an organic constant currency basis expected for 2025.
• 2025 Guidance: Operating profit expected to increase 10%, EPS to grow more than 30%, and operating cash flow to reach $350 million.

• Warning! GuruFocus has detected 5 Warning Signs with HBI.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Hanesbrands Inc (NYSE:HBI) delivered strong results for the fourth quarter and full year 2024, with improvements across sales, margins, EPS, operating cash flow, and debt reduction.
• Sales trends improved each quarter, culminating in a 4% year-over-year growth in the fourth quarter.
• Gross margin improved by 580 basis points over the prior year to 41.4%, attributed to permanent cost savings initiatives and improved assortment management.
• The company paid down over $1 billion of debt, reducing leverage by nearly two turns.
• Hanesbrands Inc (NYSE:HBI) expects to generate consistent top-line growth, expand margins to over 15%, and generate more than $400 million a year of operating cash flow in the future.

Negative Points

• The reclassification of the Champion Japan business to discontinued operations has made fourth quarter and full year results not directly comparable to previous guidance or current consensus estimates.
• The consumer environment remains challenging, which could impact sales growth.
• There is a potential risk related to macroeconomic conditions, consumer demand dynamics, and the inflationary environment.
• The company is undergoing a leadership transition, which could introduce uncertainty during the search for a new CEO.
• Despite improvements, the company still faces challenges in certain international markets, such as Australia, where inflation remains sticky and GDP growth is low.

Q & A Highlights

Q: Can you talk about the degree of confidence in the company's ability to drive positive sales in '25 and the visibility into future margin expansion? A: Stephen Bratspies, CEO, expressed confidence in achieving 1% organic constant currency growth for 2025, citing momentum from Q4, innovation, brand investment, and permanent retail space gains. M. Scott Lewis, CFO, highlighted a 125 basis point expected increase in operating margins, driven by cost savings, SKU mix, and SG&A reductions, with no additional brand spend headwinds anticipated.

Q: Could you discuss your decision to step down as CEO and whether this was always part of your plan? A: Stephen Bratspies, CEO, explained that the decision was made from a position of strength, with the company having a strong foundation and clear long-range plan. The Board and he are aligned on succession, and he remains fully engaged in leading the company through 2025 while assisting in identifying his successor.

Q: How far are you on eliminating the stranded costs associated with Champion, and how much runway is left? A: M. Scott Lewis, CFO, stated that the company is focused on eliminating stranded costs and has accelerated cost reduction actions. The process is expected to be essentially complete in 2025, contributing significantly to the 125 basis point margin expansion.

Q: Can you break down the guidance for 2025 in terms of the US versus international business, and discuss any changes in ordering patterns? A: Stephen Bratspies, CEO, indicated that US sales are expected to be flat, while international sales are projected to grow in the low single digits on a constant currency basis. No major shifts in ordering patterns are anticipated, and the company is well-positioned with retail partners.

Q: Could you talk about the opportunity in the Printwear business and its contribution to the 2025 growth outlook? A: Stephen Bratspies, CEO, noted that while Printwear is not a large part of the business, it is seen as highly incremental. The company is focusing on this area with new leadership and innovation, such as the 50th anniversary of the Beefy-T, which is expected to contribute to growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.