Clothing Company HanesBrands Q3 Earnings Miss Estimates - Activewear & Consumer Spending Slowdown Take Its Toll

HanesBrands Inc HBI reported a third-quarter FY23 sales decline of 9.6% year-on-year to $1.51 billion, missing the analyst consensus estimate of $1.55 billion.

The constant currency sales declined 9.3% with growth in Latin America and Japan as well as consistent performance in U.S. Innerwear more than being offset by a decrease in U.S. Activewear, the continued macroeconomic-driven slowdown in consumer spending impacting Australia, as well as decreases in Europe and parts of Asia. Innerwear sales were flat Y/Y, and Activewear sales declined 17%.

Global Champion brand sales decreased 19% on a reported basis, with a 16% decline in the U.S. and a 22% decline internationally. On September 19, 2023, the company announced it initiated an evaluation of strategic alternatives for its global Champion business, including a potential sale.

Gross margin contracted 260 basis points Y/Y to 31.1%. Operating margin contracted 410 basis points to 4.4%, and operating income for the quarter fell 53.2% to $66 million.

Inventories decreased 29% to $1.52 billion. The company held $191.1 million in cash and equivalents as of September 30. Cash flow from operations for the quarter was $155 million.

Adjusted EPS of $0.10 missed the consensus estimate of $0.11.

Outlook: HanesBrands expects 2023 sales of $5.7 billion (previously $5.8 billion-$5.9 billion) versus an estimate of $5.85 billion. HBI sees 2023 adjusted EPS of $0.12 (previously $0.16-$0.30) versus the $0.20 estimate.

For Q4, the company anticipates sales of $1.36 billion against the estimate of $1.47 billion and adjusted EPS of $0.09 against the Street view of $0.16.

Price Action: HBI shares are trading higher by 1.90% at $4.30 on the last check Thursday.