Hanesbrands Inc. is flexing its muscle in the increasingly competitive world of innerwear.
As many of its major brands see double-digit growth, the underwear, casualwear and activewear conglomerate is ramping up sales and consumer awareness of its portfolio by boosting overall media spending by 40 percent, increasing consumer research and celebrity endorsements and a taking a fresh approach to product. The facelift has been taking shape since the $4.5 billion corporation was spun off from Sara Lee Corp. in September 2006.
Hanesbrands has little choice but to transform itself into a more modern business model. The group, like its competitors, is battling lackluster retail sales, department store consolidation and a shaky financial environment, all of which are resulting in depleted margins, increased markdowns and a glut of inventory.
And while Hanesbrands is one of the world's largest companies in the cotton underwear, T-shirt and cotton knit businesses, it is facing off against another major league player: Fruit of the Loom, which generates estimated annual revenues of $1.8 billion. Berkshire Hathaway acquired FTL for $835 million in 2002, bought the VF Intimates business this year for $350 million and purchased Russell Corp. for $600 million in 2006. And both VF Intimates and Russell have strong cotton knit businesses.
But despite major competition nipping at its heels, as well as a third-quarter drop in income of 22.7 percent to $38.9 million for the three months ended Sept. 29, Hanesbrands appears to be pushing its way toward success with a 3.1 percent sales gain to $1.15 million from $1.11 million in the same period.
At the time, Richard A. Noll, chief executive officer, said the third-quarter decline in profits was caused by higher-interest expenses associated with the company's independent structure following the spin-off, and he expressed optimism about the group's strategy.
"Our strategic initiatives of investing in our brands, reducing costs and driving cash generation are creating value and positioning us to achieve our long-term growth goals," he said.
In other words, Hanesbrands is now free to groom its brand portfolio, which includes underwear, bras, casualwear and activewear for men and women bearing the Hanes, Playtex, Bali, Barely There, Wonderbra, Just My Size and Champion names, instead of relying on food and beverage giant Sara Lee to dole out budgets. Among the new extensions is apparel for children and tweens by Hanes and Champion.
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