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.The redo at Hanesbrands comes at a time when veteran Hanesbrands and former Sara Lee executive Lee A. Chaden plans to retire as the group's executive chairman on Dec. 29. Chaden, 65, will continue to serve as board chairman. Chaden joined the organization in 1991, when Sara Lee acquired the Playtex bra brand, and served as ceo from 2004 until his appointment last year as executive chairman to help prepare the organization for its spin-off into a separate, publicly traded company.
"Lee Chaden has had a tremendous career at Hanesbrands and is one of the finest, most knowledgeable and most respected executives in the apparel industry," Noll said. "I had the extreme pleasure and honor of working side by side with Lee as we guided Hanesbrands into independence and set the strategies for competitive success. Fortunately, Lee will remain chairman of the Hanesbrands board and will continue to help guide the company in that role."
Kevin D. Hall, executive vice president and chief marketing officer of Hanesbrands, interviewed at the firm's design and branding offices at 16 West 34th Street in Manhattan, outlined three key directives that are bolstering the group's business:
l Brand identification. "It's about refreshing our brands, strengthening their core equity and knowing their core audience," said Hall, who joined the firm in June 2006.
l New ideas, a creative platform that Hall described as "getting close to the consumer through new products and marketing initiatives for 2008 and 2009."
l Investing in Success, a multimedia push to market and advertise the complete range of megabrands.
"We are increasing [overall] media spending for [TV, national print, viral and outdoor] ad campaigns 40 percent against a year ago," said Hall, whose background includes senior vice president of marketing for Fidelity Investments Retirement Services and Procter & Gamble, where he headed the Secret, Sure, Vidal Sassoon, Pantene, Pert Plus and Old Spice businesses.
The Hanes brand, which has an estimated ad budget of $90 million, will be increased "about 20 percent," while other brands that are part of the newest media campaigns such as Playtex, Bali, Barely There and Champion, will average a 10 percent gain, said Hall. He added a main focus will be creative and unorthodox campaigns and marketing partnerships, like the 10-year marketing and cobranding partnership with the Walt Disney Co. for Hanes and Champion.The deal includes co-branded T-shirts by Disney by Hanes at the Walt Disney World Resort, theme parks and on Disney cruises.
"The custom-designed T-shirts will be an exciting way for young ones to see how things are done, like the Build-a-Bear [toy]," he said. "We are taking a totally different approach with Champion with Disney's Wide World of Sports Complex. We'll be able to wear-test Champion products on consumers there, and we'll also be featuring ESPN Zone by Champion T-shirts and we'll probably bring in Champion products."
Hall noted the Just My Size and Wonderbra businesses continue to be "very strong, relevant brands for the company." However, he singled out four brands that have generated the highest sales during key ad campaigns over the past year. The big winners are Hanes All-Over Comfort Bra, which posted an 18 percent growth in the higher media test markets nationwide and features ongoing ads with Jennifer Love Hewitt; Barely There, which generated sales gains of 26 percent during its Invisible Look ad campaign last summer, which won the 2007 OBIE Award for outdoor advertising; Playtex, which has seen sales increases of 15 percent over last year since the new multimillion dollar Girl Talk campaign was launched in September, and Bali, whose sales rose 15 percent over the previous year since the Live Beautifully campaign photographed by Peter Lindberg was launched last spring.
Hall credited innovative product, enhanced color palettes and ads that are more contemporary and updated with a whimsical twist, as well as a celebrity cachet with celebrities including Cuba Gooding Jr., Hewitt and Michael Jordan. Gooding and Jordan appear in TV spots for Hanes' ComfortSoft Waistband underwear, a campaign with a tag line saying "Our Most Comfortable Underwear Ever."
Based on consumer research in 10 to 12 demographic markets, Hall said, "People love Jennifer and Cuba because they represent what Hanes is all about, a brand that connects with America. One of the nice things of the marketing culture we've created is we'll test and expand aggressively where we see success, and we are doing a lot of free sampling programs online and in print."
A key example has been at sporting events this fall and summer with Hanes at Atlanta Braves games, and Hanes and Champion at college football games."Champion is the number-one collegiate branded license, a $1.5 billion business at retail."
Hall added that Champion's new "more contemporary" ad campaign for the 88-year-old brand, entitled "How You Play," broke in December magazines and a billboard ad facing Penn Station in Manhattan will feature two scenarios during a two-week period. The first scenario will feature a male model and a female model on separate sides of the billboard, while the second week's ad shows the female model sitting next to the male model as if they've become an item.
"Over the last two years, Champion [sales] has grown 15 percent annually," Hall said. "We see the active category just exploding."
Hanes for men, women and children has ranked first place in the WWD 100 list of best-known brands for five consecutive years, and has estimated annual wholesale sales of $2.4 billion. The $1.2 billion Playtex brand vaulted to a top 10 slot from 17th place in 2007 on the 100 List. Bali, with annual revenues of about $800 million, jumped to 30th place from 65th. Rounding out the portfolio, Just My Size generates sales of $1.5 billion to $1.6 billion, Barely There does between $250 million and $300 million, Wonderbra has sales of $275 million to $300 million and Champion's volume is $1.5 billion.
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