Hanesbrands Inc. is looking to cut costs and improve sales, even after a first quarter that counts as one of the basicwear company’s best.
The company said it’s kicked off a new multiyear initiative referred to as “Project Booster” that is expected to generate about $300 million in operational cash and $100 million in net savings annually by 2020.
As part of the initiative, Hanesbrands has eliminated its direct-to-consumer segment, which consisted of outlet stores, its legacy catalogue business and retail Internet operations in the U.S. The related elimination of 220 corporate employee positions cost about $7 million.
The project also calls for a $50 million reinvestment aimed at yearly growth, mainly focused on the company’s Champion activewear business, as well as going omnichannel worldwide.
Hanesbrands chief executive officer Gerald Evans Jr. said Project Booster “provides a clear road map to accelerating growth and value creation” as the company weathers “expected challenges in the retail environment,” like a 4 percent drop in organic sales.
To that point, Hanesbrands saw sales for innerwear dip over the first quarter, but sales in activewear and international sales increased, which, when coupled with the recent acquisitions of Hanes Europe and Champion Europe, “more than offset the decline in organic sales,” according to the company.
Hanesbrands said it was affected by the same ailments affecting retailers, namely reduced foot traffic and store closings, as well as “cautious” inventory management.
Overall, Hanesbrands first-quarter net sales hit $1.38 billion, a 13 percent increase over last year, but operating profit only reached $121 million, a 1 percent dip.
Nevertheless, Evans said Hanesbrands is “off to the strong start of 2017 that we sought.”
“We had one of our best first quarters for cash flow as we executed a disciplined working capital plan,” he added.
Activewear sales increased 3 percent during the quarter, led by double-digit sales growth from Champion, while sales in Hanes’ international segment rose by 71 percent “driven by acquisitions and Champion Asia space gains,” according to the company.
Looking ahead to the rest of 2017, Hanesbrands said it expects net sales to reach between $6.45 billion and $6.55 billion, representing growth of 8 percent, and operating profits to be between $845 million and $895 million, representing growth of 12 percent.
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