In Q3 FY22, on a constant currency basis, net sales decreased 3 per cent, or $60 million. The constant currency decline was due to the macro-driven slowdown in consumer spending in the US and certain Asian markets coupled with the impact to orders as US retailers tightly managed their overall inventory levels. These headwinds more than offset innerwear growth in Australia and the other Americas as well as Champion growth in Europe. Furthermore, global Champion brand sales decreased 14 per cent on a reported basis as compared to prior year, with similar declines in both the US and internationally.
American multinational clothing company HanesBrands has posted 7 per cent decline in net sales from continuing operations to $1.67 billion in the third quarter of fiscal 2022 ended October 1, 2022. The company’s gross margin also declined to 33.7 per cent, down from 39.1 per cent in the prior year, while the gross profit was $563 million, down 20 per cent.
HanesBrands’ Q3 FY22 adjusted gross profit, excluding certain costs related to the company’s full potential plan, was $576 million. Adjusted gross margin of 34.5 per cent, declined approximately 460 basis points compared to prior year. Near-term headwinds, including commodity and ocean freight inflation as well as manufacturing time-out costs related to its inventory reduction actions represented more than 500 basis points of year-over-year margin headwinds in the quarter, the company said in a press release.
Selling, general, and administrative expenses declined 9 per cent to $421 million in Q3 FY22 as compared to last year. Adjusted selling, general, and administrative expenses, which exclude certain costs related to its full potential plan, declined 6 per cent from last year to $408 million.
Operating profit and operating margin in the third quarter of 2022 were $141 million and 8.5 per cent, respectively, compared to $235 million and 13.1 per cent, respectively, in the prior year. Adjusted operating profit was $168 million, declined $96 million as compared to third-quarter 2021. Adjusted operating margin of 10 per cent declined nearly 470 basis points over prior year.
The company’s generally accepted accounting principles (GAAP) and adjusted effective tax rates for third-quarter 2022 were both 17 per cent. For the third quarter of 2021, GAAP and adjusted effective tax rates were 7.9 per cent and 15 per cent, respectively.
In Q3 FY22, income from continuing operations totalled $80 million, or $0.23 per diluted share. This compares to income from continuing operations of $177 million, or $0.50 per diluted share, last year. Adjusted income from continuing operations totalled $102 million, or $0.29 per diluted share. This compares to adjusted income from continuing operations of $188 million, or $0.53 per diluted share, in third-quarter 2021.
HanesBrands’ innerwear sales in Q3 FY22 decreased 11 per cent compared to last year. The year-over-year sales performance was driven by macroeconomic pressures that weighed on consumer spending as well as the impact from retailer actions to manage inventory.
In Q3 FY22, activewear sales were comparable to prior year. Relative to last year, the company experienced continued growth in the collegiate channel as well as solid growth in the printwear channel for both its Champion and Hanes brands. Champion sales within the activewear reporting segment decreased 9 per cent as compared to prior year, while sales of other activewear brands within the activewear reporting segment increased 15 per cent. Operating margin for this segment was 11.6 per cent, decreased approximately 490 basis points compared to prior year.
Furthermore, the brand’s international sales decreased 6 per cent on a reported basis in Q3 FY22, including the $59 million from unfavourable foreign exchange rates. International sales increased 5 per cent on a constant currency basis compared to prior year, driven by Champion growth in Europe as well as innerwear growth in Australia and the other Americas. Operating margin for this segment was 13.9 per cent, decreased approximately 220 basis points compared to prior year.
Total liquidity position at the end of third-quarter 2022 was $863 million, consisting of $253 million of cash and equivalents and $610 million of available capacity under its credit facilities. Based on the calculation as defined in the company’s senior secured credit facility, the consolidated net total leverage ratio at the end of third-quarter 2022 was 3.9 times on a net debt-to-adjusted EBITDA basis as compared to 2.6 times at the end of third-quarter 2021.
Inventory at the end of third-quarter 2022 was $2.14 billion, an increase of 31 per cent over prior year. On a unit basis, inventory increased 16 per cent over prior year but decreased 6 per cent as compared to second-quarter 2022. Cash flow from operations was $51 million in the third-quarter 2022, driven primarily by the working capital impact from higher inventory.
For fourth-quarter 2022, which ends on December 31, 2022, the company currently expects net sales from continuing operations of approximately $1.40 billion to $1.45 billion, which includes a projected headwind of approximately $68 million from changes in foreign currency exchange rates. HanesBrands expects the GAAP operating profit from continuing operations to range from approximately $53 million to $83 million, while the company expects the adjusted operating profit from continuing operations to range from approximately $70 million to $100 million and includes a projected headwind of approximately $9 million from changes in foreign currency exchange rates. Also, the company expects the charges for actions related to the full potential plan of approximately $17 million.
Fibre2Fashion News Desk (DP)
