HBI - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the HanesBrands Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, today's conference is being recorded. I'd now like to introduce your host for today's conference, Mr. T.C. Robillard. ahead. go please Sir,

T.C. Robillard

second and webcast. the here We're update after provide everyone, has Hopefully, release, to this news call conference today quarterly section found the FAQ a can today. chance call we of an earlier the progress a Investors our website. and the be pleased review had document our on of release welcome and news issued day, XXXX. HanesBrands everyone to investor to quarter The Good to updated of hanes.com replay be in

today, uncertainties various be either beliefs are or call the may filings may to results found that our based remarks These the associated we our our in and and expectations current and On cause are with may actual are make statements, not The or detailed materially. exclude statements as SEC on as in well acquisition, only time on as website are well integration statements, at differ our and which noted, in references guidance, subject consolidated which forward-looking as action-related question-and-answer any to the risks These session. risks continuing prepared made. to represent to does in other update results, financial speak the today's they XXXX news and releases. or charges revise otherwise forward-looking Unless our company operations undertake our and to all expenses. certain

Barry performance Financial other our press including Evans, call to information, Officer; are release. the Additional Chief on Officer. non-GAAP can Executive measures me today be Chief our reconciliation and these in and With of GAAP, found today's a Hytinen, Gerald

we'll it Gerald. questions. to turn your call I'll will and For to today's provide brief up some remarks call, over open the now then Barry and Gerald

Gerald W. Evans Jr.

Thank you, T.C.

ahead Investor revenue, second our and company, Sell guidance that levels and power the May, past our leveraging were in global spoke one the for further remain by capture For flow by and is We of in leverage total initiatives. And more continued our cash reiterated chain. well performance year become higher including positioned our Generate more to as share mid growth, about scale came More, on our profitability organic grew Day of operating global supply guidance, while earnings in the flow flow. to to high-teens full-year This Hanes able significantly progress in to and our across our half. midpoint sales, operating quarter XX% currency organic plan. At is to to constant that's at increased unfolding an sales of Overall, expected. our cash revenue basis. business online. the return Global of improve Champion the growth single-digits generate sales the delivered growth revenue, fully designed per Less, our Spend business strategy profit with and the cash quarter, accelerating growth consistent increased strategy we our Cash of reinvigorate International over double-digit strong increased Consumer-directed and diversifying profit key a several years the second efforts we

we the to seeing in and the distribution plan. are well well our as to half, half key costs strong higher company, marketing return improving also we're and reception total cost projection For making progress quarter, was the quarter and our second as profitability our we leverage our growth, consecutive key should up selling organic business. the constant headwinds a to our remain outperformed initiatives, deliver retailers marking in in as modestly investments first fourth driven revenue for to synergies positioned the margin with half of continued organic alignment from of product increasing plans for organic first season and innovation, U.S. track behind Intimates our stabilize The expected back-to-school Acquisition action latest by to tracking are on We're see We're revenue currency our growth. growth to us, expansion. from on margin essentially decline. levels growth

earnings In plan, our on terms of putting flow cash deliver for flow, are year. firmly cash to GAAP track on us guidance the

business a Looking improving now revenue. revenue organic the solid seeing mass licensed basis, growth a sports authenticity. at trends by on of in growth expected and With in a year. represent in Activewear, performance our casual in see constant remains X% we're expected, track, increase over in the last more of an increased category, Flex Innerwear On innovation women's currency U.S. sales than Overall, positive demanding with with the the offset by driven the our our business as convergence short-term year, U.S. new Investor in product than seeing are pressure declined outlook. and organic associated point-of-sale our that sales Champion respect within XX% declines space quarter, At increased business growth, highlighted sales benefits. basis, and men's performed In Basics our channel. In we program Basics the the quarter closures. X%, global sales roughly apparel driven increased offset an prior XX% consumers as athletic line currency last aggregate, Day, more currency Intimates the strong trends, growth ongoing door over expected contributions to driven while latest plan X% On This X.X%, Innerwear as apparel well return compared to which U.S. brands acquisition growth and single-digit by we're We're products last from Activewear in as to with business, reception decline low our strong we our launches. an sell-through Comfort Global year, gains constant to Fit. to and innovation delivered by underwear our underwear. declined beginning

driven brand-elevation have on consumer a we strategy for years, dynamics. capitalize to several past the Champion Over these

expanding product demand distribution, globally, significantly have coordinate driven constant of outside the strong We've branded points Champion to sales and at brand past and paying in digital our global a all channel. brand our mid directly from We stores. design U.S. of product owned us grown off four mass including with have efforts currency Global through and geographies, high-teens world. across coming the in consumer our around elevation are channels. of reunited we're categories the increased across These including the engaging investments, the platforms, quarters, for across with have the each the growth to allowing rate

to constant growth XX%, channel outside half been quarters. increasing XX% range U.S., globally. XX% of accelerate continued in last Moreover, the quarter four channel, has over the the second XX% And Excluding Champion's in the to in to low-XX% last from mass year. growth mass in and the currency growth U.S. the the first up over quarter, the in accelerated high-XX%

Champion expansion outside and believe of momentum initiative in to us billion our the of new growth stores, we sales new Champion mass strong by accounts, continue of forward, Looking drive our $X to accounts, owned the retail XXXX channel. geographies as existing positioning brand-elevation in will well distribution as achieve

by our provide at focuses on additional our to as improvement strategy leveraging as supply Investor integrated, additional businesses company-owned significant as acquisition our profit acquiring chain, when that, revenue Turning talent. we growth well opportunities, Day, acquisitions, highlighted management

and our a are and strong believe remain Over to And this within capital capital our focus tracking strategy. get acquisitions mold. stated last of Integration shareholders. through we for X actions will back quarter growth as teams underway and returns X N Day, you time, range Acquisitions well heard very allocation well-run and are our our of and long-term plan. fit Alternative Things, balanced at dividends, Apparel Investor Our again our most sustainable short-term Bras leverage to EBITDA. to key debt allocation with part companies management acquisitions, These reinvestment, times high to our profiles. attractive are net on recent reducing a to buybacks long-term approach both is drive

our our So, quarter as full in We to unlock with year unfolding right focused strategy and to flow is cash our the on the expected. executing we up, remain expectations long-term potential. wrap line was

revenue the profitability additional opportunities efforts half, our improve over the have organic growth reducing multiple working, well return positioned of delivered to leverage, as diversification second charges are which We're to further acquisition our well to years. of as And with cash in growth. expansion as Our we quarters several significant scale. global all our to flow leveraging generate next we're committed is by expected to margin

partnership partnership different with in providing our XXXX in national reflected this to announced Today's where decision like morning's remain and the forward XXXX exclusive are we from driving is that agreement Target growth in Champion year. for our of during affect meaningfully booked Before expect CX Hanes The business briefly I guidance, ongoing expires the and renew their the experience look XXXX of the over XX, not focused Target announcement a fully balance not and turn transition. great the CX program CX XXXX. our We announcement. and to we contract of does don't Barry, Target current for on the Activewear our after January business, brands. made be on call touch I'd is to program to proud mutual our CX continuing to by this leading longstanding our

the us including of our well our With multiple look as diversified making achieve all the I'll Barry. as set out over Investor to business the Day. we across leaves that, goals gives can several our the turn confidence well great long-term positioned and us that next As years, global we progress over initiatives, we're growth Champion, we call at

Barry A. Hytinen

our shareholder Investor five cash outlined our Day, over long-term improve years. next the flow At organic Gerald. Thanks, profitability, increase and strategies deliver growth, we grow to returns revenue

we we're May. executing in the tracking strategy laid to our are on goals We out and

behind in We synergies will U.S. deliver driven grow have modest demand to Acquisition with price and on and half, XXXX we'll for drive half organic Transitory and second year, trends strength are the levels increasing expected and have are profitability, costs building. track global that leverage delivered of margin Organic in respect to a With of return diversified higher last brand, the to improving growth the over growth flow Innerwear we we to benefit growth positioned half. is project expansion our year first late in the our by business. pricing second in XXXX. Champion the impacted in the Cash are in quarterly beyond. us. organic benefits

our then next we'll to deploy activities. to the lower and quarters, few to shareholder-friendly flow cash range, positioned we increasing well leverage expect Over into be target

In previously was for XXXX, points currency. the last Operating organically and constant $X.XX an points. we $XX range, plan. support basis the and XX to up generated of from up results. XXX the quarter's and basis at range. our operating margin as effects higher benefit product embedded year, in brands per points as resulted million declined from right N Innerwear Looking the over we to million million profit contributions quarter, in inflation, over we well profit guidance $X.XX of rates. by declined we increase at flow the offset were inflation. million within year of $XX $XX included this points. in respectively. over planned experienced Sales, of last right million margin billion, the of costs our our $XX strategies, acquisitions raw XX.X%. International $XX than share experienced impact year were input Alternative midpoint from benefit turn Absent and was our the X.X% With margin dollar $XXX the was $X.XX declined quarter, that discussed. of all million last margin million growth our inflation, investments were what as strengthened was cash guidance. raw of our well and as of XX XX year, guidance Sales recent our In sales basis margin foreign Adjusted EPS points well quarter, segment. Gross GAAP was made expansion earnings Absent Operating as as basis material of increased guidance Things, the basis and as margin at last Apparel operating mix and and as versus and $XX Bras the let's less ahead a which The compared from XX was operations, midpoint last details summary, material in gross the of our operating gross transitory exchange to costs our

guidance our quarter, decrease and were acquisition the other and with year. million, from charges million related $XX For last line of a represented in $X

will ongoing prior We acquisitions our to that making progress end are continue good for charges to we on initiative all integration integrations, XXXX. complete during project and

our segment our the in outlook. performance. increased take In our quarter, me both Intimates early stability by our to progress for track expectations. we Innerwear consistent of let year. with revenue points to Basics U.S. sales year, implement and the compared return through last We're Now, seeing to you with the declined, Intimates on We're XX to continue action basis of declined prior plans. end X% as line signs

are increase programs we bra in gained we mass in corresponding channel new performing Our the have and a are seeing space point-of-sale. well,

which will In shipping addition, cooling products, innovations, the shapewear third new include new our in quarter. begin

organic Champion space The our sales. than to the Alternative an operating quarter from points and While segment Innerwear first due previously apparel to year scale declines sports organic Activewear's U.S. raw licensed basis margins quarter. due the points more quarter Apparel our increased exceeded the in product to principally growth declined $XX improved increase increase mix decline X.X% mass the from expectations, over in from Activewear the the margin rate benefits year, basis material Basics growth. and declined and business. as to last Champion's million XX.X%, costs XXX disclosed in first from sales in compared the a offset last business. higher headwinds We in X% our XXX improvement experienced sales contribution of

As compared higher offset material inefficiencies costs, distribution and raw manufacturing higher favorable product mix to last was start-up year, costs. by

last points On by Champion or International the exchange basis to and constant from in $XX million due primarily XX% the year, realization XX% growth margins of sales contribution to last sales Asia. operating year driven $XX increased effects Things over the Bras International and compared basis, increased of XXX N currency Our and to segment acquisition continued Europe million organic increased from synergies. X% of rates. million foreign $XX with leverage a

in from cash flow on to flow million consistent the sheet from we flow the operations generated normal a half, was the operations, balance cash of items, and seasonality, moving for of with $XX $XX million. Now, quarter, use and cash first

up line First better flow improved up payables was working inventory from half with half last for capital days performance year, days. in with acquisitions. sales we was by driven includes by and the line in year-on-year, receivable our same cycle was sales. and seven Accounts balances period Inventory cash recent driven planned, than our from second the guidance performance. both Cash

was ended we EBITDA to at X.X terms prior times a consistent quarter. on debt the with the In of quarter leverage, net basis, which

the move We times target of XXXX, year-end, high-end expect be approaching target our within X back range be range. leverage of through expect to to by X and our we to as we

revenue, our update Turning half the $XX and has guidance. headwind, to earnings we million compared our our a to outlook per guidance, dollar since strengthened, creating the this headwind second reiterated revenue last prior flow. full-year profit, as Despite in for operating in cash May, share

acquisition expect million. We continue to contributions of $XXX

prior better initiatives, Given the revenue key than to we performance slightly full-year our be organic growth now the for projection. X% our growth of strong expect

operating As dollar. reflects guidance impact the stronger it relates our profit, to from our the full-year

growth include of contributions also well savings benefits acquisition cost as and approximately input With million the our from guidance, exchange third rates, million continues million organic quarter outlook respect cost X%. from the contributions, $XX $XX million an acquisition of headwind and our to as Our of to inflation, initiatives. net at approximately acquisition from outlook midpoint, $XX $XX revenue reflects synergies

reflecting be growth Innerwear trends Intimates. We X% expect sales in U.S. improving down in and to between and X%, Basics

We constant Activewear International. growth organic U.S. currency expect and in

as points offsetting for and approximately initial higher from programs. well input to In as leverage XX of price trending as support margin, to organic accelerating well This certain acquisition the reflects growth, are margin which Champion's seasonal distribution at increases midpoint, expectations, implies our quarter slightly terms is of costs, third as guidance expansion our operating basis synergies, elevated costs growth.

about we with pleased progressing. So, profit cash we're half, growth positioned in accelerating second in closing, feel the is for and revenue, We're the good way guidance. year and the full-year flow our well

the forward, of improving years. With several executing T.C. I'll at to next generate strategies returns and focused the Investor call significantly on we're cash levels as turn our back Looking over to long-term Day, flow highlighted shareholder over that, we higher our

T.C. Robillard

That concludes our prepared Thanks, Barry. remarks.

and questions time single allows. to question-and-answer who question begin a to one to session. begin ask to I'll your reenter follow-up a to now and the then may yourself queue now call will additional questions. be and turn limit there I'll operator the ask Operator? question, would like number We taking you over the continue you Since the as any of ask will a back that

Operator

Anderson the Our first comes B. Riley. from with of Susan question line

line open. Your now is

Susan Anderson

on question detail also by could taking that a then the could wanted Hi. out Thank I you. down want didn't potentially on bit, provide quarter. there distribution renew could Good drill any be take around job Thanks the little offset my thoughts brand, and maybe they guess region just and you why or if Champion be from any and map And growth CX Target exiting nice contract. the you expect you would the for just if exclusive to to if morning. to could channel maybe I you great. that then thought other this, retailers more

Gerald W. Evans Jr.

Sure, Susan. morning. It's Good Gerald.

the with start really feeling quarter overview our about because and year you we just went. The business the core, good, a feel how suggested, Let me we're as is quick about of channels our EPS of really the profit. revenue, expected, in across guidance and and geographies is unfolding customers in at came right we we midpoint and operating working, and diversification total as in our how

the for first a that feel the decline. organic feel the our about than and we of quarter good good half delivered consecutive fourth growth our outlook start, slight fact And so, frankly about better of

in accelerate, growth continue and including the U.S. reaffirmed seeing quarter So, year growth. the as Innerwear comments our in to year, expect for late to as our the organic to back guidance in well, real you come heard good, fourth organic

we're very exit to So, the of of program, I XXXX. let this business. the your a Specific that XX, comments an positive that my in again, about question about feeling and me all that what January is reiterate accelerating the first ends said CX just year seeing about contract in

XX can business. our to things years business to Europe we seeing So, over through XXXX been Target in Target business component executing over And you're it the expect the of XXXX. together years and and volume actually creating global licensee, business global channels leave It is pre-spin the the started from strategies, the a elevation to It's is from mentioned business one we growth it's certainly last one to. in our begun with a I we're our selling to to for materially growth fantastic that in don't been with Champion story, now long-running that's strategy. in wonderful us. for business of mass is frankly standpoint what business on different it across we another the to U.S. us, was and to original a old. they fully as of the time, years avenues doing been few experience evolving multiple product this has XXXX our in you to one and numbers. a business comments, Champion evolved it's growth. that but mature, Specific It's mature. to and But a and number Champion out that has begun what and partnership. do maturing from side I two our Japanese from over there, mature business, to need work and initiatives our my a we've businesses business And repurchasing Champion But be guidance, speak do, tell of what as it booked will domestic I a for the The than was the a

in You currency now the growth And mid seen heard at to business, those the is the last single-digit of outside four the constant it mentioned exclude been actually low-XX% mass when importantly, as in consecutive numbers, this the for it from this high quarter, basis. quarters numbers this vast was mass have the and we've that evolved a we've growth in I to numbers. rate majority of four channel. channel the And XX%. past high-XX% you quarters, year,

and globally. see It's in the in a XX% it's So, on Europe. mass and in over U.S., nice you outside XX% ramping going growth XX% Asia

the think continue we see and as to channels existing evolution strong in see for a new as on and retail expansion month our initiatives And of driving go down we coming this as we potential building. our We well it's accounts, to as accounts geographies us every elevation momentum forward, look So, the path. see we will drive natural we Champion our momentum shift our own stores. see we

we're my to the that responses. momentum continuing. So, on in $X feel have of mass channel our and And by even that continue spring, now outside for half our getting into of signs the the the pretty billion If latter initial as channel, in bookings the view of of can second programs path XXXX second toward view outside us in some momentum I our positioned XXXX spite now of noted our strong overlapping this favorable we to have in comments, clear very now to, goal the we get as at for half trends growth half of year. we year, last well see we which we look we continues

Champion excited about Champion a we're global feel and of the teams. the So, in years building great in the see for about There's very enthusiasm in Champion. momentum my I ahead. can lot it we potential

Susan Anderson

That's details, product look channel. all good and Thanks specialty for does the Great. the in the really helpful.

in if Just Intimates on I the squeeze one more, could there side.

of too? was stabilization guess store problem. expect a space of – closures first Just was the more channel problem in a pressure this action stores half, to the department it brand a expand mass the is I was more you on and within Maybe department it Thanks. figure the or and to the brand trying kind those like if or back could out plans, sounds the half. related So, if you door it some in

Gerald W. Evans Jr.

it Yeah. on early it initiatives a reach question, of it new initiatives mid-tier some our expect the were and in those we stabilization our It's demonstrate and mid-tier launch to closures seeing been has channel, the the a great follow-up your To Intimates into are third – in truly is some as and place. quarter. about, in plan, with – channel to department door fourth were we've stabilization track talked they store and the department multi-quarter the plan. those mass question, And POS There overlapped positive store of those quarter. of both as more the in go we're in and channel, and we last we

shapewear stabilization an important our overlap for were. was key But new more us is, another innovations shapewear our relaunch includes in programs the and certainly including closures the a where third mid-tier is as And So, to that cooling as in initiative we that as it key big door we our as the well. customers, headwind well quarter, mass within items. that's area both customers look

and stabilize well we the closures, So, overlap business place as – as QX. overlap in this door we get those and we're quarter in the positioned think to

Operator

with question next comes Duffy Stifel. from Our Jim

now Your is open. line

James Vincent Duffy

couple for me. Thank questions you. Good morning. A

you've segment the the stabilization year-end. First, to for inflection before have margins? Innerwear an Do sight called in in lines Innerwear you

Barry A. Hytinen

Innerwear. for improvement that a half in out an feel We back and all for margin year about morning. expansion reminder, been in been Good the very back Jim. includes calling Hey, half. a And We've just – things the the just that half long, in back playing few are margin trajectory we've as reminder, a the helpful. as are good

plans in and we've year, in late talked the First we benefit pricing off, for have we got already quarter. as got motion the seasonal to addition third the in that's about, that

be raw raw Innerwear been up has And discussed. organic particularly had think there So, quarter through we less quarter. as year that material know, just growth and will We'll impacting the material ramped in spend a last you the the as we've in particular, that fact then, out our impact, called have that if we in year. our the business the reminder, marketing you about fourth

The quarter And we we a so, headwind in year year-over-year fourth had of basis, last the mix inefficiencies that that back a half. And then, on distribution year also in on go goes that some year-over-year we about the basis. talked away. impact away last had

expansion good just it So, And out about are that have in building the doing and Innerwear we I'll as where total to both very we've we margins feel been business. improving just our Gerald and margin in as relates point mentioned. Champion's synergies, International got great,

we we are. where good So, feel about

James Vincent Duffy

Thanks, XXXX. you Barry. pricing on about you spoke that. A more comments, In your prepared in on follow-up into Can visibility speak detail that?

Gerald W. Evans Jr.

are the replenishable programs those, as supply and across majority Yeah. increases out their in is inflation-driven years. as Jim, well. have input come communicate go really the XXXX those would we are increases we're really work standpoint the there now XXXX. and costs. but of This retailers' through XXXX, for to more were of And price Gerald. planned chains as actually out are be price is said we visibility, it some tend certainly retailers seeing around the From fiscal increases our the that We this communicating in that we in our place,

them, a of when in surprise not communicated, path there's well increases we these discuss So, those feel and price place. getting with down we we're the

Operator

comes Our Omar with ISI. Saad Evercore next from question

now is open. line Your

Omar Saad

the information. a for to thanks I follow-up all want statement. a Champion. to morning. Wanted make Actually, Good ask Hey, on

choose and behind Target given walk the to parent this that would kind to of respond the away surprising a momentum that current I Champion kind halo strength can then, from of moment It's global time question. it growing not. or direction. doesn't at kind have another And move how when that brand managing You a it's an price it to given you're rethink But maybe and it at have point global opportunity it a value it renaissance is the sense. sense make in brand? does Maybe overall to Champion being around or that said, of make sub-brand its the

standpoint, product hiring little broader brand the you division get standpoint, talent can strategy you to billion brand and talk to bit Thanks. more that too. maybe about for to build Are then $X out? Champion talent a So, the a from

Gerald W. Evans Jr.

standpoint managing reinforce as how Sure. And managing from part does standpoint the an consumer, brand. standpoint seeing the the through world. the in stores. of those from CX our of across Europe. position seeing the expanded we three an run of for opened And Europe, drive own to came we're which our both the lines a Italy Chicago the to contract store, in Amsterdam. And opened lever it second a was as London. We've that the play first, in the that elevating Boston. our the we're across in are out year L.A. of success, to ability that locations see brand example, strength the equities just whole of same even as reuniting brand wholesale of all particularly we time. in and ends that fantastic up now, and store. the looking from out to the the communicating but typically stronger, some success drive roll in stores the New fantastic early had of discovering more and for retail product and opened our and we and as is our consumers of that pushed retailers consumer, the up Brea They've further. global with We've we've we're brand this we're seen out the using been We've a business all open younger definitely brand group XXXX. And La of we're We've first and brand we're we're just had Northern key York, the of But as base business And with our among brand XXXX thing merge of the to a our extraordinary together we into a come global brand, what's importantly, and stores important brand both number one driving there, well as with

taking see hold now thing We then we So, been time for China. established we've and it's the where own there. retail some as running look in across see Japan, in our more same we Asia, that

in with we're even gone focused genders some extreme as and one Our And Japan, have partner where one consumer a with a early we've really at offered the at initiatives store opened stores only including that success. new in from extraordinarily China business female it's there. experimenting having we've been to successful, formats, all

the So, happy we are elevating and we're world. certainly around it very driving brand and the

Omar Saad

let it CX you Does wayside of that focus label brand? parent and on by the Is sense the something thought XXXX kind the just potentially to after about? make go

Gerald W. Evans Jr.

do core think hard. brand, at to it. we to it successful and equity the that is in post potential we done XXXX to it, What and yet be the There's a our to being was with the failed and relationship. asked very all earlier and on And incredible it brand. that I driving focused tool we in use. But It Well, – CX that we that through I brand is in time drive brand. the is – Target potential do answer determined. momentum to we reunite given own do is have with we're are is could that that going we There we've question a Target the upside brand didn't XXXX, and certainly

Operator

comes Michael question Credit with next Our from Suisse. Binetti

is you Thanks about - the here. how Hey, Could Your as And margins now margin margins the Credit that that far broadly the your Activewear contribution open. that Day the is Michael coming for could at from to then, see our there we segment? expect that's flowing Securities CX on into positive the all line as to we (USA) what considering segment taking you'll more horizon speak line on exiting, turn business the we Suisse Binetti LLC the top for expectations? point be where can questions think Analyst saw guys. a

Barry A. Hytinen

Yeah. Michael, Barry. this is

and I think very questions, me let of both those are good those. take

a as for On CX want can margin, know. I margins and program think I you frankly proprietary the and also terms can like to for fully can't that you'd as why that. we But competitive appreciate the contract, respect appreciate give reasons, the well specific of

thoughts you frame let help So, a me give to few that.

think it's that I essentially us off, sourced. for business to XXX% First important that note is

all no because expect So, you should sourced. deleveraging it's

that's you business currently. essentially U.S. for me the Champion, think of core about growing our same thing second margins The operating U.S. fast. business then let On Champion is and the basis, CX the margin they're help so operating

last in seeing seeing question, expansion are Champion goes of that core we're though, margin this the and we that what business. Importantly rapid – to part your scale a we as

year-on-year. In were X,XXX fact, over basis hundred business expanded points in the points core most recent quarter, basis up and year-over-year, well the margins Champion operating gross margins several in the the

U.S. in see business. the scale we So, to business. we're outlook and core feel playing margins got continuing really out we our world Champion global concept the in leverage on that that's the to expand the continue way, Champion growth. about a inherent great it frankly, is the around We by And opportunity good as that

Now, the was talked the about. does $X billion how your you Investor we Day Gerald into the already other Well, of Champion play question talked goal. to part about scenarios it

the laid speak of So, me end we scenarios let Day. to out the at Investor that the

views changed First in or our laid goals the presented. we Investor I out off, the scenarios conservative the to nothing's that regarding frankly related Day

the and the flow Day, the will at we talking headwinds the team continuing frankly, just was had what profit recall, those strategies, specifically And organic and we've you pending. still some Day, you seen recall, had conservative mature and scenarios was at capable grow, from from we as At of those was the cash driving scenarios presented all those the also of for Investor and was X% the been CX We of with business the You'll the to really to there. it strategies. as growth presented CAGR. Champion the – the from the that business Investor been scenarios. time, two the separated renewal conservative probably time see business scenarios, we that excluded fact relates to about And

if excluded CAGRs have and scenario. So, those the goals. differently, from would Said had X% we exceeded it we the significantly contract our been renewed, frankly, specifically

changed we nothing's about are feel and scenarios. where good we So, as it relates to those

Operator

comes Chethan from Barclays. with question next Our Mallela

now line Your is open.

Chethan Mallela

Hey, good morning.

trend drive the year, versus the think talked you still first the guidance full-year gross margin the in back the trend tailwinds. of the pricing and but understand half. in larger inflation, throughout some is operating your it can outlook? framed improvement you've better So, are with maybe leverage little in give of so change consistent more the pretty is and which and But swing a factors, what each factors is of synergies, magnitude half, a a as we costs, just the there And for transitory easings kind some about implies on detail big acquisition of that that I how year-over-year a way to

Barry A. Hytinen

Sure.

inflation first that It you I several the remind the I'd raw million than ramping was second the through think you material The was is year-on-year in quarter. pricing benefit the them. in hit back $XX on of quarter. half. more

we as see second we half, move away. through so, And go that headwind the essentially

organic margin the find significant that's you'll in more and And considerably the growth International have half, but to trajectory fair efforts you're back across The is if certainly help see amount expand. through then And gross that We suggest addition, to the in playing the I'd leverage. are in the P&L, work right. implied on, a you continue and there. Booster that in guidance, margins our we the gross of just thanks growth organic business provides the synergies our then, considerably. improvement margin absolutely out And

half both part years, that we as few drive through the margin improvement. continuing in of one And well so, is back as as see, moving business to next our that the

very feel back the about we we move through gross as half. So, margin the good

Chethan Mallela

a It But easy then, from any helpful. about remarks, have And alignment the and are comparison. you're how just would you like, pretty one pretty back-to-school, follow-up thinking just prepared be Great. there some retailers quick on with key that time you period? good context sounds just lapping obviously

Gerald W. Evans Jr.

we're From standpoint the right right of it middle in of now. Yeah. back-to-school, the

In for biggest of customers. last week ads fact, some season, if the you them, mass the key follow dropped of the

we're So, we out you how feel we're now, and little we see positioned starts know, weeks. extended the few period. as we'll well feel longer, Back-to-school back-to-college plays it a well for next it's over but an And that, prepared.

Operator

comes question Ike next Fargo. with from Wells Our Boruchow

Your line is open. now

Ike Boruchow

Hi. Good morning, everyone.

while a XX core business Gerald, like, maybe, just business has that the bit? the the and the I questions at, peaked in maybe guess, is months, again, it maybe like declining on base been really business is over couple looked U.S. for what top CX it well? then, seems history because because decline us for that last line some little what it's CX. what And sounds it a doing in business year the like trend to possible Just tell revenue is

Gerald W. Evans Jr.

I'll based this limited few and place has in Frankly, It on think can share on and the has Ike, the has since you nicely can business I tell we're agreement. we for I been that's XXXX grown at what point. years. our been last years, many where it leave that mature

Ike Boruchow

then, And talking or the think I think, XXXX said XXXX. Okay. through based you about I will on January, you're how continue business

that how models. in be for So, Or in expect exactly get that should I'm – decline essentially how we XXXX, year the should to it multi-year should total we top layer our But trying to when – or XXXX. understand line? company just fiscal fiscal XXXX okay when the X-point fiscal model we're and we headwind roughly assuming into there a is should

Gerald W. Evans Jr.

size should the I look in you business, think Champion with is see balance that the the if of business that at momentum period the of offset that you the time. of global by

Barry A. Hytinen

goes just mentioned be And to you that. and Ike, that's XXXX, thinking goes it about want that you I it note ought through through, so January where when to

Operator

from comes Bank. question next Our with Tiffany Deutsche Kanaga

now open. is line Your

Tiffany Kanaga

look Hanes in CX private Target taking retailers their confidence the the confidence can you you competitive Thanks announcement, can't can and do, more dig Innerwear label to companies moat? Hi. to what it your what control other differently, you said of extend build other you wouldn't help there? that programs In also gives what say I Or disrupting potentially to wake because aggressively questions. our us into for know

Gerald W. Evans Jr.

and as that Innerwear continue brands to strong well, relationship all, confidence, and the of standpoint From talked we of business and mutual things brands, gives in of what that in longstanding consistently growth. we've is of Target we me that brands about we partnership It We've the we ongoing Consumers – and categories. XX% standpoint to expect looked XXXX through with loyalty. branding the an and maintain do young our relationship, in the strength First the the very to percentage doing do business, many cases, is same for have what drive from brand we Investor and on all the and in in equity XXXX. about XXXX. old, was focus at consumer Day, investment innovation as our at at brands, like care looked the reinforcing that, years. category the continue Basics, to XX% that was anticipate it's side core matter have we of got so the for in a of looked And in XXXX. in a And the we example, is

Tiffany Kanaga

All right, much. so thanks

Operator

comes question Jay from Sole next UBS. Our with

line now open. Your is

Jay Sole

Thanks so much. Great.

in is could percent in And how Champion those Just on Activewear the up change, the can what to the follow of January International? right the percentage change? get when business, as we maybe we both for see Champion, of to the segment us XXXX segments is we business you and see to now describe CX growth what in

Barry A. Hytinen

it. good generally Jay, is thing are in across have sense we've I a if But mass the you out the through the to the we terms we that what we And growth of break the call business. out particular, made been the of specifics of disclosures Investor outside important from seeing work seeing of think you'll the here coming business. in the that Champion globe the think don't sizing of at I Day, is

it's outside the U.S., very and out at we're of strong in in saw just growth the If out growing over in amazing here. Champion, growth mass It's you very Champion strong in look of what of XX%. Asia, saw our we just experiencing we Europe quarter, growth

I we're did we the just phenomenal. you point would the parsing to without Day, more at Investor much So, it than seeing is trajectory

Jay Sole

to up different want smooth from Okay. maybe give and Target do presumably CX that? will color to you they're from just Gerald, you on have be more going whatever next. follow that, Can for some us to Champion going a is transition that not on XXXX mass XXXX. to to And maybe said of Because kind

to the kind usual, be a So, happens? that transition might year to same this that business next Or going sales down do into level the as be sales still expect of they at that that year? bit is little operate it million are you $XXX is but as

Gerald W. Evans Jr.

are First of all, the bookings underway. XXXX still for

what – we is see won't we a expect that from So, what's material difference.

those We haven't finalized bookings.

of So, year. we'll in XXXX, at time, what this point difference expect know, program that we we material XXXX. not and see how January be the contract But And out. that intend plays in a runs business we just through from what we to providing – through to the this do see we

Operator

question next comes Our with from Simeon Siegel Nomura Instinet.

Your line is now open.

Simeon Avram Siegel

Great. Thanks color. all the for and thanks

excluding manufacturing is And business benefits current the that say point Is or you? expansion margin know as same the just sales just that Champion the Just mass the have model? surprising can Champion how much given contextualize, did sourced the you from business or margins about your encouraging. were core CX to Thanks. you are we then, it clarify

Barry A. Hytinen

really it future but consider We more, much don't that for break we'll out disclosure.

also the line. incremental growth but we that production. of higher internalization expect to scale you're seeing the the think the that's you and I line, of it's what scale there growing the Champion both the it of an point now is reasons from move reasons hitting but really – major internal to in of out see the margin of margins, the time, margins, continue amount benefit. As just benefit And we of to that inflection the core as been That's relates some a one for one organic

So, very Champion. we the on feel opportunity good margin about

a it play seeing to are favorable this that be to very year, expect couple next I of mix years, the way. our over in continue to We and out meaningful

Simeon Avram Siegel

about I behind – the understand like if on – follow-up, great. there it I talk So, in cash just hitting this flow, the at cash you line, one just Thanks. drivers then, point? the flow just given looks million there. can Okay, around last can. operating just the Can And through if numbers think comfort the year your you help $XXX we're drivers you can

Barry A. Hytinen

guidance, as start full-year cash I'd pretty view. straightforward with, a Maybe it's flow reminder, Sure. simple our just for

income You you add and back take of net and our are stock there. GAAP you and D&A kind comp

I said half for use for start Now, we're on, of that, focused think noting having been the is first first half. plan through than the you're less second for we by most of me capital let half. what has ahead a planned Working the flow cash

net occurs the I'd at at that and the Then, half, our that working the then encourage I'd guidance and back comp. I to D&A add income second the of GAAP second and our half. So, stock course for with capital would in typically look look you performance start

we put second we tax naturally down the repeated certainly cash typically reform, would including out half half the achieve would expect and generator that as at easily improvement, appreciate, and again. through guidance there. receivable if of is move we you the the And frankly, we're well, we've that back as come peak we not simply As a working a and inventory, for be year's we that from year. just source in benefit cash significant even last seasonal Accounts capital will got flow the

the the are through we've about given So, we we for confident full-year. we the first good where half feel and feel in very guidance

Operator

with comes McShane Citi. question next Kate Our from

Your open. now line is

Kate McShane

cost talked But your product If supply of some you the short-term? the in control Thanks morning. how for costs to we've efficiencies offsetting we these Good chain back our I in are already much do thinking questions. Hi. of you pricing discussion, about. through about go could the in actions some have taking know

Gerald W. Evans Jr.

Booster philosophy has been chain constantly inflation Well, work on price you over Project always certainly we time. our part a project. supply But exactly that that inflation, time certainly for efficiencies over on of and is

done have the some on the of interim costs. inflation. we're as that things offset we to focused recover builds, to so, implementing prices the But in And the inflation

Kate McShane

website online at success business business, own you changes just you. that at growing, or most Thank be online seeing as good are you any in any walk with the saw some partners, to just an your through it is And your great. are half again or seeing Okay, and seems the initiatives where the pure quarter. seeing us new you the you how whether support plays unrelated and business? retail question, your this in it's like second growth will Can

Gerald W. Evans Jr.

even first did across generally that online we're a global The seeing change grow a various that basis me calling players. see and traction build and of later to the in Well, pure are global it be seeing out. thanks is I'd businesses start all, grow our for too. biggest well, for across it channels. but little continuing International say that build and We're we the on was – the yes, It would there,

us gives International basis. our are gain continuing confidence it to momentum So, strategies that on an

Operator

with comes next Our Bank from America. question Balsky of Heather

Your line is open. now

Heather Balsky

taking my Hi. Thank question. for you

year? about does next and how product the on side, how First, matter just what's cost follow-up. Can guess costs you the things I a driving for inflation, much cotton are looking talk

Gerald W. Evans Jr.

me and across This packaging general not question. it is cotton you coming you broad across This broadly, a say that materials we're you give we a natural just see it it costs, oil, with want I'll it cotton. is as get. let see see you what is and to the coming strong no I are. always inflation let think and company is across just we cotton-dependent – this and specific often answer people comes me let But the a Well, cotton many on And pressure longer shape Barry question a inflation. economy first input coming

are will well. chains through all supply their seeing And as come touch so, why our it it retailers the products. That's own

to represents small, so, And percent fairly From now? pricing standpoint are total, our what isn't Barry, it we of cotton of that. offset it's the

Barry A. Hytinen

thing said, rate really for been it It's of point, and that to of our million of we been as coming single-digit kind is. kind to It's important the good impact across of $XX the mid number continue brands. in of the essentially line have And would projecting. Yeah, inputs. line is net of with All we've visibility the pricing, expectations. strength our that we total. on That is see terms a think that in pricing with I offset year, kind inflation here net just I of a play just about we've calling echo of

Operator

Our next John from Kernan Cowen. with question comes

Your line is now open.

John Kernan

of that the for in morning. taking my acquisition are embedded the Barry, synergies guidance back for Thanks half Good year? quantify question. the can you the

Barry A. Hytinen

Sure.

it in course, the the fourth Alternative quarter, In quarter, third million, it's $XX of terms – Apparel... have – of about and is in we

Gerald W. Evans Jr.

synergies, Yeah, contribution (XX:XX). not

Barry A. Hytinen

Oh, synergies. Oh.

That's second we of don't one tell terms better generally break you synergies, the that synergies in In say our would compared that the ramping. as to I are came the things a in the the But We couple quarter would elements specifics. I more out of guidance. in actually synergy the actually guide, of is terms had headwind quarter a we but of second were of in building. that that noted

gross SG&A the million relates that's to I and have, as both first the as and of uptake because on significant that's seeing – on to run it International We and rate basis, it would dollars line. relates half the particularly the upside a side say, is margin several

John Kernan

you product on reception talk on Okay, the competitive great. the placement the Hanes you feel to consumer there and That's helpful. Amazon? brand Can and overall about Amazon just the to how environment

Gerald W. Evans Jr.

work and box were buy feel the that ensure yeah, first on that to marketing. our continue that about there. it have that about competitive Amazon is one it but very and more win It we're continuing about business is great and Look, was, relationship. to on a to nice business We – built with up then a than is it brands pop focused really we once Amazon the early partners of we

and channel, that's appropriately, do that you you in any have and invest like maintain focused. we're where to Just presence

Operator

Our next with question Macquarie. Laurent from comes Vasilescu

Thanks line XXXX. two-year How revenues implied inflected for Your as consider XXXX low basis? revenue we organic in low Capital think growth but taking my Organic they Laurent were morning. stack for question. Macquarie single-digits the the to XXXX, now Inc. up XH open. - then (USA), is in should we single-digits down meaningfully XH XH about Vasilescu Good

Barry A. Hytinen

think you going the destocking terms part was on incurred. in it of about related the that that was prior year, year really If the and on was the of inventory on that Innerwear, before the to prior in company what that

year's to be So, the organic across you the about way is I the additive growing couple of globe well quite One, really factors. this Champion and think is to think a ought continues to business. really,

in expecting the apparel also as seeing than upside we actually Fit men's. driving Our is better sports came ramping And growth that men's women's business Basics I we were than business and is that that to spoke Gerald seeing probably good our trends the Flex expected. and Comfort were would previously was underwear improving. significant say on better is

just are expecting we some that factors speaking, So, than what – in would business trends that's were the those earlier I year. modestly the in And generally our are better say. International

- and recognize the so, Capital that strong Inc. Macquarie a would have Vasilescu And Champion I be at a it's we visibility side looking factors business. those very mostly since on seasonal commit (USA), Laurent

on FY follow wanted XXXX. for up CX the Thank then, helpful. very I guide you. Okay, revenue And to

there thresholds. if curious revenue are contract minimum Just understand to

reconcile CX your to a year. the business seasonal can curious and Just I to or parse this CX out different Target morning Innerwear $XXX from more calls since that Maybe you think business then, think million the And that commitment long-term FAQ was a I compared relationship is sourcing out last how standpoint. is business.

Gerald W. Evans Jr.

Yeah.

start I is commit it business. would seasonal me the of a guide, standpoint question. of is Let say with part what your the first From a

finalized have for commitments XXXX. the So, not been

It the see to and what information strongly we're is change this do give based business forward we on But that we with about our positioned brand a all of shares it is time. not point customers. know at great our that The our and brands. basis period national feel business meaningful of our – good XXXX you expectation for to runs with including from that within in this XXXX well are prepared through the It's replenishable time, we business. at be replenishment a looking like we're best particular we as through our So, where very It's Innerwear not to But go very we bookings business. where on as the We go Target driving performance only a built feel built lines businesses confirmed business. replenishable key and a our contract we is all XXXX customers, is period. in XXXX. as on mass certainly will have an

feel So, we good about those businesses.

Operator

Our next Thomas Doug with question comes Gabelli. from

Your line now is open.

Doug Thomas

make guess be want of this back growth I'm talked I redouble first my about that can to consumers sort guess looking guys talk and a and before, – this the Good do you really of long-term? don't is not lot a is a business? your about are guess Target just of – Champion. given about my into fad I you went I sort what with to Hey. in you relaunch the core together, the – long-term saw to Comfort line. out the we are Activewear was this expectations maybe their – question like my And talk think their as guess of necessarily, to coming first the morning. and what try the this but Champion, of feel it Gerald, to comment shapewear – time who shapewear at you I you're you Can notwithstanding, I really do are what business, But must in the not success having even other I people's is view relaunching the is wave view – commitment touch

Gerald W. Evans Jr.

interesting. Well, for billion. momentum toward its really too Doug, let we me XXXX tremendous $X good got momentum going Champion, you say and goal your question, that comments From the thank it's about feel believe strength of of the forward it's first on shapewear and

products what shapewear some prefer some it's and products, insight You with very the done business. we've items The way lot our on of what similar and that these familiar with of we consumers have a they're more something in cooling – do particularly products millennial type for to the Basics Activewear saw business, you. across perform that

product cooling business to product, case warm, of standpoint technology an so cooler when has adopted have to the from – consumer know made And unhappy. in the same aspect and traditionally we very that can a very of make has some lacking yarn been worn. constricting shapewear we been brings So, it's a shapewear, consumers the and be it's one a the has that been

it resetting innovations to feel So, like upgrading these come some and business we of in back the to QX, consumer that reason gives our with along a purchase again. the with programs

Doug Thomas

create create segment in HanesBrands you – that an can of line Can aspirational apparel?

Gerald W. Evans Jr.

we Well, think...

Doug Thomas

Or how – yeah. do you

Gerald W. Evans Jr.

all them we one deliver what do Along our to consumer understand and can, We the pretty – Maidenform we do needs this offering. them. think And strength those in of of the particular. is it's our consumer brand, a with try of or is to segments know wants because compelling with we

than we this do our have to that a categories. believe bought get we to it. job a consumer to consumer purchase other to that a while. Innerwear do we And But compelling have less to attract some a Now, is we're the in it placed, hasn't our making frequent offer of

and bringing a new important is pretty making them with So, step. back something purchase that

Operator

showing further back closing questions for Robillard to remarks. no like I'd I'm this call turn in queue to Mr. at time. the

T.C. Robillard

and we a with you attending to call look Have forward today, everyone thank like for day. our soon. great to speaking We'd

Operator

This participation Everyone, for disconnect. day. program a may gentlemen, now Ladies the in and and thank concludes today's conference. you you great your have

T.C. Robillard	Hanesbrands, Inc.
Gerald W. Evans Jr.	Hanesbrands, Inc.
Barry A. Hytinen	Hanesbrands, Inc.
Susan Anderson	B. Riley FBR, Inc.
James Vincent Duffy	Stifel, Nicolaus & Co., Inc.
Omar Saad	Evercore ISI
Michael Binetti	Credit Suisse Securities (NYSE:USA) LLC
Chethan Mallela	Barclays Capital, Inc.
Ike Boruchow	Wells Fargo Securities LLC
Tiffany Kanaga	Deutsche Bank Securities, Inc.
Jay Sole	UBS Securities LLC
Simeon Avram Siegel	Nomura Instinet
Kate McShane	Citigroup Global Markets, Inc.
Heather Balsky	Bank of America Merrill Lynch
John Kernan	Cowen & Co. LLC
Laurent Vasilescu	Macquarie Capital (USA), Inc.
Doug Thomas	GAMCO Investors, Inc.

Hanesbrands (HBI) 1 Aug 182018 Q2 Earnings call transcript