Hanesbrands Inc. (HBI) Bundle
Understanding Hanesbrands Inc. (HBI) Revenue Streams
Understanding Hanesbrands Inc.'s Revenue Streams
Net Sales: Total net sales in the third quarter of 2024 were $937 million, compared with $961 million in the same period of 2023, representing a 3% decrease.
Year-over-Year Revenue Growth Rate: For the nine months ended September 28, 2024, total net sales were $2.71 billion, down from $2.88 billion for the same period in 2023, marking a decrease of 5.9%.
Revenue Breakdown by Business Segments
| Business Segment | Q3 2024 Net Sales (in $ millions) | Q3 2023 Net Sales (in $ millions) | Percent Change |
|---|---|---|---|
| U.S. | $678.3 | $684.9 | (1.0%) |
| International | $259.1 | $255.8 | 1.3% |
| Other | $(0.4) | $20.5 | (101.9%) |
| Total | $937.1 | $961.3 | (2.5%) |
Segment Contribution to Overall Revenue
U.S. Segment: For the nine months ended September 28, 2024, U.S. net sales were $1.96 billion, representing a decrease of 3.6% from $2.04 billion in 2023.
International Segment: International net sales for the same period were $747.2 million, down 3.8% from $776.5 million in 2023.
Other Segment: The "Other" category net sales decreased significantly to $1.1 million from $67.9 million, a decrease of 98.4%.
Significant Changes in Revenue Streams
The decrease in revenue was primarily attributed to the divestiture of the U.S. Sheer Hosiery business on September 29, 2023, which impacted net sales by approximately $38 million due to the unfavorable effect of foreign currency exchange rates.
Additionally, there were macroeconomic pressures leading to a higher than anticipated level of inventory management actions by select retailers, which further affected sales performance.
Net Income (Loss): The net loss for the nine months ended September 28, 2024, was $(307.6 million), compared to a loss of $(95.7 million) in the same period of 2023.
Operating Profit: The operating profit for the third quarter of 2024 was $103 million, an increase of 27.1% compared to $81 million in Q3 2023.
A Deep Dive into Hanesbrands Inc. (HBI) Profitability
A Deep Dive into Hanesbrands Inc. Profitability
Gross Profit: In the third quarter of 2024, the gross profit amounted to $390,440,000, representing an increase of 11.6% compared to $349,781,000 in the same period of 2023.
Operating Profit: The operating profit for the third quarter of 2024 was $102,998,000, a significant increase of 27.1% from $81,030,000 in the third quarter of 2023. The operating margin improved to 11.0% from 8.4% year-over-year.
Net Profit: The net income for the third quarter of 2024 was $29,951,000, a remarkable recovery from a net loss of $38,799,000 in the same quarter of 2023.
Trends in Profitability Over Time
During the nine months ended September 28, 2024, the company reported a total net sales of $2,710,709,000, down 5.9% from $2,880,328,000 in the same period of 2023. The operating profit for this period decreased to $78,977,000, a decline of 55.3% from $176,507,000 in the previous year. The operating margin also fell to 2.9% from 6.1%.
Comparison of Profitability Ratios with Industry Averages
As of the third quarter of 2024, the company's operating margin of 11.0% is above the industry average of approximately 8.5%. The gross margin stands at 41.7%, which also exceeds the industry average of 39%. However, the current net profit margin of 3.2% is slightly below the industry average of 4%.
Analysis of Operational Efficiency
Cost management has been a focal point for the company, with cost of sales decreasing by 10.6% to $546,663,000 in the third quarter of 2024 from $611,513,000 in the same quarter of 2023. The selling, general and administrative expenses rose to $287,442,000, an increase of 7.0% year-over-year.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Sales | $937,103,000 | $961,294,000 | -2.5% |
| Gross Profit | $390,440,000 | $349,781,000 | 11.6% |
| Operating Profit | $102,998,000 | $81,030,000 | 27.1% |
| Net Income | $29,951,000 | ($38,799,000) | 177.2% |
| Operating Margin | 11.0% | 8.4% | 25.0% |
| Gross Margin | 41.7% | 36.4% | 9.1% |
The operational efficiency is evidenced by the improved gross margins, which are attributed to a 565 basis points reduction in input costs. The company also achieved 185 basis points in savings from supply chain improvements.
Debt vs. Equity: How Hanesbrands Inc. (HBI) Finances Its Growth
Debt vs. Equity: How Hanesbrands Inc. Finances Its Growth
Debt Levels
As of September 28, 2024, the company reported total debt of $3,301,250,000 compared to $3,336,750,000 as of December 30, 2023. The breakdown of debt includes:
| Debt Type | Principal Amount | Interest Rate | Maturity Date |
|---|---|---|---|
| Term Loan A | $912,500,000 | 7.35% | November 2026 |
| Term Loan B | $888,750,000 | 9.00% | March 2030 |
| 9.000% Senior Notes | $600,000,000 | 9.00% | February 2031 |
| 4.875% Senior Notes | $900,000,000 | 4.88% | May 2026 |
| Accounts Receivable Securitization Facility | $0 | N/A | May 2025 |
Debt-to-Equity Ratio
The company’s debt-to-equity ratio as of September 28, 2024, was calculated at 22.09 based on total liabilities of $5,312,254,000 and stockholders’ equity of $149,344,000.
Industry Comparison
The industry average debt-to-equity ratio is approximately 1.5. The company’s significantly higher ratio indicates a greater reliance on debt financing compared to peers.
Recent Debt Issuances
In March 2023, the company issued $600,000,000 of 9.000% Senior Notes and refinanced its debt structure to enhance financial flexibility amid macroeconomic uncertainties. This involved redeeming $4.625% and $3.5% Senior Notes, resulting in total charges of $8,466,000 recorded in the first quarter of 2023.
Credit Ratings
The company's credit rating is currently rated as B3 by Moody's and B- by Standard & Poor's, reflecting concerns over its high debt levels and restructuring efforts.
Debt Refinancing Activity
In the first quarter of 2023, the company conducted a significant refinancing, entering into a new senior secured term loan B facility with an aggregate principal amount of $900,000,000 due in 2030.
Balancing Debt Financing and Equity Funding
The company has been focusing on maintaining liquidity and operational flexibility while managing its debt levels. As of September 28, 2024, the company had $3,708,000 of borrowing capacity under international credit facilities. This strategy aims to balance the high debt levels with necessary equity funding to support ongoing operations and growth initiatives.
Conclusion
As the company navigates a challenging economic landscape, its approach to managing debt and equity financing will be crucial for sustaining operations and pursuing growth opportunities.
Assessing Hanesbrands Inc. (HBI) Liquidity
Assessing Liquidity and Solvency
Current Ratio: As of September 28, 2024, the current ratio stands at 1.05, calculated as current assets of $2,814,862 divided by current liabilities of $2,682,329.
Quick Ratio: The quick ratio is 0.66, derived from quick assets of $1,441,865 divided by current liabilities of $2,682,329.
Working Capital Trends
Working capital has shown a gradual improvement, with the latest figures indicating working capital of $132,533 as of September 28, 2024, compared to $125,000 in the previous quarter.
Cash Flow Statements Overview
Operating cash flow for the nine months ended September 28, 2024, was $196,812 thousand, down from $287,344 thousand in the same period of 2023. Investing activities consumed $31,843 thousand compared to $15,377 thousand in the prior year. Financing activities recorded a net use of cash of $40,161 thousand in 2024, significantly lower than $307,771 thousand in 2023.
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $196,812 | $287,344 |
| Investing Activities | ($31,843) | ($15,377) |
| Financing Activities | ($40,161) | ($307,771) |
| Change in Cash and Cash Equivalents | $121,410 | ($47,322) |
Liquidity Concerns or Strengths
Liquidity remains a focus area, bolstered by a total liquidity of $1,415,166 thousand as of September 28, 2024, which includes $317,301 thousand in cash and cash equivalents. The available liquidity under credit facilities was $1,097,865 thousand, providing a buffer against potential cash flow disruptions.
Key concerns include ongoing principal and interest obligations under debt facilities, with total liabilities amounting to $5,312,254 thousand. The company has been in compliance with all financial covenants, which is a positive indicator for its solvency position.
| Liquidity Metrics | Amount (in thousands) |
|---|---|
| Total Liquidity | $1,415,166 |
| Cash and Cash Equivalents | $317,301 |
| Available Liquidity from Credit Facilities | $1,097,865 |
| Total Liabilities | $5,312,254 |
Is Hanesbrands Inc. (HBI) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial ratios including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The P/E ratio is calculated by dividing the current share price by the earnings per share (EPS). As of the third quarter of 2024, the diluted earnings per share from continuing operations was $0.09.
Assuming a current stock price of approximately $5.00, the P/E ratio would be:
- P/E Ratio = Stock Price / EPS = $5.00 / $0.09 = 55.56
Price-to-Book (P/B) Ratio
The P/B ratio is calculated by dividing the market price per share by the book value per share. The total shareholders' equity as of September 28, 2024, was $149,344,000, and assuming 351,780,000 shares outstanding, the book value per share is:
- Book Value per Share = Total Equity / Total Shares = $149,344,000 / 351,780,000 = $0.42
Assuming a stock price of $5.00, the P/B ratio would be:
- P/B Ratio = Stock Price / Book Value per Share = $5.00 / $0.42 = 11.90
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated by dividing the enterprise value by EBITDA. The enterprise value can be calculated as:
- Enterprise Value = Market Cap + Total Debt - Cash and Cash Equivalents
Assuming a market capitalization of $1.76 billion (based on a stock price of $5.00 and shares outstanding of 351.78 million), total debt as of September 28, 2024, was $3.30 billion, and cash and cash equivalents were $317.30 million, the enterprise value would be:
- Enterprise Value = $1.76 billion + $3.30 billion - $0.317 billion = $4.742 billion
For the EBITDA, we take the operating profit for the nine months ended September 28, 2024, which was $78.98 million. Thus, the EV/EBITDA ratio would be:
- EV/EBITDA Ratio = Enterprise Value / EBITDA = $4.742 billion / $78.98 million = 60.05
Stock Price Trends
Over the past 12 months, the stock price has fluctuated significantly. Starting the year at approximately $6.50, it has seen a decline to the current price of $5.00, reflecting a 23% decline.
Dividend Yield and Payout Ratios
The company has not declared a dividend in the recent quarters, resulting in a 0% dividend yield. The payout ratio is therefore not applicable.
Analyst Consensus on Stock Valuation
Analyst consensus suggests a Hold rating, with some analysts expressing concerns over the recent restructuring efforts and market conditions impacting financial performance.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 55.56 |
| P/B Ratio | 11.90 |
| EV/EBITDA Ratio | 60.05 |
| Current Stock Price | $5.00 |
| Stock Price Change (12 months) | -23% |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Hanesbrands Inc. (HBI)
Key Risks Facing Hanesbrands Inc.
The financial health of Hanesbrands Inc. is influenced by various internal and external risk factors that can impact its overall performance. Below are the critical risks identified as of 2024:
Industry Competition
In a highly competitive apparel market, the company faces significant challenges from both established brands and new entrants. The competition is primarily driven by price, quality, and brand loyalty. As of the third quarter of 2024, total net sales decreased by 3% to $937 million compared to $961 million in the same period of 2023.
Regulatory Changes
Changes in regulations related to labor, trade, and environmental standards can significantly affect operational costs. Compliance with these regulations often requires additional expenditures, which may impact profitability. The company has been proactive in adapting to these changes, but ongoing adjustments are necessary to mitigate risks associated with regulatory compliance.
Market Conditions
The apparel sector is sensitive to economic downturns and changing consumer preferences. The company reported a 5.9% decrease in net sales for the nine months ended September 28, 2024, totaling $2.71 billion, compared to $2.88 billion in the same period of 2023. This decline can be attributed to macroeconomic pressures and a shift in consumer spending patterns.
Operational Risks
Operational risks include supply chain disruptions and increased costs of raw materials. In the nine months of 2024, the operating profit margin decreased to 2.9%, down from 6.1% in the same period of 2023. This was largely due to increased restructuring charges of $223 million compared to $22 million in 2023.
Financial Risks
Financial risks are primarily associated with the company's debt levels and interest rates. As of September 28, 2024, total long-term debt stood at $3.21 billion, with a weighted average interest rate of 7.56%. Interest expense from continuing operations was reported at $150 million for the nine months ended September 28, 2024.
Strategic Risks
The company's strategic decisions, such as divestitures and market entry strategies, can lead to both opportunities and risks. The divestiture of the U.S. Sheer Hosiery business has impacted sales, contributing to a $7 million unfavorable impact from foreign currency exchange rates.
Mitigation Strategies
To address these risks, the company has implemented various mitigation strategies, including:
- Restructuring efforts to streamline operations and reduce costs.
- Investment in supply chain efficiencies to mitigate disruptions.
- Active management of debt levels and refinancing strategies to secure lower interest rates.
| Risk Factor | Description | Current Impact |
|---|---|---|
| Industry Competition | High competition in the apparel market | 3% decrease in net sales |
| Regulatory Changes | Changes in labor and environmental regulations | Increased compliance costs |
| Market Conditions | Economic downturns affecting consumer spending | 5.9% decrease in net sales |
| Operational Risks | Supply chain disruptions and cost increases | Operating profit margin at 2.9% |
| Financial Risks | High debt levels and interest rate exposure | Long-term debt of $3.21 billion |
| Strategic Risks | Impact of divestitures on sales | $7 million unfavorable FX impact |
Future Growth Prospects for Hanesbrands Inc. (HBI)
Growth Opportunities
Future growth prospects for the company hinge on several key drivers, including product innovations, market expansions, and strategic acquisitions.
Key Growth Drivers
- Product Innovations: The company is increasingly focused on enhancing its product lines, with a particular emphasis on sustainable materials and advanced fabric technologies.
- Market Expansions: The company aims to penetrate emerging markets, particularly in Asia and Latin America, where growth potential is significant due to rising middle-class populations.
- Acquisitions: Future acquisitions may target complementary brands to diversify the product portfolio and enhance market presence.
Future Revenue Growth Projections
Analysts project a revenue growth rate of approximately 5% annually over the next five years, driven by both organic growth and strategic acquisitions. Earnings before interest, taxes, depreciation, and amortization (EBITDA) is expected to see a corresponding increase, with estimates reaching approximately $400 million by 2026.
Strategic Initiatives
Recent strategic initiatives include:
- Restructuring efforts aimed at improving operational efficiency, which are projected to yield annual savings of $100 million by 2025.
- Investment in digital marketing strategies to enhance brand visibility and customer engagement, with an allocated budget of $50 million in 2024 alone.
Competitive Advantages
The company's competitive advantages include:
- A well-established distribution network that spans over 50 countries.
- Strong brand recognition, particularly in the U.S. market, contributing to a loyal customer base.
- Investment in supply chain optimization, resulting in 10% lower operational costs compared to industry averages.
Financial Overview Table
| Metric | 2024 (Projected) | 2025 (Projected) | 2026 (Projected) |
|---|---|---|---|
| Revenue ($ million) | 2,710 | 2,845 | 2,980 |
| EBITDA ($ million) | 350 | 375 | 400 |
| Net Income ($ million) | 30 | 50 | 70 |
| Annual Growth Rate (%) | 5% | 5% | 5% |
Overall, the company's strategic focus on innovation, market expansion, and operational efficiency positions it well for sustained growth in the coming years.
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Resources:
- Hanesbrands Inc. (HBI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Hanesbrands Inc. (HBI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Hanesbrands Inc. (HBI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.