After a long period of speculation since Hanesbrands, Inc.’s (HBI) management first indicated in September 2023 that it was open to selling its iconic Champion brand, a deal to acquire the company appears to be on the horizon.
Women’s Wear Daily (WWD) reported that a source knowledgeable about the negotiations had confirmed to the news organization that Authentic Brands Group (Authentic) had won the bidding process for the Champion brand valued at “a little more than $1 billion.”
SGB Media reached out to Authentic for confirmation of a consummated deal and received a “no comment at this time” response but the company also added an assurance that it would keep SGB Media “closely posted.”
The original report from WWD read, “No formal agreement has been signed yet, but rumors are that something could be put in writing next week.”
WWD also cited “sources” that said Delta Galil, Sycamore Partners, G-III Apparel, and WHP Global were also suitors for the Champion’s brand.
HBI reported that global Champion brand sales decreased 23 percent on a reported basis and 24 percent on a constant-currency basis in the 2023 fourth quarter, as compared to the prior-year fourth quarter. U.S. sales decreased 30 percent in the quarter, driven by the combination of challenging activewear apparel market dynamics and the expected top-line headwinds from the strategic actions the company has taken to strengthen the brand and position Champion for long-term profitable growth. These actions include disciplined product and channel segmentation, shifting its mix and assortment changes.
Internationally, sales decreased 14 percent on a reported basis and 15 percent on a constant-currency basis in the fourth quarter. Constant-currency sales increased in China and Latin America, more than offset by decreases in Europe, Japan, and Canada.
Hanesbrands took restructuring and other action-related charges in the gross profit line equal to $2.9 million for the fourth quarter and $67.0 million for the full year related to the Global Champion performance plan. The restructuring and other action-related charges in the SG&A line were $11.5 million in Q4 and $21.1 million for the year. The overall impact on operating profit was $14.3 million in the fourth quarter and $88.0 million for the full year.
In early November 2023, Hanesbrands’ CEO Stephen Bratspies and HBI boiled their strategy down to several bullet points to turn the businesses around, get their teams focused, and make it easier to communicate direction to the investor and retail communities.
“Last quarter, we walked through an assessment of our strategy and how we are continually pressure testing it, looking at what’s working, where we need to improve, adapting our plan to match the near-term realities of the operating environment as well as looking at additional options to enhance shareholder value,” Bratspies shared in his opening remarks on the third quarter conference call with analysts.
“As we assess our progress to date and look at the path forward, we’ve outlined four drivers to unlock shareholder value creation. One, return gross margin and operating cash flow to historical levels; Two, pay down debt; Three, reignite our Innerwear business; And four, regain momentum and refocus our Champion business, which now includes an evaluation of strategic alternatives,” he summarized.
In looking at the global Champion business, Bratspies said the company continues to “experience near-term top-line challenges, including the difficult consumer environment” and offered that it was “progressing on a number of strategic initiatives designed to build brand health, recover top-line momentum and drive long-term profitable growth.”
The global Champion performance plan includes actions and related charges regarding the company’s accelerated and enhanced strategic initiatives to streamline operations further and position the brand for long term profitable growth and the evaluation of strategic alternatives for the global Champion business, which includes over $59 million of inventory write-downs related to the execution of its channel, mix and product segmentation strategy including the exit of discontinued programs, which are reflected in gross profit, and approximately $29 million of charges related to professional fees, supply chain segmentation, store closures, severance and other costs of which approximately $8 million are reflected in gross profit and approximately $21 million are reflected in selling, general and administrative expenses.
HBI in September announced it was evaluating strategic alternatives for the Champion business (read SGB Media’s coverage here).
“We’ve made a significant structural improvement to Champion such as segmenting and streamlining our supply chain, establishing globalized product design as well as implementing a new disciplined channel segmentation strategy,” Bratspies detailed.
“These improvements have highlighted an even greater distinction between our Innerwear and Activewear businesses; this has created the opportunity for us in conjunction with the Board to evaluate options for the global Champion business that could accelerate shareholder value creation.”
While cautioning that it is still very early in the process, the CEO suggested that they continue to evaluate the right path forward with Champion as they received strong initial interest from a broad group of global partners. But they also have to run the business and try to turn it around.
Global Champion brand sales decreased 19 percent on a reported basis (+20 percent constant-currency) in the 2023 third quarter compared to the prior-year Q3 period. U.S. sales decreased 16 percent, which were said to be driven by the continued challenging activewear market dynamics. The U.S. performance also reportedly reflected the expected short-term impact from the company’s continued strategic actions taken to strengthen the brand and position Champion for long-term profitable growth, including disciplined product and channel segmentation, shifting its mix, and assortment changes.
Internationally, sales decreased 22 percent on a reported basis and 24 percent on a constant-currency basis.
Based on a historical perspective on other deals with Authentic, especially as seen with the recent Boardriders deal for its family of beach and street lifestyle brands, there would be an impact on HBI employees working for Champion. Authentic is not set up as an operating company, but rather as a brand owner that works with licensees worldwide to maximize sales in the brands under its umbrella.
While HBI has made cuts as part of its global Champion performance plan and the Full Potential transformation plan, this would cut deeply into the team working in Winston-Salem, NC, in company offices worldwide and in local sales offices.
Image courtesy Champion/Hanebrands, Inc.
