HanesBrands Lifts Outlook On Robust Margin Improvement In Q2

HanesBrands Inc. raised its outlook as its transformation efforts are driving higher margins and operating efficiencies. On an organic basis, sales for the parent of Hanes, Maidenform, Bali and and Australia’s Bonds innerwear brand were flat.

“For the third consecutive quarter, we delivered revenue, profit and earnings per share growth that exceeded our expectations as we continue to see the benefits of our growth strategy and prior transformation initiatives,” said Steve Bratspies, CEO. “With our strong performance to date and our visibility to cost savings and input costs, we raised our full-year outlook, which continues to reflect our expected impact from U.S. tariffs. Our strategy is delivering consistent results, and we’re confident it positions us for continued long-term success. We have multiple avenues to drive increased shareholder returns over the next several years through consistent sales growth, additional margin expansion, and continued debt reduction.”

Second-Quarter 2025 Results

Net sales from continuing operations were $991 million. HanesBrands’ guidance had called for sales of $970 million.

• Net sales increased 1.8 percent compared to prior year.
• On an organic constant currency basis, net sales were relatively consistent with prior year.

Gross profit and gross margin increased year-over-year driven by the benefits from cost savings and productivity initiatives, the benefits from assortment management, and lower input costs.

• The company continued its consolidation and other optimization actions in its supply chain to lower fixed costs, increase efficiencies, and further improve customer service and in-stocks with lower levels of inventory. The company expects these actions to drive continued benefits in 2025.
• Gross profit increased 38 percent to $412 million and Gross Margin increased 1,100 basis points to 41.6 percent as compared to prior year.
• Adjusted gross profit increased 6 percent to $408 million and Adjusted Gross Margin increased 145 basis points to 41.2 percent as compared to prior year.
• Adjusted gross profit and adjusted gross margin exclude certain costs related to restructuring and other action-related charges.

Operating profit and operating margin increased over prior year through the combination of gross margin improvement and lower SG&A expenses. SG&A expenses decreased compared to prior year both on an absolute basis and as a percent of net sales due to the benefits from cost savings initiatives and disciplined expense management.

• Operating profit increased 345 percent to $155 million and Operating Margin increased 2,210 basis points to 15.6 percent as compared to prior year.
• Adjusted operating profit increased 22 percent to $153 million and Adjusted Operating Margin increased 255 basis points to 15.5 percent as compared to prior year.
• Adjusted operating profit and adjusted operating margin exclude certain costs related to restructuring and other action-related charges.

Interest Expense and Other Expenses

• Interest and other expenses decreased $4 million over prior year to $57 million driven primarily by lower debt balances.

Earnings Per Share

• Income from continuing operations totaled $85 million, or24 cents per diluted share, in the second quarter of 2025. This compares to a loss from continuing operations of $136 million, or 39 cents per diluted share, in second-quarter 2024.
• Adjusted income from continuing operations totaled $84 million, or 24 cents per diluted share, in the second quarter of 2025. This compares to income from continuing operations of $53 million, or 15 cents per diluted share, last year. HanesBrands’ guidance had called for adjusted EPS of 18 cents.

Second-Quarter 2025 Business Segment Summary

U.S. net sales decreased slightly, or approximately $5 million, as compared to prior year. The company continued to focus on its core growth fundamentals including innovation, brand investments, and incremental programming opportunities. These fundamentals delivered year-over-year growth in its Basics, Active, and New businesses. Similar to the overall innerwear market, this growth was more than offset by continued headwinds in its Intimate Apparel business.

Operating margin of 25.0 percent increased 360 basis points over prior year driven by benefits from cost savings and productivity initiatives as well as lower input costs.

International net sales decreased 3 percent on a reported basis, which included a $7 million headwind from unfavorable foreign exchange rates, and were consistent with prior year on a constant currency basis. By region, constant currency net sales increased in the Americas, were consistent with prior year in Australia, and decreased in Asia.

Operating margin of 10.7 percent decreased 225 basis points compared to prior year, driven primarily by increased promotional activity, unfavorable mix, increased brand investment and the impact from foreign exchange rates, which more than offset the benefits from cost savings initiatives and lower input costs.

Balance Sheet and Cash Flow

• Based on the calculation as defined in the company’s senior secured credit facility, the Leverage Ratio at the end of second-quarter 2025 was 3.3 times on a net debt-to-adjusted EBITDA basis, which was below prior year’s 4.6 times (Table 6-B).
• Inventory at the end of second-quarter 2025 of $957 million increased 4 percent, or $40 million, year-over-year.
• Cash flow from operations was $36 million in second-quarter 2025, which compared to $78 million last year. Free cash flow for the quarter was $27 million as compared to $71 million last year.

Third-Quarter and Full-Year 2025 Financial Outlook

The company is providing guidance on tax expense due to the expected fluctuation of its quarterly tax rate, stemming from the deferred tax reserve matter previously disclosed in fourth-quarter 2022. Importantly, the reserve does not impact cash taxes. Some portion of the reserve may reverse in future periods.

The company’s guidance reflects its expected impact from U.S. tariffs and is subject to change in the future.

For fiscal year 2025, which ends January 3, 2026, and includes a 53rd week, the company currently expects:

• Net sales from continuing operations of approximately $3.53 billion, which includes projected headwinds of approximately $35 million from changes in foreign currency exchange rates. Net sales are expected to increase slightly over prior year on both a reported and organic constant currency basis.
• GAAP operating profit from continuing operations of approximately $471 million.
• Adjusted operating profit from continuing operations of approximately $485 million, which excludes pretax charges for restructuring and other action-related charges of approximately $14 million. The operating profit outlook includes a projected headwind of approximately $5 million from changes in foreign currency exchange rates.
• Interest expense of approximately $180 million.
• Other expenses of approximately $46 million, which includes approximately $10 million of one-time pretax charges related to first-quarter 2025 refinancing activities.
• Tax expense of approximately $35 million.
• GAAP earnings per share from continuing operations of approximately $0.59.
• Adjusted earnings per share from continuing operations of approximately $0.66.
• Cash flow from operations of approximately $350 million.
• Capital investments of approximately $65 million, consisting of approximately $50 million of capital expenditures and approximately $15 million of cloud computing arrangements.
• Free cash flow of approximately $300 million.
• Fully diluted shares outstanding of approximately 357 million.

For third-quarter 2025, which ends on September 27, 2025, the company currently expects:

• Net sales from continuing operations of approximately $900 million, which includes projected headwinds of approximately $7 million from changes in foreign currency exchange rates. Net Sales are expected to be relatively consistent with prior year on both a reported and organic constant currency basis.
• GAAP operating profit from continuing operations of approximately $116 million.
• Adjusted operating profit from continuing operations of approximately $122 million, which excludes pretax charges for restructuring and other action-related charges of approximately $6 million. The operating profit outlook includes a projected headwind of approximately $1 million from changes in foreign currency exchange rates.
• Interest expense of approximately $46 million.
• Other expenses of approximately $10 million.
• Tax expense of approximately $10 million.
• GAAP earnings per share from continuing operations of approximately $0.14.
• Adjusted earnings per share from continuing operations of approximately $0.16.
• Fully diluted shares outstanding of approximately 357 million.