Champion brand’s global sales increased 20 percent over the third quarter of 2019, with 22 percent growth in the U.S. and 19 percent growth internationally, according to quarterly results posted by its parent, Hanesbrands.
Champion growth in the quarter was driven by strong consumer demand across channels in the U.S., continued growth in its European business, and the ramp-up of our partners in China.
“Champion is all about being fun and inclusive,” said Steve Bratspies, Hanesbrands’ CEO, on a conference call with analysts. “Consumers around the world love that Champion gives them the confidence to express themselves and to feel good doing it. As a result, Champion U.S. share position increased in the quarter in both men’s and women’s categories.”
He added, “In Europe, we continue to execute our Champion growth strategy with expansion in key categories, such as kids and footwear, increased space gains, as well as expansion into new geographies. And in China, we continue to expand our consumer touchpoints. We’re adding stores through our partners. We’re broadening our product assortment with key pure plays, and we’re expanding onto social e-commerce platforms.”
In the Q&A session, Bratspies said he saw Champion’s growth “accelerating” coming out of the pandemic despite potential shifts away from comfort as people socialize more and are less bound to their homes.
“I don’t see it slowing down at all coming out of the COVID time frame,” said Bratspies. “We certainly had a good quarter, up 20 percent versus 2019. A lot of momentum around the globe. We are continuing to pick up new doors, gaining space adding new categories.”
He also called the growth in the footwear and kids business in Europe “really encouraging.”
Bratspies added, “And we see the same thing in the U.S.
When we launched our Reverse Weave Week, which celebrates the iconic Reverse Weave platform, we had strong consumer engagement that introduced some consumers to Reverse Weave and reengaged others. The response was really strong.”
He further cited the benefits of innovation for the Champion brand, including its recently-introduced soft-touch bras and leggings that are “doing extremely well” and have also helped Champion gain shelf space. He concluded, “Champion has momentum not only domestically but globally. And we expect it to continue only to increase as we go forward.”
More broadly, Bratspies said he believes Hanesbrands’ activewear business has momentum and is taking a share in the marketplace. The Activewear segment includes t-shirts, fleece, sport shirts, performance T-shirts and shorts, sports bras, thermals, and teamwear under the Champion, Hanes, Alternative, JMS/Just My Size, Gear for Sports and Hanes Beefy-T brands.
“I feel good about the business and, overall, don’t see any trend change,” said Bratspies. “Consumers are seeking the product. We do still have a headwind in our Activewear business around sports and college licensing businesses. That channel was conservative coming out of COVID to open up this year, but we expect that to continue to grow. And while we’re not back to 2019 levels in that channel yet, we are above 2022.”
Companywide, sales in the third quarter totaled $1.79 billion, up 5.8 percent year-over-year. Sales were just below Wall Street’s consensus estimate of $1.8 billion.
The gains were supported by 33 percent year-over-year growth in Champion year-over-year globally. Excluding $179 million in sales of personal protective equipment (PPE), sales jumped 18 percent over the prior year. The year-over-year growth was driven by strong consumer demand and point-of-sale trends in the U.S., Europe, Americas, and certain Asia markets, including China, which more than offset headwinds from the extended government COVID-related lockdowns in Australia and Japan. Total constant currency third-quarter net sales increased 5 percent.
Compared to third-quarter 2019, sales increased 11 percent, including the 20 percent growth in Champion brand sales globally. Total constant currency net sales increased 10 percent. Growth in the global innerwear and activewear businesses was driven by strong consumer demand, higher point-of-sale performance and market share gains.
On an adjusted basis, income grew 17.5 percent to $188 million, or 53 cents per share, year over year, topping Wall Street’s consensus target of 47 cents. Compared to the 2019 second quarter, earnings were up 8.0 percent.
On a reported basis, net earnings totaled $177 million, or 50 cents, in the latest quarter against $118 million, or 34 cents, a year ago and $189 million, or 52 cents, in the third quarter of 2019.
Adjusted operating profit of $264 million increased 9 percent from the prior year and 8 percent compared to 2019.
Activewear Sales Jump 42 Percent Against 2020 and 4 Percent Against 2019
By segment, Activewear sales grew 42 percent to $462.5 million over the prior year, driven by strong double-digit growth in both the Champion and Hanes brands.
The Activewear segment experienced strong point-of-sale trends across several channels in the quarter. The segment continued to benefit from pent-up consumer demand and the overlap of last year’s pandemic-related headwinds.
Activewear revenues increased 4 percent over 2019. Champion brand sales within the segment increased 14 percent, which more than offset declines in other brands. Strong point-of-sale trends were experienced across the online, wholesale and distributor channels in the quarter, which was partially offset by declines in the college bookstore channel.
Activewear operating profits reached $76.2 million, up 157.6 percent from $26.6 million a year ago. Segment operating margin of 16.5 percent increased approximately 740 basis points over the prior period driven by fixed-cost leverage from higher sales and the benefits from the business mix, which more than offset higher brand marketing investment. Activewear’s operating margin decreased approximately 10 basis points compared to third-quarter 2019 as leverage from higher sales volume and benefits from business mix were essentially offset by increased investments in brand marketing.
Innerwear Up Double-Digits Excluding PPE
In its other segments, Innerwear sales year-over-year were down 11.4 percent to $702.6 million. Excluding PPE, Innerwear sales increased 12 percent over last year with strong point-of-sale growth across channels. Innerwear sales increased 25 percent compared to third-quarter 2019. The Innerwear segment includes men’s underwear, women’s panties, children’s underwear and socks, under the Hanes, Champion, JMS/Just My Size, Bali, Maidenform, and Polo Ralph Lauren names.
Hanesbrands said that year-to-date, the company’s U.S. innerwear market share had increased approximately 140 basis points over 2019 with increased share positions in men’s, women’s, kids’, and socks.
Innerwear’s operating margin of 21.0 percent decreased 70 basis points compared to the prior year due to fixed cost de-leverage from lower sales, higher transportation costs, increased investments in brand marketing, and higher inflation levels. Operating profits declined 14.2 percent year-over-year to $147.7 million.
International Sales Gain 6 Percent
International sales increased 6.0 percent to $536.5 million. Excluding PPE sales in the prior-year quarter, third-quarter sales increased 9 percent on a reported basis and 7 percent on a constant currency basis. Sales grew 4 percent versus 2019.
The International segment’s operating margin of 16.1 percent decreased 385 basis points over the prior year, driven by de-leverage in Japan and Australian businesses and an increased brand marketing investment.
Earnings Guidance Again Raised For 2021
For 2021, net sales are expected in the range of $6.76 billion to $6.83 billion, which represents approximately 11 percent growth over the prior year at the midpoint and includes a projected benefit of roughly $108 million from changes in foreign currency exchange rates. The updated guidance was pretty close to the previous range of $6.75 billion to $6.85 billion.
Adjusted EPS is now expected in the range of $1.79 to $1.84, up from $1.68 to $1.76 previously.
Photos courtesy Champion
