Hanesbrands Inc., the parent of the Champion and Duofold brands, said that while first quarter results were in line with expectations and had been significantly impacted by the economic recession, the company may also be seeing some positive movement from retailers. The trends leave management with the impression that second quarter shifts in sales and operating profit will improve.


Rich Noll, HBI chairman and CEO, suggested that retailers, while still experiencing soft retail sell through, are beginning to loosen inventory constraints. He said they were still planning as though it could be a false bottom – but it could also be a turning point. An improving trend at retail may not be widespread, however, and Noll suggested that the categories where they play present less markdown risk – and also come on the heels of sharp across-the-based inventory reductions in the fourth quarter. The potential for positive trends is not broadbased for HBI either, as Noll suggested that the Hosiery business – which he sees as more discretionary – continues its downward trend.

 

HBI revenues decreased 13.2% to $857.8 million in the first quarter from $987.8 million in the year-ago period. The company posted a net loss, including restructuring charges, of $19.3 million, or 20 cents a share, in the period, compared to net income of $36.0 million, or 38 cents per share, in the year ago quarter.

 

Restructuring charges amounted to $18.7 million in the latest period versus $2.6 million a year ago. Sales in the Innerwear segment, which includes the Duofold brand as well as the bra and underwear businesses, declined 5.5% for the quarter to $513.8 million. The Outerwear business, which includes Champion, among other brands, saw revenues fall 21.0% to $214.9 million for the first quarter. The Innerwear sales decline was seen as less severe than the 11% decline in the fourth quarter 2008, while the Outerwear sales decline was more severe than the 8% decline in Q4, primarily due to “lower casualwear sales in the retail and wholesale channels.”


Based on advanced booked sales, HBI expects the sales decline rate for the Outerwear segment to improve to a midsingle-digit decline in Q3. On the supply chain side, the company has decided to start production Oct. 12, 2009 at its new Nanjing, China knit textile manufacturing plant. The plant is the company's first company-owned fabric manufacturing facility in Asia and will support the company's product sewing operations in Southeast Asia. Management said that cotton costs had a negative $15 million impact in the first quarter, but should provide a $9 million positive impact in the second quarter, a $12 million positive impact in Q3 and an approximately $18 million positive impact in the
fourth quarter.