HanesBrands is taking a hard look at Champion — putting a for sale sign on the struggling active brand.
As it explores “strategic options for the global Champion business,” the intimates giant said its board would “consider a broad range of alternatives to maximize shareholder value” including “a potential sale or other strategic transaction.”
The brand could also remain part of HanesBrands, which has been taking heat from activist investor Barington Capital Group, which has a long history in fashion, mixing it up with L Brands, Avon Products, The Jones Group and Warnaco, among others.
James Mitarotonda, Barington’s chairman, hit the HanesBrand with a broadside last month, saying the company needed to focus on “cash generation and debt reduction” and that “management’s largely ineffective response to recent market challenges is responsible for the company’s rapidly deteriorating results.”
Champion’s first-half sales fell by 14 percent, with a 25 percent decline in the U.S. — a big drag for HanesBrands, which overall saw sales for the six months drop 8.5 percent to $2.8 billion.
Stephen Bratspies, the Walmart veteran who HanesBrands tapped as chief executive officer in 2020, told analysts last month that Champion was being positioned for the future but that only some of the efforts were “translating to financial results” thus far.
“We’ve seen solid performance within our retail business,” Bratspies said. “Our footwear business continues to build momentum, and we’re leveraging our global scale by bringing our top-performing styles to the U.S.”
But wholesalers have been cautious with fall/winter orders — a headache that is widely felt in fashion right now, but one that seems to have hit Champion particularly hard.
“In the U.S., Champion is not where we expected it to be at this point in time,” the CEO said. “This is clear in our results and our outlook. And as a result, we’re actively taking steps that we believe will drive the long-term success of the brand. We brought in new leadership, which is driving new talent in design, merchandising and sales.
“We’ve completed our first full global product line from the new team, which is based on our disciplined global segmentation approach and will be available for the 2024 fall/winter selling season,” he said. “In total, nearly one-third of our 2024 product and fabric platforms will be global versus zero today.”
That has the brand coming to market when it’s in a fast decline and in the midst of a major reworking — a tough proposition even though the dealmaking market is starting to heat up.
But clearly the board feels it has to explore its options, and publicly, as Barington needles it on its “excessive debt burden,” which according to S&P Capital IQ weighs in at $4.2 billion.
Shares of HanesBrands were up 2.1 percent to $4.56 in midday trading Tuesday, leaving the company with a market capitalization of $1.6 billion.
Ronald Nelson, chairman of HanesBrands, said, “Champion is a renowned global lifestyle brand, with a storied heritage in sports as the pioneer of American athletic wear. In recent years, the executive leadership team has implemented significant structural improvements within Champion that have resulted in greater distinction between the company’s innerwear and activewear businesses. With this in mind, and after careful consideration, we have commenced a comprehensive review of strategic options for the global Champion business. We are committed to working with our advisers to identify the right path forward that enables both Champion and HanesBrands to reach their fullest potential and maximizes value.”
Goldman Sachs & Co. and Evercore are advising HanesBrands.