Winston-Salem - Activewear giant Hanesbrands is to end one of its key contracts with Target Corp. for its Champion brand of activewear. Reporting a 18.5 per cent drop in net profits in its second quarter, despite a 4.2 per cent increase in sales, Hanes said it would not be renewing its 15-year old contract for the exclusive line of C9 by Champion activewear apparel when the current contract expires at the end of January 2020.
“The C9 by Champion program at Target is a mature program after 15 successful years,” said Hanes Chief Executive Officer Gerald W. Evans Jr. “Overall, Champion has significant momentum in all geographies globally, and we will continue to focus on growth across our Champion portfolio through expanded geographic penetration, product lines and distribution channels, including online and retail. Our core Champion sales in constant currency increased more than 30 per cent globally in the first half of 2018.”
Net profit at Hanesbrands plunged in the second quarter to US$140.6 million, down from $172.5 million with the company adversely affected by tax changes and a drop in intimate apparel sales. Total sales for the quarter were up four per cent at $1.72 billion.
The latest results showed that domestic Innerwear segment sales decreased 3 per cent, while operating profit decreased 10 per cent as a result of raw material inflation and mix of products sold. However, sales of Innerwear basics increased slightly as point-of-sale trends improved, men’s underwear sales increased, and women’s underwear returned to growth. Innerwear Intimates sales decreased in the quarter, although Hanes noted that progress was made on key aspects of the company’s plan to stabilize the business and then return to growth.
Elsewhere, International segment sales increased 15 per cent and operating profit increased 27 per cent.
Encouragingly, net sales for Bras N Things, acquired in February 2018, and Alternative Apparel, acquired in October 2017, totaled nearly $52 million in the quarter while global Champion sales increased 18 per cent in the quarter and were up 16 per cent in constant currency.
According to Evans Jr., the results for the second-quarter were consistent with the company's guidance and the year was unfolding as we expected. "We achieved organic growth for the fourth consecutive quarter with strong International and global Champion sales growth," he said. "We continue to address the challenging environment for intimate apparel and expect our turn-around plan to gain additional traction by the end of the year."