Hanesbrands Inc.

Good day and thank you for standing by. Welcome to the Haines Brand's first quarter 2022 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star, then 1 on your telephone keypad. Please be advised today's conference may be recorded. If you require operator assistance during the call, please press star, then 0. I'd now like to hand the conference over to your host, T.C. Robillard. Please go ahead.

Good day, everyone, and welcome to the Haynes Brands quarterly investor conference call and webcast. We are pleased to be here today to provide an update on our progress after the first quarter of 2022. Hopefully, everyone has had a chance to review the news release we issued earlier today. The news release, updated FAQ document, and the replay of this call can be found in the investor section of our Haynes.com website. On the call today, we may make forward-looking statements, either in our prepared remarks or in the associated question and answer session. These statements are based on current expectations or beliefs and are subject to certain risks and uncertainties that may cause actual results to differ materially. These risks include those related to the impact of the COVID-19 pandemic and measures taken by governmental or regulatory authorities to combat the pandemic on our business and operations, on the consumer, as well as on the business and operations of our customers, suppliers, business partners, and labor force. These risks also include those detailed in our various filings with the SEC, which may be found on our website as well as in our news releases. The company does not undertake to update or revise any forward-looking statements which speak only to the time at which they are made. Unless otherwise noted, today's references to our consolidated financial results and guidance exclude all restructuring and other action-related charges and speak to continuing operations. Additional information, including a reconciliation of these and other non-GAAP performance measures to GAAP, can be found in today's news release. With me on the call today are Steve Bratspies, our Chief Executive Officer, and Michael Dastu, our Chief Financial Officer. For today's call, Steve and Michael will provide some brief remarks, and then we'll open it up to your questions. I will now turn the call over to Steve.

Thank you, TC. Good morning, everyone, and welcome. Hanes Brands delivered strong first quarter results with sales, operating profit, operating margin, and earnings per share, all exceeding the high end of our expectations. We also made continued progress on our full potential plan to transform Hanes Brands into a consumer-centric growth company. I'm extremely proud of the work our global team has done. We continue to demonstrate our ability to both run the business and change the business at the same time. And despite one of the most challenging operating environments in decades, our team continues to deliver results, underscoring our resiliency and proven ability to execute. Michael will walk through the details of the quarter and our outlook for the remainder of the year in his section. However, it's clear that over the last three months, the global operating environment has become even more challenging. There's a tragic war in Eastern Europe. Inflation continues to hit new highs, putting additional pressure on costs and consumer budgets. And COVID continues to create new headwinds to both demand and supply chain logistics. While this creates additional short-term challenges that I'm confident our team can manage through, it does not change our full potential strategy. We remain unwavering in our commitment to make the necessary investments to transform the business, irrespective of the near-term environment. In fact, these challenges reinforce our strategy is right. For our company to thrive, we must make our planned investments to drive accelerated and consistent growth and returns. There are no shortcuts, and challenging macro environments are actually the ideal time to lean in and execute long-term strategies. When we laid out our full potential strategy a year ago, we said that we'd consistently grow revenue. We'd expand margins over the course of the plans. We simplify and invest in the business, and we build a winning culture. We're confident we can achieve our 2024 financial targets. These include growing total company revenue at a 6% CAGR to $8 billion, growing interwear sales at twice the category rate, growing champion sales at a 14% CAGR to $3.2 billion, and expanding operating margins to 14.4%. Our full potential plan is on track, and I'd like to spend a few minutes updating you on the progress we've made to date. In terms of growing sales, we're seeing good initial results from our strategy. In 2021, full year revenue increased 9% on a constant currency basis, or 26% excluding PPE. And we ended the year with sales meaningfully above pre-pandemic levels. In the first quarter of this year, The strong growth continued, with sales increasing 7% in constant currency, as we were able to positively comp last year's strong 25% growth. We're committed to our full potential plan to grow champion and reignite growth in anywhere. And to do that, we're taking a two-pronged approach, centered on energizing the core and adding more. With respect to our core, we have iconic brands, strong consumer franchises, and distribution scale. However, the company historically has not fully leveraged these strengths. We see significant growth opportunities in both interware and activeware simply by energizing our core. We'll do this through consumer-driven product design, by delivering category-leading innovation, and improving on-shelf execution at retail. We've made a lot of progress over the past year, We've coordinated product design globally, we've improved our processes, we've removed internal barriers, and we've accelerated our speed to market. A good example of energizing the core is the newest version of our Hanes Total Support Pouch product. The innovation platform has driven increased engagement with younger male consumers. And we've built on this success by launching a new platform that includes our XTEMP technology to provide cooling and wicking benefits. We also leveraged our global operating capabilities to simultaneously launch this product in the US and Australia, supported by coordinated regional marketing campaigns. We're excited by the early traction of this launch, and I'd encourage you to check out the advertising on our Bonds website and Bonds YouTube channel to see the unique and fun way our Australian team is communicating the benefits of this innovative product. I'm pleased with the early benefits we're seeing from energizing our core. But what I'm really excited about is the robust product innovation and pipeline that we've developed over the past year as part of our full potential work. This is the broadest pipeline of Interwear and Champion products the company has had in decades, positioning us for continued growth in 2023, 2024, and beyond. In addition to energizing the core, we're also driving growth by adding more. This is a focused initiative grounded in disciplined brand management. We see specific opportunities to grow sales by reaching new consumers as well as expanding into new usage occasions, adjacent categories, and new geographies. We've made progress across each of these opportunities over the past year. Looking specifically at Champion, we continued our expansion in China, adding new stores in the quarter through our partners. In Europe, we continue to reach new consumers with new styles and silhouettes for kids. and we doubled our spring-summer footwear sales, driven by an expanded product offering across channels and geographies. We also launched our Win With Women campaign, as we grow our champion franchise with young female consumers. This campaign celebrates women in sports, with an underlying narrative of fueling confidence for women to feel comfortable in their own skin. We launched the campaign in mid-March, which is centered on our soft-touch sports bras and leggings, The integrated marketing campaign is off to a great start, and we've seen strong consumer engagement on our Champion site with higher conversion and increased sales. Next, I'd like to provide an update on how we're increasing investments and simplifying our business to enable revenue growth and ultimately lower costs and expand margins. We've made significant progress to date on both of these enablers. In terms of business simplification, we've coordinated product design globally for both Interware and Champion. We're streamlining our portfolio, shedding non-core, lower-margin businesses. And we've reduced our SKUs. To date, we've taken out more than 35% of our SKUs, which has lowered costs while also creating space for the pipeline of new products. With respect to our investments, we have a number of initiatives to unlock growth, improve the consumer brand experience, lower costs, and improve efficiencies. We've increased brand investments globally, spending an incremental $90 million over the past five quarters. In the first quarter, brand marketing investment increased 12% over prior year. In the second quarter, we'll step up investment as we support our champion Win With Women campaign and our total support pouch with Extent products under both the Hanes and Bonds brands. We're investing in technology to lower costs, improve visibility, and simplify our processes. We're investing in data analytics to drive growth through improved consumer insights, lower costs through fact-based negotiations, as well as lower working capital needs through improved manufacturing planning. And we're investing in our supply chain to improve our speed to market, which positions us to capture incremental demand, lower costs, and improve service to consumers and retailers. A good example of this is the work we're doing to optimize our U.S. distribution network. At a high level, we're reducing complexity, improving customer service, and increasing flexibility for future growth. One project is the addition of a third-party managed direct-to-consumer distribution center on the West Coast, which will increase capacity and improve the consumer experience by reducing product delivery times. Another project is on the wholesale side of our network, where we are leveraging our global scale to direct ship from our factories to certain customers. By eliminating a distribution node, shipments will skip our DCs, thereby lowering costs for both us and our retailers, while simultaneously reducing delivery times. We're also progressing our cost savings initiatives to fully offset our full potential investments. To date, we've realized approximately $60 million of cost savings through a number of initiatives, including vendor consolidation, leveraging data analytics, and a voluntary retirement program. And lastly, I'd like to provide an update on how we're enabling our full potential plan by building a winning culture. We're continually adding new skills, talent, and experience to our leadership team. And today, I'm very pleased to welcome Vanessa Le Fay to our team as the new president of Global Activewear. We're also building a truly inclusive organization as we create a culture of opportunity for all. Recently, we launched our new purpose and global values, which guide our behaviors as we move faster, innovate, and win in the marketplace. And we're quickly becoming a more sustainable company, building sustainability into everything we do. So as I step back, we've made significant progress on implementing our full potential plan. Through brand management discipline, we have defined lanes of opportunity to grow revenue by energizing the core and adding more. We're confident we can grow revenue in 2022 on top of last year's significant growth. And looking at our robust product pipeline for both Interware and Champion, we believe we're very well positioned for continued growth in 2023, 2024, and beyond. We have detailed plans to productively invest in the business to unlock future growth opportunities. We have line of sight to the cost savings initiatives that will offset our investments. And we're transforming our culture to enable growth. We're confident we have the right strategy. We remain unwavering in our commitment to execute our full potential plan on the timeline we laid out. And while the near-term operating environment is masking the progress we've made to date, we're on track to deliver our 2024 financial targets. And with that, I'll turn the call over to Michael.