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Operator
Good day and thank you for standing by. Welcome to the Haynes-Brands First Quarter 2024 Earnings Conference Call. At this time, all participants are in a 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to T.C. Robillard, Vice President of Investor Relations. Please go ahead.
Steve
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 2024. 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 current macroeconomic conditions, consumer demand dynamics, our ability to successfully execute our strategic initiatives, including our full potential transformation plan, the champion performance plan, and our evaluation of strategic alternatives for our global champion business, our ability to deleverage on the anticipated timeframe and the inflationary environment. 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. 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 Bratskis, our Chief Executive Officer, and Scott Lewis, our Chief Financial Officer. For today's call, Steve and Scott will provide some brief remarks, and then we'll open it up to your questions. I will now turn the call over to Steve.
Steve
Thank you, TC. Good morning, everyone, and welcome to our call. Haines Brands delivered solid first-quarter results with sales at the midpoint of our outlook, better than expected operating profit, positive cashflow generation, and further reduction of our leverage. The year is unfolding as anticipated, and given our strong visibility to our operating profit and cashflow guidance, we reiterated our full-year outlook. In addition, we further strengthened our market leadership position in InterWear. We continued our progress on Champion, and with a positive inflection in margins and our lower fixed cost structure, we believe we're well positioned to accelerate earnings growth and further reduce debt, putting in place a flywheel for shareholder value creation over the next several years. For today's call, I'll briefly touch on our InterWear and Champion businesses. Then I'll discuss the value creation opportunity we see ahead of us. Looking at our global InterWear business, as expected, apparel sales globally remain under pressure as stretched consumers limit their spending. However, despite the headwind, we focused on strengthening our market-leading InterWear businesses, and our strategy of consumer centricity is working as we gain share and outperform the market. We're launching new consumer-led innovation, including MadeInFormM, BondsChapel, and the second phase of our successful Haines Originals platform called SuperSoft. With our robust product pipeline, we expect 2024 to be another record year of innovation. We're increasing brand marketing investments to support our current and future innovation launches, build greater brand relevance with younger consumers, gain incremental shelf space and seasonal programming, and further solidify the leadership position of our brand portfolio. In parallel, we continue to improve our operating model, including better inventory management capabilities and skewed discipline, improve service, and on-shelf availability, as well as a lower fixed cost structure. As a result of our strategic work over the last three years, our brands are healthier. Our product pipeline is full and is resonating with consumers. Our gross margin is back to historical levels. We're investing more in marketing than we have in over a decade, and we're seeing all of this reflected in our market share, particularly with younger consumers, as we gained another 50 basis points of market share during the quarter across both men's and women's in the US. We're widening the gap against our competitors, and we're well positioned for growth as the category returns to its historical trend of steady growth. Turning to Champion, we're aggressively implementing our performance enhancement plan designed to strengthen the brand and position Champion for long-term profitable growth. We also continued our focus on building brand heat, particularly with younger consumers, including strategic collaborations, as well as targeted new product offerings and key channels. We moved our kids' business to a licensed model, which is part of our strategic plan to optimize the portfolio. And as we highlighted last quarter, we're increasing marketing investments to build on the momentum of our Champion What Moves You campaign ahead of our new fall winter product offering. It's early, but we've seen some initial green shoots that our marketplace segmentation strategy is working. As we've previously stated, it will take time for our strategic actions to fully translate to the P&L. Global Champion sales in the first quarter decreased 25% on a constant currency basis. During the quarter, we began the planned strategic move of our kids' business to a licensed model. This move accounted for approximately 500 basis points of this decline. Normalizing for this, we saw a sequential improvement in Champion's -over-year trends. We expect the sales decline to continue to moderate in the second quarter. And we continue to expect Champion sales to trough in the first half. As we move past our channel cleanup actions, our collegiate business returns to its normal seasonal cadence, and we build on our momentum in Asia. With respect to our review of strategic alternatives for the Global Champion business, the process is progressing as expected. We continue to evaluate the right path forward as we've seen strong interest from our broad and diverse group of global parties. And while there's nothing specific to add at this time, we remain committed to updating you as appropriate when there's news to share. Now we'd like to turn to the significant value creation opportunity we see over the next several years. The underlying financial model of this company has always been strong, with healthy margins and consistent cash generation. While inflation, market disruption, and a challenging consumer demand environment have masked this for some time, this strength is once again visible. And over the past three years, we've taken necessary actions across the business to further enhance our operating and financial models. We've built new capabilities around brand building, data analytics, as well as inventory management and skew discipline. We've added talent. We've streamlined our supply chain and extended our advantages. And we've taken out more than $200 million of fixed costs, nearly half of which were at SG&A. With our leading brand positions, lower fixed cost structure, reestablished gross margin, consistent cash generation, and a commitment to reduce debt, we've created a flywheel for shareholder value creation. One that we believe positions us over the next several years to accelerate earnings growth, drive faster de-leverage of our balance sheet, as well as free up incremental capital to invest in growth initiatives. As I close, I'd like to take a moment and thank the entire Haynes Brands team. Your dedication, teamwork, and commitment to our transformation journey is beginning to show in our results. We delivered a solid first quarter in a difficult consumer and apparel market. We have strong visibility to achieving our outlook for the year. We've strengthened the long-term operating and financial models of the company, and we believe we're well positioned to unlock shareholder value over the next several years. And with that, I'll turn the call over to Scott.
TC
Thanks, Steve. At a high level, we delivered solid first quarter results as we've met or exceeded guidance across all of our key metrics. And as I look at our results, I'm reminded of where we were a year ago and the progress we've made delivering on the core financial objectives we laid out. Gross margins are back to historical levels. We're taking costs out of the business. We're generating consistent cash flow, and we're paying down debt and reducing leverage. We're also continuing to strengthen our operating model. We're increasing grand investment. We're rolling out even greater levels of product innovation, all of which is expected to generate strong earnings growth this year, as well as position us for more consistent top and bottom line growth over time. For today's call, I'll touch on the highlights from the quarter, our improved financial position, and then I'll provide some thoughts on our outlook. For additional details on the quarter's results and our guidance, I'll port you to our news release and FAQ document. Looking at the details of the quarter, net sales of $1.16 billion is at the midpoint of our guidance range. This represents a decrease of $233 million or nearly 17% versus prior year. Of this decrease, approximately $15 million was from FX, $20 million was from the US Hoesery divestiture last year, and $65 million was from discrete timing-related items within the activewear segment that we discussed on last quarter's call. These include the strategic shift of the Champion Kids business to a license model, accelerated orders from customers ahead of our SAP implementation, and shipment timing within our collegiate business, all of which benefited last year's first quarter. Adjusting for these, the comparable sales base of our business decreased approximately 10% year over year in the first quarter. Looking at sales by segment, within US Anywhere, as expected, the category remained challenging in the quarter. Sales decreased 8% as compared to prior year. This was roughly 200 basis points below our outlook, driven by a higher than anticipated level of inventory management actions by select retailers. However, we are seeing that our strategy is working and we are winning in the marketplace. Our point of sale trends outperformed the market as we gained another 50 basis points of share in the quarter. In our US activewear business, sales decreased approximately 31% or $97 million as compared to prior year, which was in line with our outlook. Approximately $65 million or two thirds of the decline was driven by the previously mentioned timing weighted items in the prior year quarter. Adjusting for this, activewear sales decreased nearly 14%, which represents a sequential improvement in the underlying year over year trends in both the Champion brand and the activewear segment. And in our international business, constant currency sales decreased 9% compared to last year, which was in line with our outlook. For the quarter, growth in Latin America, Japan and China were more than offset by decreases in Europe and Australia as macroeconomic headwinds continued to impact demand in these regions. During the margins, gross margin of .9% was strong, coming in 140 basis points above our outlook. As compared to last year, gross margin increased 720 basis points driven primarily by the benefits from lower input costs, cost savings initiatives, as well as the impact from business mix. With respect to SG&A, we decreased expenses $13 million as compared to last year in line with our outlook. The lower expense was driven primarily by the benefits from cost savings initiatives and discipline expense management. These savings helped fund a 50% increase in brand marketing investments, which was focused on our US Interwear and global champion businesses in the quarter. This resulted in an operating margin of .3% for the quarter, an increase of 270 basis points over last year and ahead of our expectation, driven by the strong gross margin performance. Looking at the remainder of the P&L, interest in other expenses were $76 million, tax expense was $15 million, and earnings per share for the quarter was a loss of 2 cent, which was ahead of our outlook. During the cash flow and the balance sheet, we continued to strengthen our balance sheet and our financial flexibility in the quarter. We generated cash flow from operations of $26 million. This was driven by better than expected profit performance and disciplined working capital management. Leverage at the end of the quarter was five times on the net debt to adjusted EBITDA basis, which was nearly a half a turn lower than last year. The improvement in our leverage was driven by lower debt, reflecting the $500 million of debt we paid down last year. All of this has led to a strong liquidity position of more than $1.2 billion at the end of the first quarter. And now, turning to guidance. All of my comments were referred to adjusted results and will be based on the midpoint of our guidance ranges. We reiterated our four-year guidance for sales, operating profit, earnings per share, and operating cash flow. Our view for the year is unchanged since our previous call. As a reminder, we highlighted that we expect the macro consumer environment to remain challenging for our categories in 2024, with progression in the -over-year sales trends as we move through the year. We continue to remain highly confident in our operating profit guide, which implies 26% growth over the last year, as we believe we have appropriately de-risked in this uncertain consumer environment. Our confidence in delivering $500 to $520 million of operating profit is based on our visibility to input costs on our balance sheet through the rest of the year and our proven cost savings programs that continue to exceed our expectations. With respect to our second quarter outlook, we expect net sales on a reported basis to decrease approximately 6% as compared to last year. Adjusting for the impact from the US Hoesry divestiture and FX headwinds, organic constant currency sales are expected to decrease approximately 3%. That said, we expect second quarter operating profit to increase approximately 40% over prior year, and operating margin to expand nearly 300 basis points to 9%, driven by the benefits from lower input costs and our cost savings initiatives. And given the lower debt balances, we expect interest expense to decrease -over-year, resulting in earnings per share of 9 cent as compared to a loss of 1 cent last year. So in closing, the year is unfolding as anticipated. We have confidence and visibility in our full year outlook. We're paying down debt and lowering interest expense, and we're increasing investments to drive growth. This has created a multi-year flaw wheel to generate meaningfully higher earnings and significantly reduced debt, which we believe will drive strong shareholder returns over the next several years. With that, I'll turn the call over to TC.
Steve
Thanks, Scott. That concludes our prepared remarks. We'll now begin taking your questions and we'll continue as time allows. I'll turn the call back over to the operator to begin the question and answer session. Operator?
Operator
As a reminder, if you'd like to ask a question at this time, please press star one one on your touchtone telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from the line of Jay Sol with UBS.
Jay Sol
Great, thank you so much. Steve, you touched on this in your prepared remarks a little bit, but can you just elaborate on the visibility you feel like you have into the company's profit recovery and maybe just touch on the long-term earnings algorithm with margins coming back. How do you see it? If you could give us a little bit more color there, that'd be great, thank you.
Steve
Thanks, Jay. I think when you think about profit, as we stated in the remarks, we are highly confident in the operating profit guide that we have for the year and we continue to expect that year for year improvement each quarter in both gross and operating margins. The macro consumer environment's gonna remain challenging for us and we think we factored that in appropriately, but when we look at the input to the visibility cost that we have on the balance sheet through the remainder of the year, the cost savings programs that we have in place which continue to over deliver, so I thank the team for the hard work that they're doing there. We're really confident that we've got the 500 to $520 million guide covered and we think we see risks appropriately. We haven't put all the cost savings in, so despite a challenging sales environment, we feel pretty good about where we are and where we can take it going forward.
Jay Sol
Got it, okay, thank you so much.
Operator
Our next question will come from the line of Paul Ishway with Citi.
Paul Ishway
Hey everyone, this is Bob Brandenburg. I just wanted to dig in on the gross margin you reported for the quarters. Above expectations, I guess, what are you expecting for the rest of the year? Why wouldn't you be able to achieve a similar rate in the back half? What are some of the puts and takes there?
Steve
Thanks, Brian. I start and Scott, you can come in time. I think we are very confident in our gross margin for the rest of the year. And while there's business mix changes that happen throughout the year, when you think about some of the key components, whether it's cotton, whether it's distribution, we have really good visibility to that and it's already on the balance sheet so we know what's gonna roll off throughout the year. So obviously we had a really strong first quarter at 39.9 and are really pleased with where that is. We feel really good about where we've been. We think our guide is actually relatively conservative overall, but a lot of confidence that we can get there based on what we know about our business already.
TC
Yeah, and just to add a little bit of color for the first quarter, right, we, like Steve said, a great start to the year. The next point and something I think you probably recall this like in the first quarter, we had a heavier mix of sales in our international business, which is a higher concentration of retail. And so that has a higher gross margin rate, but also a higher SG&A rate. So we saw that in the first quarter. That's a normal seasonal trend that you see in the first quarter and over the course of the year. And like Steve said, the rest of the year, we have great visibility to the input costs. And as you think about, from a modeling perspective, for the second quarter, I would guide you to a .5% to 39% gross margin rate. And then as you think about the rest of the year and the full year, I would continue to use that at .5% to 39% rate for gross margin. Again, great visibility, we have the cost, identify, we know it's gonna roll off, we have cost savings that have been placed. Again, we de-risk that profit guide. So it gives us a lot of confidence that we know we can deliver that profit number.
Paul Ishway
Got it. And just to clarify, you're not seeing any pricing pressure to pass through some of those cost savings.
Steve
Sorry, we lost the last part of your question. Could you say it again?
Paul Ishway
Sure, yeah. And just to clarify, you're not seeing any pricing pressure to pass through some of the savings that you're receiving on cotton.
Steve
Yeah, on cotton. No, we actually think we're in a really good position. And we have really good visibility, cotton all the way through this year. We know where we're gonna be. So if there's any movement, it's not gonna be anything this year that we incur at all.
Paul Ishway
Okay, and one more, sorry if my line is breaking up. Can you qualify the POS trends that you're seeing right now and the retailer's decision to take down inventory? Is there potentially a restocking opportunity there eventually? You know, and can they continue to restock? I feel like we've heard about them continuing to restock that channel for a while now. So we suspect that their inventories are pretty ruined.
Steve
Yeah, so let me talk about POS overall, then I'll talk about inventory. When you came through the quarter, the beginning of the quarter was softer on POS than the month of March was. Some of that is just a strengthening in business. Some of that is there's an Easter flip in there. But March was definitely stronger than January and February. And as we get through the Easter flip, we're starting to see that more positive trend in POS as we start to come into April. So we feel pretty good about our POS performance. Category is still struggling, there's no doubt about that. And it's soft, but our POS definitely outperforming. And that's why we got the 50 basis
TC
of performance here
Steve
as we go forward. When you think about the inventory, as we planned Q1 and guided, we expected some inventory reduction to be there. It turned out to be a little more than we expected, but it's about 10 to $15 million lower than we expected. We don't think this is a business model shift. There's always some changes and adjustments that are made, but we don't anticipate this being an ongoing challenge of a movement in inventory. Will it be a restocking? Look, we're always trying to find opportunities for inventory out there. We work very closely with our partners to find opportunities where there's gaps in assortment or gaps in inventory, all the way down to the store level. We've built a lot of data analytics to help us do that and really partner with them. And we have a really good working relationship on that front. But overall, we have not put a restock into our guide going forward.
TC
And just maybe one more point on the earlier comment about cotton, because you may be also asking about from a pricing standpoint, like we said, over the last year, we did not fully price for the inflationary peak. So if that's stabilizing off, we would not anticipate, again, a pricing pressure on that side of it.
Paul Ishway
Got it. Appreciate your time, and thanks for your time.
Operator
Yeah. Our next question comes from the line of Ike Boruchow with Wells Fargo.
Ike Boruchow
Hi, everyone. Good morning. Maybe, Steve, can you talk a little bit to, maybe a little bit more granular on some of the categories that are key to you guys? There are bits of kind of reach from some of your competitors, I think, on the underwear category, being under the most pressure. I'm kind of curious if you can kind of parse out the different pieces of interweaving if you're seeing kind of varying degrees of demand and just any other color. Would be kind of helpful when you think about that in the QQ and beyond.
Steve
Sure, Ike. As you think about the categories, at the most macro level, it's pretty consistent performance when you look at POS, and if you look at our share gains, pretty consistent across the business, which add up to that 50 basis points. You will see that men's underwear is outperforming more than other businesses, and it's always been probably the strongest category for this company. And we're gonna continue, obviously, to lean into that. We've got all the innovation in that space with SuperSoft, which is doing extremely well. I'm encouraged about what's happening with Maidenform and with the launch of M and Valley, with Breathe coming at the end of the year. So we're looking for some impact in the back half on that. But the categories overall, there's not major differences across the board. There's puts and takes in one month over another, but it's relatively consistent.
TC
Yeah, and maybe add a little bit too, like from a God standpoint, I know we don't God by segments, but let me give you some directions on the US underwear business. We've had the 8% decline in Q1, but as you look at Q2, again, we expect that moderating trend to continue. And also, we're gonna continue to outperform the category for all the things that Steve was talking about. We've got brand investments supporting the innovations that are coming. So as you think about US underwear, we're guiding, again, directionally to a 4% -over-year decline, factoring all of that in. And then just to touch on while we're talking about segments, just real quick, on the international side, as you think about modeling for Q2, I would say that would be down the mid-single digits on a reported basis and essentially flat on a constant currency basis. And then on activewear in the US, I would guide you down to mid to high single digits. And that compares to down 14% in the first quarter on that adjusted basis when you factor and take out the timing items that we talked about in our earlier remarks.
Ike Boruchow
Got it, thanks so much.
Operator
Our next question comes from the line of David Swartz with Morningstar.
David Swartz
Good morning, thanks for taking my question. Firstly, can you let us know if you're seeing any differences and trends in Australia and if it seems like that business is getting better or is it remaining under pressure? Secondly, are you confirming that you have decided to maintain control of Champion and will not be selling to business? Thanks.
Steve
So in terms of Australia, we're starting to see some improvement and it really depends on the business over there. Bond business over there has continued to do particularly strong, it's been particularly strong, particularly in the wholesale business and the grocery channel. The D2C business with Bros and things has remained a little bit softer, but we're starting to see a little bit of improvement. We are expecting some tax relief in the back half of this year and anticipating a little bit of interest rate improvement although there is some uncertainty right there. But the comps and compares get easier as we go into the second half. So we anticipate that business starting to rebound. I would tell you, I'm really pleased with the work team is doing over there. I'm excited about the innovation in Baby and the Bond's Chafeoff product. So we're leaning in. We have some aggressive advertising campaigns that are going on right now that are resonating. So feel good about that business as we go forward. In terms of Champions, we're not making any announcement today in terms of us keeping the business as you ask the question or selling it. The process is continuing. We're gonna continue to evaluate the right path forward. The process is progressing as we expected. And in parallel with that, we're gonna continue to implement the long-term growth strategy, like we said we always have. And we will follow the same protocol as we have in the past. And we will update you as appropriate when there's news for
Chafeoff
us to share. Okay, thanks Juan.
Operator
Our next question comes to the line of Paul Kearney with Barclays.
Paul Kearney
Good morning, thanks for taking my question. On the brand marketing opportunities and investments you're making, can you go over what you're doing differently today and where the marketing investments are concentrated and kind of the timing of those through the year? Thanks.
Steve
Sure, as you said, we increased our investment pretty significantly in the first quarter. And this has been a build over the last couple years. One of the things that we've been focused on for a while now is strengthening our brands. And I think these brands have been under invested in for a long period of time. And if you wanna be a consumer-centric company, you wanna be a brand-driven company, you wanna be an innovation-driven company, you have to invest and you have to continue to lean in to your brands. The bulk of our advertising in the near term has been around and is going to continue to be around innovation. It's leverage the brand but talk about the news. And the news, last year was really around originals, this year it's around end by maiden form. It's the next stage of originals which is super soft. On the champion side, it's gonna continue to talk about the brand and our positioning and what that brand represents and really leaning in when we have our new fall-winter line that's coming as we go forward. And along with that in the back half, we'll have Valley Breathe. So when you think about our advertising, you think about our media, think about it as leaning in behind branded innovation. And I think that's the best way for us to talk about it. The mix over time is gonna continue to change and depending upon the brand. So Hanes will go to market differently than Champion will go to market. It'll show up in different channels, whether that's linear TV or that more direct to consumer channels. And what gives me confidence is we're starting to see the results of that. So take M, maiden format. For example, when we started to literally lean into that on the first part of this year, we saw POS jump 18% in that business. So we've got confidence that our messaging is right, our approach is right and we're gonna continue to make those investments over time. Tying back to some of the things we talked about earlier, our cost position and the way we continue to take costs out, gross margin improvement, the SG&A focus, enables us to fund those investments. And we're gonna continue to find that right balance as we go forward.
Paul Kearney
Thank
Operator
you. Our next question comes from the line of Hale Holden with Barclays.
Hale Holden
Hi, good morning. The last couple of quarters we've talked about declines in the US inter-wear kind of industry, not necessarily your segment, but the whole sort of sales opportunity set. And was wondering, it sounds like you've seen that stabilize this quarter and in the next quarter and maybe if you could give us some dynamics about what you're seeing in the segment.
Steve
Yeah, I think when you think about the indoor segment, I think you have to think more broadly about the consumer environment and where it is. Overall, consumer demand remains challenging for apparel across the board in US, Europe, Australia. We've been seeing those headwinds for several quarters, whether it's interest rate impact, inflation, consumers are definitely seeking value. We can see their activity of shopping events and you definitely see that in the POS. When we look at the category from a long-term perspective, I've got a ton of confidence that it's gonna rebound to historical levels, which is 1% plus growth. You've seen that, you go back to 08, 09, when all the challenges in the market right there, the category was impacted and then it rebounded. We expect that's gonna happen over time. If you look at the last three years, on average, the category performed at historical rates. It's just been incredibly disruptive. 2001, I hate to go back that far, was such a massive growth, 24, 25%. And then it's been challenged ever since. But we expect that to moderate over time. We're starting to see some stability over time and we got a lot of confidence this category will perform to its long-term run rate as we go forward.
Hale Holden
Great, thank you very much.
Operator
Our next question comes from the line of William Reuter with Bank of America.
Chafeoff
Good morning. For the sales decreases of Champion, I was wondering if you could talk a little bit about what channels those decreases in, whether those were kind of specialty channels, whether they were off-price channels, mass versus department stores. Where did you see the biggest declines in your sales into?
Steve
Yeah, thanks for the question. When you think about it, it really varies by geography in terms of over performing. In the US, it's really kind of generally across most channels or all channels. And that has a lot to do with cleaning up of inventory that's been out there. And I think we've finally repositioned ourselves to a place where the channels are cleaner and we can prepare to move forward. And as I mentioned earlier, we're excited about the fall winter line that's coming and think that that's gonna help start to rebuild the business as we go forward. In Europe, wholesale has been challenging and the customers are just being conservative with they've been in inventory challenges in the past. I think there's a challenge going forward. When we look at Asia, Asia's performing pretty well. Japan's up, China's up. We're seeing opportunities there to continue to grow. And those markets have rebounded from where they've been the last couple of years. So I think it's a mix by geography, but I think going forward, we're well positioned across all the different channels. If you look at, in the US, our e-commerce business was up 12% in the first quarter. So we're starting to build some momentum there. And more importantly, the programming that we have now is channel specific. And I think that's what has been missing in the past. We weren't differentiated enough by channel. We weren't segmented enough by channel and by product. And the product that we have going forward accomplishes all that. We've instituted a more global approach to how we go to market. And that's really what's gonna make a difference for us in terms of global platforms on product, on fit, on color, all those different things are gonna help us win across channels. And it's something that we haven't done very well in the past.
Chafeoff
I guess just one, a little more specifically on that, were there intentional reductions to off price that impacted the sales of Champion?
Steve
No, nothing intentional. We're managing through or have been managing through high inventory positions in the channels and consistently looking for opportunities as we go there. We think the brand can play very effectively across a lot of different channels and we'll continue to activate that.
Chafeoff
Great, that's all for me, thank you.
Operator
Our last question today will come from Michael Coppola with JP Morgan.
Michael Coppola
Good morning and thanks for taking our question. The first one we had was on the Champion kids licensing deal. Did you guys receive any cash payment for that? And I know you kind of called out there was a 500 basis point impact to revenue. Just how we think about revenue and margins pro forma for that going forward.
TC
Yeah, that wasn't a transaction where we sold something. They actually converted it to more of a top line wholesale model to a licensed model so we get a relative income stream going forward.
Michael Coppola
Gotcha, thank you.
Steve
And you'll see that was the biggest headwind from that will be in Q1 and it'll moderate as we go forward.
Michael Coppola
Okay, great, thank you. And then the second one, I'm gonna get you guys to reaffirm that you plan on paying down about $300 million in debt this year. You know, if you, any comment of where you prefer to go after term loan or bonds for that as well or if there's any way you're thinking about that.
TC
Yeah, great, thanks for your question. Again, you know, we've paid down 500 million last year of debt. We got another 300 plus coming in this year. So really good about the cashflow generation. We talked about the profit driving that, working capitals coming through. As you think about how to apply that 300 million plus of debt pay down, you know, we have a lot of flexibility with our debt structure. When our senior secured credit facility, we have the term A and term B loans that are prepayable without any penalty. And so that's higher rate debt, it's prepayable and that's what we'll focus on, the debt pay down.
Michael Coppola
Great, thank you very much and I'll pass it off.
Operator
That concludes today's question and answer session. I'd like to turn the call back to TC Robillard for closing remarks.
Steve
We'd like to thank everyone for attending our call today and we look forward to speaking with you soon. Have a great day.
Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.
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