Hanesbrands Inc.

Good day and thank you for standing by. Welcome to the Haines Brand's 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, Investor Relations. 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 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.

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 cash flow generation, and further reduction of our leverage. The year is unfolding as anticipated, and given our strong visibility to our operating profit and cash flow guidance, we reiterated our full year outlook. In addition, we further strengthened our market leadership position in Interware. 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 Interware 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 Made in Form M, Bonds Chafe Off, and the second phase of our successful Hanes 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, improved 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 in key channels. We moved our kids business to a license 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 license model. This move accounted for approximately 500 basis points of the decline. Normalizing for this, we saw a sequential improvement in Champion's year-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 I'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 further enhance our operating and financial models we've built new capabilities around brand building data analytics as well as inventory management and SKU discipline we've added talent we streamlined our supply chain and extended our advantages and we've taken out more than 200 million dollars of fixed costs nearly half of which were in SG&A with our leading brand positions lower fixed cost structure, reestablished gross margin, consistent cash generation, and a commitment to reduce debt, we have created a flywheel for shareholder value creation, one that we believe positions us over the next several years to accelerate earnings growth, drive faster deleverage 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.