Hanesbrands Inc.

Good day and thank you for standing by. Welcome to the Haines Brand second 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 one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one 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.

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 second quarter of 2024. Hopefully everyone has had a chance to review the news release we issued earlier today. Beginning with second quarter results, We have reclassified our global champion business and our U.S. outlet store business to discontinued operations, and we have realigned our segment reporting. This was not contemplated in our initial second quarter guidance back on May 9th. Therefore, second quarter results from continuing operations are not directly comparable to our previous guidance or to current consensus estimates. In addition to our earnings release and FAQ document, we have provided two additional documents today. One is a supplemental financial packet with recast historical financials. The other is an earnings handout that provides an overview of the go-forward business, as well as a bridge from second quarter results to our prior guidance. All documents, as well as the replay of this call, can be found in the investor section of our haines.com website. On the call today, we may make forward-looking statements, either in our prepared remarks or in the associated question and answer sessions. 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 restructuring and other action-related items, 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 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 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'll now turn the call over to Steve.

Thank you, TC. Good morning, everyone, and welcome to our second quarter earnings call. Since we last spoke, we've taken strategic actions and made several decisions that will drive a new direction and future for Hanes Brands. As we announced in June, we've reached an agreement to sell our global champion business and we'll use the $900 million of net sale proceeds to pay down debt and further de-lever our balance sheet. We also completed the exit of our remaining U.S. outlet store business. By exiting these lower margin businesses, we have fundamentally strengthened the companies. creating a more focused, simplified business, one with more consistent top-line growth, higher margins, strong cash generation, a wide competitive moat, and multiple levers to unlock shareholder value over the next several years. Before I get into why I'm so confident about the go-forward business, I'll briefly touch on the quarter. In addition to all the strategic activity in the quarter, our Haynes Brands team did a tremendous job operating the business. We delivered strong second quarter results with better than expected performance from our interwear business in the US, strong cash conversion, and continued expansion of both our gross and operating profit margins. Given that we moved certain businesses to discontinued operations, which was not contemplated in our initial second quarter guide, page three of the earnings handout shows the bridge from our results to our prior guide. As you'll see, on a total company basis, Sales for the quarter were at the midpoint of our guidance range, and we were above the high end of our range for gross margin, operating profit, and earnings per share. Now let me turn the discussion to our business on a go-forward basis and what Haynes Brands looks like post-divestiture. Haynes Brands is a powerhouse in basics and innerwear with a global footprint. We're relatively evenly split between men's and women's. and we operate in a category that is core and essential for consumers. While the pandemic and the current macroeconomic environment have created a period of volatility, long-term, we're confident this remains an attractive and stable category. We own a portfolio of iconic brands that hold the number one or number two market share position in their categories, including Hanes, Bonds, Valley, and Maidenform. Our brands are synonymous with comfort, and have been trusted by consumers for generations. We have a proven global consumer-centric innovation process that is driving market share gains, new retail space, and is making our brands increasingly the choice of younger consumers. In the U.S. alone, innovation product has contributed over a half a billion dollars of sales in the last 18 months, and our innovation pipeline is full, giving us visibility to new product launches and brand programming into 2026. We have global go-to-market capabilities and distribution scale that is unmatched, allowing us to capture demand wherever the consumer wants to shop. Our products are available in every channel, including leading retailers that are winning with consumers and through our own direct-to-consumer offerings. And we have advantaged world-class manufacturing and sourcing operations. This is a powerful asset base and capability that we are already leveraging to further widen our competitive moat. to extend our market share lead and to generate consistent top line growth over time. In addition, we're well positioned and highly confident in further margin improvement. We have the natural recovery of our gross margin and the benefits from our existing cost savings programs, which are driving margin expansion this year. Beyond that, the divestiture of Champion and the exit of our US outlet stores has created the opportunity to deliver a step function change in our overall cost structure and improve our operational efficiency. We've identified three key areas and have specific plans in place to further reduce costs. First, we're resuming our migration to a consistent modern technology platform across the global organization that will enable better business analytics and planning, improve forecasting, and drive greater automation. we're further optimizing our supply chain. With the divestiture as well as the benefits from automation and our SKU management initiatives, we're able to exit several manufacturing distribution facilities while maintaining capacity for growth. These actions are expected to further simplify operations, reduce overhead, drive greater utilization, and improve customer service and in-stocks. And third, we're attacking SG&A overhead. This is all of the non-revenue generating spend within SG&A. We're creating the right cost structure for a simpler and more focused company. The supply chain optimization and SG&A reduction actions represent the vast majority of the savings, and we expect these two initiatives to be complete by the end of 2025. We're also strengthening our balance sheet through debt pay down and a focus on driving faster inventory turns with higher margins, lower interest expense, and working capital productivity, we're confident we are positioned to generate strong double-digit EPS growth for the next several years. We believe Haynes Brands will generate consistent top-line growth, a gross margin in the low 40% range, an operating margin of more than 15%, and more than $400 million a year of cash flow from operations. So in closing, we delivered solid second quarter results in a challenging consumer and apparel market. Through the actions we've taken to exit lower margin businesses, we've fundamentally strengthened the company, creating a more focused, simplified business. We are now even better positioned to accelerate the flywheel of increased earnings growth and faster deleverage of the balance sheet, which provides us with multiple levers to unlock shareholder value over the next several years. And with that, I'll turn the call over to Scott.