Q2 2021 HanesBrands Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the Hanesbrands second quarter 2021 earnings Conference call.
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After the presentation, there will be a question and answer session.
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I'd now like to hand, the conference over to T C Robillard, Chief Investor Relations Officer.
Good day, everyone and welcome to the Hanesbrands quarterly Investor Conference call and webcast. We're pleased to be here today to provide and update on our progress after the second quarter of 2021.
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 and the investors section of our Hanes Dot com website.
On the call today, we may make forward looking statements either in our prepared remarks are and 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 our operations as well as the business and operations of the consumer our customers suppliers business partners and Labor Force. These.
These risks also include those detailed in our various filings with the SEC, which may be found on our website as well as and 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.
Given the short term volatility of comparisons due to the impact of the COVID-19 pandemic.
We have focused our comparisons to 2019.
Please note that unless otherwise stated all comparisons are to 2019 results that have been rebased to reflect the move of our European Innerwear business to discontinued operations as well as the exited C&I and program at NASS and the DKNY intimate apparel license.
Comparisons to 2020 results 2019 results as well as additional information, including a reconciliation of these and other non-GAAP performance measures to GAAP can be found in today's press release.
With me on the call today are Steve brass fees, our Chief Executive Officer, and Michael <unk>, 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 and I'll now turn the call over to Steve.
Thank you T C.
Morning, everyone and welcome.
Let me begin by thanking the entire hanesbrands team around the world.
And I can't express enough, how grateful and proud I am of their dedication their focus on safety and commitment to serving our consumers and customers under extremely challenging circumstances.
Our associates are our greatest strength and I want to make sure they're recognized for all their hard work.
To that and over the past months I finally been able to get out see parts of the business and interact with some of our amazing associates I'm inspired by their commitment and talent, there's a lot of excitement around our full potential plan and our associates are fully engaged.
Visit some of our retail stores and came away impressed by the knowledge of our associates and their energy around serving consumers and let me tell ya consumers are out shopping it was exciting to see high levels of traffic and our stores.
I also had the chance to tour, our New York Design Center spend time with that incredible team and see a wide range of innovative new products and our pipeline for both innerwear and activewear.
It's hard to believe it's been a year since my first day at Hanesbrands.
Reflecting back it's clear this is truly an amazing global company with a number of competitive advantages iconic brands distribution scale owned manufacturing a deep commitment to sustainability strong balance sheet, and 61 and passionate associates across more than 47 countries.
We've accomplished a lot and a relatively short period of time, we refreshed the leadership team, which is setting a new pace and driving change we underwent a deep assessment of the business that not only highlighted competitive advantages I just mentioned, but also underscored the opportunities ahead of us and the changes we need to make.
We developed our full potential plan to unlock growth, which we shared with you and may and we've taken action to simplify the portfolio streamline decision, making and organize the business to optimize future growth.
Still early and our journey, however, I am encouraged by the progress we've made and I'm excited about the opportunity ahead as we execute our full potential plan to generate higher more consistent levels of revenue and profit growth.
Today I'll focus my remarks on 2 key topics first our strong second quarter performance and our increased outlook for the remainder of the year and second a brief update on our full potential plan.
Looking at the second quarter, we delivered strong results. Despite the increasingly challenged global environment and higher levels of inflation revenue operating profit operating margin and earnings per share all exceeded the high end of our guidance range, we delivered strong operating cash flow performance and the quarter and we further strengthened our balance sheet.
With the volatility from the pandemic impacting short term comparability like many of you we are anchoring our comparisons to 2019.
For the quarter sales and operating profit increased 15% and 14% respectively compared to the second quarter of 2019.
Revenue momentum continued to build across both our innerwear and activewear businesses globally.
And U S innerwear sales were 19% higher than second quarter 2019.
Over this time period, we gained 160 basis points of market share with gains in each product category across basics and intimates and.
In addition to the strong underlying performance of our brands the category experienced above average growth due to certain transitory items, such as retailer inventory restocking government stimulus and pent up consumer demand.
And U S. Activewear sales increased 15% driven by growth and champion. We were pleased to see continued growth and champion brand with global sales up 21% from 2019 levels.
And to the international sales were 11% higher and 2019 with double digit growth and champion and high single digit growth and innerwear in spite of COVID-19 headwinds around the world.
With respect to our outlook, we raised our second half and full year expectations for sales operating profit and earnings per share to reflect stronger than expected momentum and our business as well as benefits from the child tax credit payments and the U S.
What's most encouraging to me about our second half outlook, despite higher than expected inflation, we are well positioned to generate higher operating profit dollars, while continuing to execute against our brand investment strategy and.
Investing in our brands is critical to the long term success and health of our business and we remain committed to it.
Now turning to the second topic, our full potential plan there were only and the early stages, we made progress and the quarter and we're encouraged and how the plan is unfolding.
Without going through every initiative that we spoke to and May let me provide a couple of updates.
With respect to our champion growth initiative and May we told you we're going to do 3 things to grow the brand and.
Grow our core sweater business expand our womens and kids product offering and expand into adjacent categories.
And the U S. We're introducing several new products and our core fleet category. We've added a number of new performance and lifestyle products and our women's line and and footwear and the first half we've more than doubled our points of distribution and the number of per sold as compared to 2019.
We believe the initial momentum and our footwear business underscores the consumers' affinity for the champion brand and their brand interest across product categories.
And we feel good about the momentum, we're seeing and champion and Theres a lot to be excited about around the globe, we remain confident and our full potential plan to grow this brand to $3 billion.
Looking at our U S. Innerwear initiative, we are encouraged by the underlying momentum and market share gains, we've seen and both basics and intimates.
Our latest boxer brief innovation total support patch continues to perform well with a dedicated marketing effort that targets consumers differently than we have and the past total support patch is attracting a younger consumer to the hanes franchise.
And we've significantly outpaced our initial sales projections and as we highlighted in May we increased our second half marketing investment behind total support patch to build and our momentum.
In terms of our direct to consumer initiatives agile teams are deployed and driving improved site experience conversion and speed as we continue the journey to know our consumers better.
We've increased our digital marketing investment at the top and bottom of the funnel with consistently better returns as a result, we're encouraged to see trends improving and certain digital metrics.
As compared to last year, and 2019 conversion and average order value are both up the number and value of repeat consumers continues to increase across all of our brands repeat consumers not only spend more there and important indicator of consumer engagement.
While it's very early and our journey, we remain confident and a significant growth opportunity ahead.
Lastly, we're making progress on our cost savings initiatives.
As we mentioned and May well, we don't expect the savings and investments to match dollar for dollar and every period. We're confident that we can fully offset our investments over the course of our full potential plan.
We've identified a number of opportunities and SG&A and cost of goods. For example, as we work through our SKU reduction initiative 1 of the benefit is greater manufacturing and distribution efficiencies as we produce fewer more profitable skus.
We're also working and a number of multi year global initiatives or big ideas that can generate large year over year savings things, such as global vendor consolidation and raw material platform.
We feel good about the opportunities we are finding and will continue to update you along the way.
Now I'd like to turn the call over to Michael for a review of our results and our second half outlook, then I'll return with some closing comments Michael.
Thanks, Steve I'm excited to be finishing up my first 3 months here at Hanesbrands as they evaluated this opportunity there were 3 things that really attracted me to hanesbrands and the people the brands and the full potential plan to capture future growth opportunities all are exceeding my initial expectations.
It's great to be able to speak such strong results on my first earnings call.
We exceeded the high end of our expectations across all of our key metrics driven by continued topline momentum and both global Innerwear and activewear businesses.
And my remarks today I'll be comparing our results for the second quarter of 2019 for a comparison of our results for 2020 I'll point you to our earnings release issued earlier this morning.
For the quarter as compared to 2019 sales increased 15% with double digit growth and each of the segments operating profit increased 14%.
Cash flow from operations increased 43% to $195 million and our leveraged improved to 2.9 times.
With that summary, let's turn to the details of the quarter's results.
Sales increased $233 million to $1.75 billion.
The impact from foreign exchange rates contributed approximately $26 million or 175 basis points to the quarter's growth.
Adjusted gross profit increased to $102 million or 18% compared to 2019, while adjusted gross margin increased approximately 75 basis points to 39%.
The margin expansion was driven by leverage from higher sales the benefit from product mix and the impact from foreign exchange rates. These.
These items more than offset the higher expedite cost and sourcing premiums we experience to meet the stronger than expected demand and the quarter.
Adjusted operating profit increased $29 million or 14% to $236 million.
Adjusted operating margin of 13, 5% was approximately 15 basis points lower than the second quarter of 2019.
Higher investments in brand marketing essentially offset the fixed cost leverage from the higher sales.
Adjusted earnings per share from continuing operations increased 24% to <unk> 47.
While GAAP EPS from continuing operations increased 2% to <unk> 42.
Now let me take you through our segment performance.
Innerwear sales increased 19% or $123 million over 2019, with comparable double digit growth and both basics and intimates.
The growth was driven by 2 factors first the strong underlying performance of our brands, which resulted in market share gains across our basics and intimates product portfolios and.
And second the benefit of certain transitory items, such as stimulus restocking and pent up consumer demand that drove category growth rates above historical levels.
For the quarter Innerwear operating margin of 23, 8% was 150 basis points above 2019, and margin improvement was driven by volume leverage and sales mix, which more than offset higher expedite cost and increased investments in brand marketing.
Turning to U S activewear revenue increased 15% or $53 million driven by growth across the online wholesale and distributor channels are sports and college licensing business increased significantly from last year. However, it remains below 2019 levels as on campus.
Tenants and the spring was still below pre pandemic levels.
Looking at champion brand within the Activewear segment champion and increased 20% as compared to 2019.
Activewear is operating margin of 10, 2% declined 290 basis points compared to 2019 as the leverage from higher sales was more than offset by higher expedite and distribution costs to meet the higher than expected demand as well as increased investments in brand marketing.
Switching to our international segment revenue increased 11% compared to 2019 on a constant currency basis sales increased 5% or $22 million, we experienced growth and Australia behind our bonds brand. We also saw growth in Europe, and the Americas, while sales in Asia Pacific declined driven.
And ongoing COVID-19 headwinds and Japan.
For the quarter the international segment's operating margin of 12, 9% was 250 basis points below 2019 levels driven by increased investments in brand marketing as well as deleverage and Asia Pacific from lower sales.
Got you and briefly on champion and the quarter Global champion sales increased 21% over 2019 on a reported basis and 18% on a constant currency basis champion sales and the U S. Which include all champion brand sales and our activewear and innerwear and other segments increased 25.
Percent.
Champion sales and our international segment increased 15% on a reported basis, and 9% and constant currency as compared to the second quarter 2019.
Turning to cash flow, we generated $195 million of operating cash flow and the quarter driven by strong operating results and focused working capital management.
Looking at the balance sheet inventories coming down our turns are improving and we're on track with our SKU reduction initiative and.
And our leverage at the end of the quarter improved to 2.9 times on a net debt to adjusted EBITDA basis as compared to 3.7 times a year ago.
It was a really good quarter and I'd like to thank all of our associates for their work and delivering such strong results, especially in a challenging operating environment.
And now turning to guidance.
Point, you to our press release and <unk> document for additional guidance details. However, I would like to share a few thoughts to frame our outlook.
Similar to our prior remarks, my guidance comparisons will be to 2019 at.
At a high level, we increased our second half guidance for sales operating profit and EPS by $375 million $35 million and 8 respectively compared to our prior outlook and we have factored the following puts and takes of the current environment into our guidance.
First we're staying committed to our strategy that we rolled out in May and long term. We believe it's the right thing to do for our business and our brands, we're going to continue to increase the investment behind our brands and we're excited about the consumer reaction that we're getting.
We see stronger than expected demand and both our innerwear and activewear businesses, which has been further fueled by the benefits from the recent child tax credit payments and the U S and third rising Covid cases continue to weigh on the macro environment is creating headwinds from additional lockdowns and most recently in.
<unk> and Australia.
It's also creating incremental disruptions to supply chains around the world.
This in turn is driving cost pressure as well as higher levels of inflation relative to our prior outlook.
1 of the advantages to owning our supply chain is that we have very good visibility, which allows us to be proactive our supply chain team is doing a great job managing these challenges as well as identify and additional savings and efficiencies to partially offset the increased inflation pressures.
The estimated increase in cost and inflation pressure is approximately 40 basis points of operating margin pressure and the second half relative to our previous outlook.
Looking at our key guidance metrics from a revenue perspective, we raised our second half and full year outlook for the full year, we increased our revenue guidance by $550 million, bringing the range to $6.75 to $6.85 billion.
We also issued third quarter revenue guidance of $1.7.8 billion to 181 billion.
And at the midpoint.
Our guidance now implies revenue growth of 11% for the third quarter, 15% for the fourth quarter and 13% for the full year as compared to 2019.
The higher revenue outlook is driving our increased operating profit and earnings per share guidance for the second half and full year.
Our full year guidance for both GAAP and adjusted operating profit increased $65 million.
We now expect full year, adjusted operating profit to be and the range of $880 million to $910 million.
For the third quarter, we issued adjusted operating profit guidance of $235 million to $245 million.
Our full year guidance for adjusted earnings per share from continuing operations increased 17 brings.
Bringing our range to $1.68 to $1.76.
With respect to our guidance for cash flow from operations, we now expect to generate approximately $550 million for the full year.
And with that I'll turn the call back over to Steve to wrap up.
Thank you Michael and once again welcome to Hanesbrands I'm incredibly pleased to have you on the team.
So we certainly have a lot of good things going on and the business as I step back the key highlights IC coming and the second quarter are we delivered strong results, which exceeded the high end of our expectations. We're upbeat given the momentum and our underlying business, which is reflected and our increased outlook for the second half.
We plan to continue to increase investments and our brands and the second half despite the challenges and the global environment.
We remain committed to our growth strategy and investing and our brands is critical to the long term success of Hanesbrands.
Our full potential plan is in place and we are rapidly executing against it to generate higher more consistent revenue and profit growth.
With that I'll turn the call back to T C.
Thanks, Steve.
That concludes our prepared remarks, we will 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.
And you'd like to ask a question at this time. Please press the star and the number 1 key on your Touchtone telephone.
To withdraw your question press the pound key.
And the interest and time, we ask that you limit yourself to 1 question.
Our first question comes from Omar Saad with Evercore.
Good morning, Thanks for taking my question and very nice quarter.
I guess I'd use my 1 question to ask you about the sales and the sales results are really strong.
The guidance raise on the revenue line also very confident maybe you could talk a little bit more detail the key pillars.
And you that got confidence behind the sales and maybe what you view as more transitory versus permanent.
And does this affect this kind of sales upside you're generating now does it change your calculus on the long term algorithm you provided on the Investor day.
<unk>.
Thanks, Omar I appreciate the question.
So let me a couple of pieces there in terms of sales and we remain confident.
And that will continue to build momentum and I was really pleased to see the Q2 numbers come in and shows really strong momentum across the brands.
Cross channels, the innovation that we're putting out there is working and consumers are responding to the marketing that we're investing and so across the board we feel really good about where we are and it's domestically and internationally and the markets responded really strong quarter out of our Australia group, which is really encouraging in terms of momentum going forward.
What I would say is.
We're encouraged by it certainly.
<unk> being up and in the Innerwear business by 19% is obviously, a really strong number and feel good about it.
But that said I don't think our innerwear business ongoing once we get back to a degree of normalcy and 19% business. If you think about our long term plan, we're estimating category returning to about 1% growth and we're going to double that at 2%.
So we will return to a degree of normalcy at some point, but within that we feel very good that we will continue to take share of the 160 basis points that we took was both in dollars and strong unit share underneath that as well.
So the momentum is really good across the board the 3 planks that we've laid out for growth and champion and both our core sweat and expanding Ted women's and kids' area and into adjacent categories is working.
Working and we continue to expand upon that so I feel very confident and our sales.
But there will be some degree of normalcy, we're going to have to comp. These numbers at some point and we won't continue to run at the percentage that we run because we're in a unique time right now that said I think we can we can outpace the category as we go forward.
So yes, there is certainly some transitory issues right now that are tailwind for us, but the underlying momentum of the business across our brands across channels and across geographies is quite strong.
Our next question comes from Susan Anderson with B Riley.
Hi, good morning, really nice job on the quarter and.
And I was wondering if maybe you could talk about the supply chain and the higher costs, you had and second quarter and curious if also shipping from Central America or is this product coming from Asia and then also how should we think about the increased freight costs and the back half versus the first half it maybe looks like from just the puts and takes and the gross margin and.
And being lower versus the first half the freight could be a little bit higher.
Hi, Susan this is Michael yes.
Yes, I think if you think about the first half of the year I think the team has done a nice job within supply chain and try to manage costs.
Given all of these external factors.
And I think once again.
Owning our supply chain provides a competitive advantage.
<unk>.
Some of these costs do come through immediately through the P&L. So some of the expedite cost et cetera.
Some of the inflationary cost as you can probably appreciate as we make product byproduct and we're seeing the cost increase as we sell the product say over the next 6 months, you'll start to see the pressured and so that's probably what I think you are kind of pointing to which is the profit margins do have some pressure in the back half.
And that was really that 40 basis points that we called out in the back half of pressure and I would I would point out that as a net number right because I think our supply chain team is doing a nice job with if you think about SKU rationalization that is helping them to get more even that much more efficient.
But there are some of these transportation cost and <unk>.
Commodity costs and wage pressures and it's not restricted to any particular part of the world. It's a global challenge I think in terms of these inflationary pressures and transportation challenges.
Our next question comes from Michael Binetti with Credit Suisse.
Hey, guys. Good morning, Thanks for all the thanks for all the questions here so.
Just a couple quick ones for you.
You added a lot of SG&A to the business here, Steve you talked to US about it can you just walk us through what youre investing and with a little more detail. So we understand.
Where the dollars are going and that we see now and what you baked in and in the second half you sound happy with it and then on the on the cash flows you raise the guidance this year to $5.50, and operating cash you've got the debt towards the target range and.
And at the Analyst day, I think the plan pointed to about 900 million and free cash after dividends and Capex, but I don't think you included.
Much in terms of assumptions about where you are where you'd be deploying Mac can you talk a little bit about your thinking there and where do you think thats and start deploying the cash here is it's moving and the right direction to help us with their models.
And.
Yes, Michael.
Michael This is this is Michael.
Let me start maybe with the last question and just let's make sure I understand your question is really just around capital allocation and cash flow.
So I think suffice to say first off joining a company, that's growing and topline and bottom line at the same time and improving its financial strength and financial flexibility.
<unk> is really terrific and.
As I think about kind of where we stand right now.
For this year, we took took it up to $5.50 for example on cash flow from operations.
And as you said in May we did.
To provide guidance that that's going to improve over time I think what we're probably going to do is restrict our comments and remarks to current year.
But we do think we have.
Fair amount of financial flexibility.
Clearly theres a lot of uncertainty out and the world right now and so that that makes us feel better and as we think about all of the different options and alternatives first off number 1 we need to invest and the business and that's what we're doing.
In terms of the debt metrics.
Probably saw that we're down to 2.9 times on net debt to EBITDA and if you look at the schedule and Youll see that we improved well over 20% on that metric, but it was done by both growing EBITDA and by taking debt down taking gross debt down and actually improving.
Cash.
And so as we think about going forward and alternatives to what do we do with the cash we think it's and it's an and proposition not and or proposition. So it's about I think we can invest and our business I think we can.
Reduce our debt levels and return more money to shareholders.
So I think thats kind of where where we think we are now and if we continue to grow like we are we're going to have that many more options going forward.
And Michael it's Steve and in terms of the SG&A underlying net and media investment and which we've mentioned and number of times I'm very passionate about that I think this company has wonderful iconic brands that quite frankly had been underinvested historically.
And we needed to step that up and we're starting to step that up and the.
The lion's share of that spend will be behind our big brands are Mega brands Hain champion.
And the bonds and it's starting to work with Haynes, We said, we need to get younger and the total support pouch product that we launched in the spring.
And for me extremely well and we're going to continue to lean in on spending behind that and it's reaching a younger consumer we see on our hanes Dot com business a lot of the younger consumers are joining us there and we're seeing the trend that its working which we need to do over time and.
And we're just starting with champion our campaign around beer 1 champion that is really the essence of what a champion is and non.
Not allowing others to define who you are is what champion is going to stand for it's steeped and consumer insight.
Launched we just did yesterday with Muhammad Ali that collaboration is really it.
I would call and the quintessential champion has different opportunities we have to lean into this campaign over time.
And we'll be spending more and digital.
And we'd be very thoughtful on the total funnel and how we spend behind that.
Even if you look at that the TV and we have spent on total support patch is fully integrated with social and paid search and we're taking a return based model and <unk>.
And it's playing out well so far and in my earlier remarks I mentioned.
Average order value and conversion of our App and our digital space repeat customers are improving and they are so valuable to us. So we like the early returns that we're seeing we think it's incredibly important for us to build these brands. We think they are winners both short term and long term.
And we need to lean into them. So we're going to continue to do that as we go forward.
Our next question comes from Jim Duffy with Stifel.
Thanks, Good morning, great quarter.
And I wanted to ask how youre thinking about pricing strategies, given the inflation backdrop and amidst inflation elsewhere and the store and unrelated categories. How do you think about pricing as a tool.
And your Arsenal. Thank you sure.
Good morning, Jim.
And yet pricing is certainly a tool and our arsenal.
We're going to be very thoughtful about how we do that and clearly we have inflationary headwinds that everyone else has and I thought Michael answered it well earlier were working credibly hard to offset those and credit to the team that they've been able to offset a nice chunk of it but certainly it is a headwind as we go forward. So when we think about.
Inflation and cost challenges, it's really a combination of savings initiatives manufacturing efficiencies and if we have to pricing.
The good news for US is I do believe our brands have pricing power and the market their strengths allow us to do that so that's an important place to start and we'll be selective and strategic and our approach.
Always keeping an eye on price gaps because we know the competitive nature, particularly and the eyewear business that we have to compete with but.
We'll take pricing and look at pricing on kind of that normal normal cycle with our retail partners and it's certainly something that I think is a lever for us and we have the capability of using when and if we need to.
Our next question comes from Ike <unk> with Wells Fargo.
Hey, Steve Michael Congrats great quarter.
And I guess my question is again on the on the revenue guide.
And the quarter I think you'd be by $160 million at the high and raised the year by $5.50, So $400 million raised through the back half I guess could you just maybe parse out where that confidence coming.
Comes from the debt is that orders in hand of the universe.
The acceleration and champion demand Youre seeing a debt Australia just use just any more color there would be helpful for the back half visibility and then maybe just a second quick 1 just update on Hanes, Europe and timing would be great.
Sure.
So in terms of the revenue guide Big step up and we're happy to do that and we're excited about it I think it's pretty much everything you said some of it is orders in hand, some of it is the replenishment model that we run and the volume that we see and preplanning for.
Holiday and also you have to remember that back to school splits Q2 and Q3 for us.
So it's a little bit of everything it's acceleration across channels and it also ties to the marketing spend that we're going to expect a lift from that as well. So I think the revenue guide cuts across everything all of our businesses all of our brands all of our channels. They are all performing well 1 thing I would tell you that.
Im very encouraged to see is the performance of some of our new products and the marketplace and we've just talked on this call, mostly hanes champion, but we're seeing good momentum in the valley brand. The Maidenform brand with some new products that are launching there and space that we're gaining space and we're gaining.
Lee and the back half that will be incremental to us and some of our larger customers across intimate and basics. So you add all that up and.
And it's all pieces that adds up to gives us confidence in the.
And the rate of revenue for the back half. So we continue to see the momentum and we're encouraged by that in terms of hei that process is moving along no news to share at this point, but obviously, we will let you know when there is news, but we're pleased with the schedule that we're on and it's progressing as we expected.
Our next question comes from Jay sole with UBS.
Great I just was wondering Steve if you could elaborate a little bit on the champion sales growth and the quarter. I think you said that U S was up 25% and international ex currency was up 9 where are you seeing the growth in terms of whether its customer demographics or categories or channels and sort of what does that tell you about sort of the long term opportunities to continue to.
And the champion brand share.
Sure. Thanks for the question, yes, very pleased with the numbers for champion.
Across the board, 21% for the quarter, 18% in constant currency and 25% domestically.
We're seeing growth across all different pieces of the business, our courseware businesses up and so there's some new innovation in that space.
Women's continues to grow and I was really pleased to see the very early results and our footwear business coming through so I think you should think about it and innovation working.
And then the back half we have some new innovation coming and our core fleet business. Our defenders series is going to launch which is an example of us expanding usage.
Product that's in the sweat category, but is used for extreme weather.
As I said earlier, we're focusing on women and some different products that are focused on unmet needs.
And then we have some product with new benefits that are coming out and sweat. So we think about innovation is how do we expand usage how to meet new needs. How do we bring new benefits to the category all of those things are coming and seem to be working well.
Our progress and China has been going well.
And we're early but very pleased with the partners that we have there and we continue to open stores and.
Launching footwear with Tmall has gone well and is going to rollout the stores and Q3 and Q4, so lot of different things working.
We have work to do obviously, and we're keeping that challenger brand mentality and.
And always going after the opportunities and I'm excited about the and I've mentioned earlier the <unk>.
Your own champion campaign, that's just launching right now I think has a lot of legs to it.
So a lot of good things coming champion and really just getting started in our Australia business.
So opportunities there so we.
We're pretty excited about champion and the outlook going forward, we said $3 billion brand and remain very confident that we can do that.
As we go forward.
Our next question comes from Paul <unk> with Citigroup.
Hey, Thanks, guys. I think you mentioned you were seeing signs of capturing more share from the younger customer and the innerwear business curious if you could share any numbers around that what percent of the innerwear growth is from that younger segment and also I guess along those lines.
Marketing to that younger segment and what is.
And second half marketing dollars and really look like versus the first half how does that compare to 2 years ago.
Sure. So let me take it in reverse order in terms of marketing dollars. We said, we're going to spend an incremental $50 million for the year. We're on track probably think of that maybe as a minimum for the year of what we're going to spend and that will increase and the second half. So that also gets us back to the earlier questions.
Around momentum on revenue.
About our ability to.
Deliver on that because the marketing is picking up and doing well in terms of share.
You mentioned 160 basis points a share over 2019 in the innerwear business, which we're very encouraged about <unk>.
Wondered 30 basis points and that was unit share. So there's a lot of volume underneath that which is really encouraging to see.
In terms of reaching newer younger consumers, we're starting to see that.
And the TSP product that we launched is certainly a great example of that and we're targeting that consumer.
Through a voice and a marketing campaign, that's different than we have and the path and.
And it's working.
And when you look at debt majority of the consumers that are purchasing that product on our site on Haynes Dot com majority of them are new to Hain and the majority of them are under the age 39. So really good initial metrics as we go forward and in general our marketing for Haynes will be targeted at that younger consumer.
So as we spend we're being very targeted and it's working so again early starting to see the results, but we're very encouraged that the hanesbrands can perform just as well with younger consumers as it does with older consumers and by the way that's true for our other intimates brands as well as I've mentioned their success Valley main form they are all we're all.
And this journey to go and we like our early results. We're learning as we go and we're adjusting as we go but out of the gate that we're doing well.
Our next question comes from David Swartz with Morningstar.
I guess can you tell us a little bit a little bit more about the plans for champion footwear and how they differ from.
Champion footwear, and the past and what your distribution plans are for the.
For the per category.
Sure.
And 1 of the things that about champion footwear that we talk about a lot and let's be clear we are not trying to be a performance footwear brands.
And this brand is going to be in a kind of and that lifestyle casual wear space and where the brand plays extremely well and focus on developing product and that space.
And we're going to have men's women's and kids already being developed I just had the opportunity 2 weeks ago to go out to our New York Design Center and do a walk through of all of the different products that are being developed for a global basis and its really exciting to see the breadth and range of our product that we're getting into so very focused very driven.
Our consumer understanding of the products that we have.
Youll hear some news soon about our expansion domestically and how we're going to serve the U S consumer and our ability to do that we're launching into China as I said and had some good success are very successful soft launch with Tmall and that will rollout to stores and Q3, and Q4 and China. So a good start.
That we have going forward and it's also a strong business in Europe.
It's a business that will be global for us it'll be broad men's women's kids, but very focused and that casual lifestyle space, where the brand sits and where we think we can develop winning product over time.
And.
Our next question comes from Carla Casella with JP Morgan.
Hi, and I had a question on and the inventory levels and your comfort level with your own inventories as well as inventories and in the channel and if yes.
Health Doctor you for back to school versus holiday and and you expect any is there any risk of getting products and <unk>.
And the supply chain issues and shipping.
Yes.
Hi, Carla this is Michael.
Yes.
I think when you when you think about inventory levels right.
Right now our inventory.
Tori levels were down about 14% to a year ago at the end of the second quarter now keep in mind. There are there is a number of things that are embedded in there last year, we would've had PPE inventory and that and that number.
So I think when we think about the back half.
We feel like we have the current challenges and supply chain factored in as far as getting goods and.
Into the U S.
Factored in so that was factored into our and our sales and profit guidance.
It is more it is a more challenging environment than it would've been.
And 2 plus years ago right.
Pre pandemic.
We think our team is.
And then working through all of the challenges and difficulties.
And so that was factored in and that's.
Hope that keep our fingers crossed and the next 6 months things will start to get better, but I think we do have all that factored into our back half and I would just I would just add for back to school.
Most of that has shifted.
<unk> shipped so no risk at all for our back to school timeframe and I'll just reiterate what Michael said, we factored in the current environment and the risks, but owning our supply. This is the time when visibility and flexibility, which is what I like to attest to our supply chain are great advantages, we feel good about our guide and the back half.
And our supply chain's ability to deliver on the product that we need.
Our next question comes from Michael Binetti with Credit Suisse.
Hey, guys I just wanted to jump in net back in there Michael.
So let me and again by the way.
Michael I think you alluded to some space gains when you were answering the question earlier about the sustainability of the growth on the innerwear side I would really like to hear about that particularly.
Knowing this management team a lot of you guys came from the company's largest.
Largest customer where we saw a lot of.
Negativity and the sales growth rates before the pandemic. So you guys have very unique perspective on what caused that I do want to hear about the space gains.
And that you are talking to where you see the brand position during private label and if that's if that's if that relationship is changing and all I think that'll be very important.
So Michael it's Steve.
So in terms of let me start with space gains.
We're seeing them across a number of customers and across a number of brands and I think it comes from 2 places 1.
Testing of innovation has worked and they like the innovation that we have.
They like the fact that we're leaning into our brands and investing behind them and quite frankly, I think we've proven over the last call. It year debt our supply chain, while challenged like everybody else's and far from perfect has done a really nice job of meeting the demand and many of our customers are.
Confident and our ability to supply them at a rate debt as advantageous to them. So a lot of that is driving the space and it cuts across both innerwear and internet.
In terms of.
That customer relationship I don't want to get into too much details, we don't really comment on specific customers, but what I would tell you is.
Our big customers are incredibly important to us and we're going to work extremely hard to make sure that we serve them the way they need to be served and I feel good about the relationships and where we can take those going forward.
For private label, specifically I've always said from the day I got here that is private label at risk to our business. Yes. It is but it's not a risk if we do our jobs right.
And that means we have great brands and great brands do as they lead on innovation.
They invest behind their brands and drive traffic to retailers because they are in demand and I'm confident that we're going to have the ability to do that I think the share gains that we're showing is showing that that's resonating at the shelf and with the consumer and our customer and I think.
Private label is something obviously, we watched when I mentioned pricing earlier, we're going to do if we have to do pricing and we do take price it will be through the lens of managing price gaps at the shelf and not let that get away from us. So I think that's incredibly important but between our innovation capabilities, our supply chain capabilities to brands that we have.
And the investments that we're making the innovation and the pipeline.
I feel very good about our ability to compete at the shelf.
Going forward, whether that's through other against other national brands, whether that's through private against private label or any other needs that are large customer sales.
Okay.
That concludes today's question and answer session I would like to turn the call back to T. C Robillard for closing remarks.
I'd like to thank everyone for attending our call today, and we look forward to speaking with you soon have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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