Q2 2022 HanesBrands Inc Earnings Call
Okay.
Good day and thank you for standing by welcome to the second quarter 2022, Hanesbrands earnings Conference call.
At this time, all participants are in listen only mode.
After the Speakers' presentation, there'll be a question and answer session.
To ask a question during the session you'll need to press star one one on your telephone.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today T. C. Robillard VP of Investor Relations. Please go ahead.
Yeah.
Good day, everyone and welcome to the Hanesbrands 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 2022.
Hopefully everyone has had a chance to review the news release, we issued earlier today.
News release updated Faq document and the replay of this call can be found in the investors section of our Hanes Dot Com website.
On the call today, we may make forward looking statements either in our prepared remarks or in the associated question and answer session.
These statements are based on current expectations or beliefs and are subject to certain risks and uncertainties that may cause actual results to differ materially.
These risks include those related to the impact of the COVID-19, pandemic and measures taken by governmental or regulatory authorities to combat the pandemic as.
As well as current macroeconomic conditions consumer demand, the inflationary environment and cyber security, including risks regarding the ransomware attack announced May 31.
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 <unk>, 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.
I'll now turn the call over to Steve.
Thank you Jessie good morning, everyone and welcome.
Despite Q2 being a disappointing quarter I want to thank our committed hanesbrands associates around the world for everything they are achieving in this difficult operating environment.
We continue to work toward and make progress against transforming Hanesbrands is a consumer centric growth company.
For today's call I'd like to touch briefly on the quarter, including the unexpected cyber event and external factors that negatively impacted our performance next I will discuss our outlook for the rest of the year before providing an update on our full potential growth strategy.
Then I will turn the call over to Michael to provide greater detail.
As you've heard through this earnings season, the global operating environment deteriorated in the second quarter inflation continued to impact product cost and increasingly weighed on consumer demand.
<unk> remains a headwind in parts of Asia and inventory is built up in pockets at retail.
All of which drove softer than expected point of sale trends in the quarter.
Adding to these macro headwinds was the unexpected impacts from the previously disclosed cyber event, which disrupted our global operations in late May.
As a result, our second quarter performance was below our expectations, while profit margins were in line with our forecast sales and profits were below our guidance and.
And we ended the quarter with more inventory than planned which is creating a near term drag on cash flow.
That said our team did a great job recovering from the cyber event, which temporarily shut down parts of our global supply chain network and limited our ability to fulfill customer orders for nearly three weeks.
Despite the disruption we shipped all of our innerwear back to school commitments on time and in full.
Absent the cyber event, we estimate second quarter sales would have still been below our guidance. However, operating profit and earnings per share would have been at the high end of our guidance range.
To be clear, we're not satisfied with our performance in the quarter.
That said as an organization, we're not standing still we remain nimble, we're continuing to execute our long term growth strategy.
<unk> focused on controlling the things that we can control.
We have plans in place to bring our inventory levels down we're confident in the quality of our inventory given the vast majorities replenishment innerwear products.
We expect to end the year with inventory units below prior year.
We continue to invest in our brands globally, as well as our technology and our talent.
We have a solid track record of managing SG&A and <unk>.
We'll remain disciplined in managing expenses without sacrificing investments in our full potential plan.
We continue to search for additional cost savings opportunities.
Looking at the back half of the year, we reduced our sales and profit outlook to reflect the changes in FX rates.
The short term costs associated with our inventory reduction actions as well as an assumption that slow consumer demand continues and the retail environment remains challenging.
While our estimated reduction may prove to be conservative we felt it was prudent given the softer than expected point of sales trends in the second quarter and the overall macro environment.
That said, we're convinced we have the right long term strategy, we're hearing it from our consumers our suppliers and our retail partners and we remain steadfast in executing our full potential plan.
We're acting more like a global operating company, we're beginning to move with speed and we're seeing evidence of this around the globe in our innerwear champion and supply chain initiatives.
Touching on each of these I'd like how we've consolidated design globally in Innerwear, we're starting to see results with new innerwear products and innovation.
We're driving retail space gains.
I am very pleased with how our total support patches X temp is performing both in the U S and Australia.
This is the first time, we've launched innovation globally and supported it with a global marketing campaign.
Our retro rib product from Australia was launched in the United States under the Hanesbrands and is exceeding our expectations. Our top customers are very pleased with the consumer response, and we expect to gain additional retail space.
We're also building innovation platforms around Absorbency. We believe this is a meaningful opportunity under our hanes and bonds brands with lots of different usage occasions, ranging from adult and child absorbency to post pregnancy needs for women.
And this is just the start.
Our product innovation pipeline is full with a lot of big ideas across our basics and intimates brands that we expect to drive continued retail space gains.
I look forward to sharing more of our innovation pipeline towards the end of this year and into 2023.
Turning to our champion business, we continue to invest in the brand globally.
It highlighted at our Investor Day last year champion is a big part of our full potential plan we.
We see significant growth opportunities through the expansion of our women's and kids businesses the expansion in new markets, such as China, as well as into adjacent product categories, including footwear.
Specifically footwear in North America represents an expanded opportunity.
We purchased the champion trademark for footwear in North America in the quarter. This purchase as the control we have over the champion brand and product globally.
It will give us greater speed to market and the ability to have a more integrated and collaborative approach with our apparel offerings.
I saw this opportunity firsthand in May as I traveled and spent time with the champion Europe team.
They are amazing head to toe product that comes to life and a great retail shopping experience.
Came away from the trip excited about our European operations, and I saw significant opportunities to leverage our global capabilities for the champion brand.
Can build in our footwear success in Europe , and Asia to address the U S market and more broadly we have a big opportunity to coordinate design product development and merchandising globally.
During the quarter. We also continued to invest in our champion distribution network as we consolidate down to two wholesale champion Dcs.
This will simplify our distribution model create efficiencies lower costs and improved retail service as well as support the future growth of champion in the U S.
And lastly, we're in the early stages of executing our full potential supply chain strategies to build on our advantaged position as well as balance speed cost and flexibility to enable faster topline growth at higher margins over time. These.
These efforts involve segmenting, our supply chain and the previously mentioned DC consolidation work, we're doing in champion and.
In addition, we also began direct shipping innerwear product from our central American manufacturing facilities to certain wholesale customers in the U S. This initiative Leverages, our scale saves time and reduces cost for both us and our retail partners.
We're also on track to go live this month with our new West Coast DC to support our direct to consumer business.
Thus, we began adding additional automation to several Dcs. This includes the addition of robots and sortation systems.
Which will help improve picking and sorting speeds, while also lowering costs.
So in closing the macro environment remains extremely challenging and is weighing on near term results, but our team is focused and we're not standing still we're executing our full potential growth strategy of consumer Centricity simplification increase speed and building digital capabilities, we're controlling the things we can.
Control and we're delivering innovation.
We have the biggest and most robust pipeline of new products and innovation in decades. These products are rolling out their testing well with consumers and retailers, they're driving retail space gains and Theres a lot more coming as we head into next year as.
As we look forward, we are convinced our strategy positions us to deliver revenue and profit growth with consistent cash flow over the next several years.
And with that I'll turn the call over to Michael.
Thanks, Steve as previously mentioned, we faced an unexpected cyber event and external factors that impacted our second quarter performance.
We're not at all satisfied with our results the near term headwinds, we're facing do not change our long term strategy or the work we are doing to transform hanesbrands and look into our consumer centric growth company.
I am encouraged by the progress we've made in implementing our full potential plan in the quarter. We continued to increase investments behind our brands globally, we're rolling out new product innovation across men's and women's with a robust pipeline that extends beyond 2023.
We're effectively managing SG&A costs, and finding cost savings opportunities, we're continuing to find ways to leverage our global capabilities, which improve speed to market and lowers cost.
The macro related factors impacting near term performance should settle out over time that said our focus remains on controlling the things we can control and executing our long term strategy by leaning in to our growth related investments during challenging times. We believe we will be even better positioned to gain market share and deliver sales and profit.
Over the next several years.
For today's call I'll touch on the highlights from the quarter as well as provide some thoughts on our outlook for the remainder of the year for additional details on the quarter's results and our guidance I'll point, you to our news release and <unk> document.
Overall, our second quarter results were below our expectations. This was driven by a combination of unexpected cyber event in late may and softer point of sales trends relative to our forecast.
In total we estimate the cyber event negatively impacted the second quarter by approximately $100 million in sales $35 million in operating profit and <unk> <unk> in EPS.
Absent the cyber event, we estimate sales for the quarter would still have been below our forecast. However, adjusted operating profit and EPS would have both been at the high end of our guidance range.
Looking at the specifics in the quarter net sales were $1 five $1 billion of.
A decrease of 14% as compared to last year.
Adjusting for the 220 basis point headwind from foreign exchange rates constant currency sales decreased 11% from the prior year.
Although the macro headwinds are weighing on our near term performance sales were up 75% on a two year stacked basis, excluding PPE.
And year to date sales are 8% higher than pre pandemic levels with growth across all businesses.
For the domestic businesses in the first half of the quarter sales were pressured by point of sales trends and product availability challenges. Unfortunately. This was magnified in late may due to the cyber event it impacted our ability to receive and ship product while at the same time, we saw consumer demand slow as the result of the highest <unk>.
Inflation in decades.
We saw these trends across across both our innerwear and activewear businesses overall, our international businesses performed relatively better in the quarter. Despite the cyber event constant currency sales declined approximately 3% as compared to prior year, although performance varied by region sale.
Sales in Australia, and Europe declined low single digits, and Latin America sales were up as we overlap COVID-19 related headwinds in the year ago quarter and in Asia sales were essentially flat with prior year as the intermittent COVID-19 headwinds in China were offset by growth in the rest of the region.
And now turning to margins.
Adjusted gross margin declined 120 basis points over prior year to 37, 8% driven by lower sales volume input cost inflation and the incremental costs associated with the cyber event and exchange rates.
These headwinds more than offset the benefits from business mix, the first quarter price increase and innerwear cost savings and less airfreight.
With respect to SG&A on a percentage of sales basis, our adjusted SG&A expense increased 215 basis points over prior year to 27, 7%.
The increase was driven by the deleverage of lower sales volume as well as planned increased investments in brand marketing and technology.
This more than offset cost controls and expense efficiencies from our full potential initiatives.
This resulted in an adjusted operating margin of 10, 2% for the quarter. Our operating margin was in line with our forecast as the organization did a great job of managing expenses in response to the challenges we face while maintaining brand related investments.
Turning to cash flow and the balance sheet, we ended the quarter with nearly $1 billion of total liquidity, which included approximately $250 million of cash.
Cash flow from operations was a use of approximately $210 million in the quarter, driven primarily by working capital use for inventory.
Inventory at the end of the second quarter was up 19% over prior year in units on.
On a dollar basis inventory was up 37% due predominantly to inflation lower second quarter sales and the early arrival of products in the third quarter commitments.
Inflation alone represented roughly half of the year over year increase we're confident in the quality of the inventory is approximately 80% of the year over year increase is in replenishment innerwear products that.
That said, we did end the quarter with more inventory on hand than planned we already have a number of initiatives underway to reduce our inventory and we expect by year end that our inventory units will be below last year's level.
The reduction plans, we have in place include temporarily reducing production shifts in our manufacturing facilities as well as strategic actions tied to our segmented supply chain initiative.
On top of those is our ongoing initiative to reduce Skus, we have plans to further reduce skus by another 30% with some of the benefit coming this year. The impact from these actions is reflected in our updated financial guidance.
And now turning to guidance looking at the second half of the year, we reduced our sales and profit outlook to reflect the changes in FX rates. The short term costs associated with our inventory reduction actions as well as an assumption that slow consumer demand continues and the retail environment remains challenging.
With respect to sales, although we expect the second half to be down low to mid single digits as compared to a prior year sales are still expected to be well above pre pandemic levels.
We are continuing to invest in our brands and we are seeing good consumer engagement and we're launching new product innovation.
Touching on the quarters, we expect better year over year sales performance in the third quarter as compared to the fourth quarter. This outlook is driven by initial back to school commitments and the shipments of our initial champion fall winter product sets.
Turning to margins at the midpoint, we expect gross margin in the second half to decline approximately 350 to 400 basis points over prior year with our larger year over year impact in the third quarter as compared to the fourth.
This was driven by three main factors first the impact from inflation as higher input costs work their way off the balance sheet and onto our P&L. This is unchanged from our prior outlook.
The deleverage impact related to lower sales.
And third the incremental costs related to our actions to reduce inventory by year end.
Looking at our outlook for operating margins at the midpoint, we expect second half operating margins to be down slightly more than 400 basis points as compared to last year.
The incremental pressure relative to our prior outlook as a function of the deleverage from lower gross profit dollars as we remain committed to investing in our brands and technology.
We expect greater year over year impact in the third quarter as compared to the fourth.
And lastly, we expect to generate approximately $400 million in cash flow from operations in the second half, which is more than sufficient to support our full potential investments and our dividend.
For the full year, we expect cash flow from operations to be essentially breakeven.
The change relative to our prior outlook is due to the lower profit outlook and the working capital impact from the higher than planned inventory dollars.
So in closing I'll Echo Steve's comments, the global operating environment remains challenging and its weighing on our near term financial results, but the organization is not standing still are.
Our team is focused we are executing our full potential growth strategy. We're controlling the things we can control and we are delivering innovation with a robust pipeline that extends beyond 2023.
As we look forward, we are convinced our strategy positions us to deliver revenue and profit growth with consistent cash flow over the next several years and with that I'll turn the call over to Tc.
Thanks, Michael that concludes our prepared remarks, we will now begin taking your questions and we will continue as time allows I'll turn the call back over to the operator to begin the question and answer session operator.
As a reminder, if you'd like to ask a question. Please.
Please press star one one on your telephone.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Michael Binetti with Credit Suisse. Your line is now open.
Hey, guys. Thanks for all the detail here.
Quarter to get through.
I wanted to ask a little bit about.
Champion you had a very specific comment in there that you delivered all of your innerwear deliveries for back to school does that imply can I assume that the cyber event.
Hit champion more than than the Innerwear business I guess I'm, specifically looking at the champion sales numbers. You gave here. This is the first time, we've seen the revenue dollars moved below 2019 levels.
Obviously, you had a lot of things that were one off going on in the quarter I'm just I'm trying to think about what happened was there an outsized impact on champion and maybe some thoughts on in detail to help us get confidence in building back champion too to a growth brand here as we as we look ahead in the model.
Sure.
And Michael Thanks for the question and thanks for joining US today. So let me kind of parse that apart and Michael if I Miss anything kind of jump in.
In terms of.
Thinking about the cyber.
Incident that we had impacting any of our more than activewear Morgan champion.
Not really I wouldn't parse it apart that way I think it was pretty much consistent across our business and how we how we manage it and how it flows when you think about champion.
It's a it's a commit business. So we brought in some of that inventory early.
Into Q2, which is part of our.
Current inventory issues from a quarter over quarter perspective, right now.
But we feel good about.
Shipping that product kind of on time and it rolls out into Q3, So no no more disruption on one side of the business than the other side of the business. When you think about champion yes, it was a tough quarter.
If you look back.
We're lapping huge quarter, so 96% two year stack, which gives us some good feeling.
Things impacted that business, let me walk you through kind of what we think impacted the business and then I'll talk to you about kind of what we're doing where we're going and why we're very confident in the brand going forward.
At the beginning of the quarter, we continue to have some.
Service challenges and some still some product delay working through that.
Then we definitely had a consumer slowdown in the middle of the quarter, which caused some of the excess retail in founding the retailer channels backing up a little bit.
We had the cyber event that we talked about and we are still experiencing COVID-19 headwinds in Asia, particularly in China, which is still working against us.
I feel I'm very confident that businesses.
Much stronger today than it was pre pandemic that said, we've got work to do.
And let me talk to you a little bit about what we're doing and where we're going to take the brand over time, because I think there is a lot of good things happening and we're very committed to champion being a big part and is a big part of our full potential plan as we go forward. So first of all we have a new leadership team and I'm really pleased with the team at the top level and its down through the business that I think is incredibly committed.
And it's going to take the brand to the next level on a global basis.
I'm very focused on a very defined segmentation strategy for product and channel and improving upon our execution against that going forward, which is an opportunity for us.
The consumer continues to ask for the brand and they continue to ask for more and broader assortment for us we need to deliver that.
The pipeline is building of new product ideas and I feel better today than I did in the past about what's to come as we go forward and we're going to continue to expand into new business opportunities.
We acquired the footwear trademark in the U S for champion this quarter, which is an accretive opportunity to us and continue to build on our capability. We already have a very robust footwear business in Europe and in Asia. So we know how to do this.
It's going to be part of the globalization strategy of the brand.
And expand in new geographies.
<unk> said this before you've heard me say, we're very early in China right now there's headwinds there right now with Covid, which so we're not moving as fast as we initially had planned but that's COVID-19 related nothing to do with the brand our operations behind it and we continue to have new or incremental consumer segments. We are underdeveloped as women and kids and we're very focused on.
So I look at the business and all the things that we're working on Havent changed because we had a rough quarter and we think theres still a lot of demand for the brand and I'm encouraged about what the opportunity is for us going forward and it's going to be a big part of our overall execution strategy and I think there's a ton of upside.
Okay. Thanks, a lot guys I appreciate it.
Our next question comes from the line of Susan Anderson with B Riley.
Your line is now open.
Hey, can you give us an idea on how much.
Pos slowed into the second in the second quarter and then also how it is trending in third quarter I guess I'm curious if you've seen a pickup at all with back to school and then the on time deliveries.
And then also if you could maybe talk about product costs for the back half in India, 2023, and if youre seeing some easing there at all.
Hadn't yet.
<unk> three and how we should think about timing for materials.
Sure Good morning, Susan and thanks for joining US let me do the first one Martin I'll, let Michael talk about Black Hawk.
The consumer is certainly still feeling pressure.
Inflation is impacting consumer sentiment overall and demand and we're seeing that.
Mobile in our U S business, Australia Europe .
And as I mentioned, we're still seeing some COVID-19 pressures in Asia.
There's lots of talk about that the shift of discretionary budgets between experiences thing. So we definitely saw the pressure build in May and June and it has carried into July . So you think about our second half we're factoring in that continued slow consumer business.
That said, if you think about us longer term.
I like our position.
Apparel, obviously that discretionary, but there's different levels of discretionary and I think we play in a really good place there with our basics business.
We've got a great brand portfolio good innovation pipeline going so I think we can operate in this environment very well and I think we're positioned well to do it when we talked about back to school for a minute.
It's still early but the consumer demand seems to be week over week, improving a little bit.
And we're encouraged by that.
Across each of our business across our DTC business.
Tax free weekend in 11 of the 17 states with last week and we saw strong response for our business. So we kind of know when consumers are buying and what the headwinds are but we're very encouraged to see what's happened. There. We have a strong program for back to school this year with more display more inventory than on the floor than we've had in the past.
So we feel good about our execution behind back to school and decided to see a little bit of improvement in the consumer in a week over week basis, but those headwinds definitely still remain.
Yes, I think with regard to cost.
Inflation in the second half one.
You can kind of see that in our inventory number right as we we called out that over half of our inventory increase is related to in place.
So in terms of as we're looking at cost Thats in our guidance.
It's unchanged really from.
The guidance, we gave you guys at the beginning of the second quarter.
And so.
In terms of.
The costs are locked in for the most part for this year in some cases into early next year.
As we think about next year as you can appreciate we're not really giving guidance.
It's great to see prices come back to a more normalized level.
And I think that.
We will be looking at that as we start thinking about next year's plans and pricing et cetera.
So but right now it's at this point I think we feel like we have our arms around cost.
Great. Thanks, so much good luck with sphere.
Our next question comes from the line of Ike <unk> with Wells Fargo. Your line is now open.
Hey, guys, it's will Gartner on for Ike.
Can you guys just touch on.
Walmart and target obviously have those big announcements can you just maybe talk about how that impacted you in the quarter and if youre going to see any impact from from that into the back half.
Hi, good morning, well, so I'm not going to talk directly about Walt.
Walmart target any of our customers what I would tell you is I think youre seeing a macro environment change in the second quarter and particularly towards the middle to end of the quarter with the inflation really hitting the consumer and you saw an inflection point in the consumer behavior and I think that's pretty consistent across.
Retail channel across different different manufacturers.
<unk> businesses in general So I think it really depends on the consumer and where the consumer has the consumer response to the challenging headwinds that theyre facing right now.
Got you and maybe just one more follow up.
<unk>, some softer than expected strength in innerwear.
Does that mean, you guys are losing share of shelf space and Youre seeing a migration of consumers trading down to more private label.
Yes, so a couple of things, let me unpack that a little bit.
We're gaining shelf space and <unk>.
Very pleased with the quarter shelf space report that I got and sitting with the team and talking about the actions that they're taking in the marketplace. A lot of that is new product that we talked about in the prerecorded remarks, our new product is resonating extremely well, so we're gaining incremental product.
Your mental shelf space and we expect that to continue going forward as the pipeline continues to build.
When you look at share a lot of ups and downs in the business.
Our share in Q2 compared to prepayment <unk> were up 60 basis points. So I try to look at share over over time, it gets a little choppy quarter to quarter, but if you look at draw that trend line over time, Unlike our share position and the reality is private label and innerwear is not really gaining share.
So thats not where shares flowing right now so.
Consumer will net that out over time, but what we're doing is we're leaning in and we're not going to let the challenging macro headwinds slow us down. So we talked about the innovation pipeline space gains do we just referred to were going to be aggressive in this time.
Whether that is managing our inventory, whether that's leading you it's building behind our brands, we're going to keep pushing and keep growing.
Great. Thanks, I'll pass it on.
Our next question comes from the line of Jim Duffy with Stifel. Your line is now open.
Thank you good morning.
Stephen I wanted to ask about the.
Incremental I believe 30% reduction in Skus to be clear is this incremental to actions already underway.
Where do you see the opportunity.
Can you speak to a working capital benefit and how does that dovetail with the innovation agenda.
Hey, good morning, Jim.
We're talking about that reduction inventory. So we did 35% last year and I hit the target for the team this year for another 30%.
And I think the ICT, we I think we may continue beyond that we'll see how that nets out.
Believe SKU reduction is obviously important for our working capital management.
Helps our innovation pipeline, we talked about a lot of the new things that are coming.
We have to create space for that both at the retail shelf and inside our pipeline and how we operate going forward.
We have not historically been as disciplined as we need to be on SKU management, and we have a long tail that I think can be cleaned up and will help us significantly in.
In terms of.
In terms of our operations and continues to build that lifeline for.
For innovation and also improves our service levels.
We talked a little bit of at the beginning of the quarter our service levels.
We want them to be they are improving already in the third quarter and I am encouraged by that but service levels is a really important metric for us and SKU management SKU rationalization is in the big enabler for us to continue to improve service levels for us to grow.
Understood and then I had a question on margins Susan asked a question on commodity costs, but I'm curious.
As it relates to the back half of the year as their utilization deleverage in manufacturing that we should consider as a comparison.
Im hoping you can itemize the impact of inventory clearance on the margin outlook, Yes, Hey, Jim. This is Michael Good question, Yes, as you think about the back half guidance. Yes. We did we took sales down and we also took profit down some of the profit relates clearly to just bringing down the sales some of it is to the point you.
<unk>, which is.
And our manufacturing we will be under utilizing.
Some of our fixed cost and so we're taking that to the bottom line in the back half.
And so that is.
A meaningful number I can't give you that number specifically.
But it is something that will impact.
The back half profitability, but we think it's the right thing to do so in other words as you think about the margin coming down in the back half, it's really not about additional.
Markdowns, it's really about just not producing more inventory and as we've talked about.
Planning to have less units at the end of the year than what we currently have and what we had at the end of last year.
But total actions there.
They are probably in the neighborhood of $30 million to $35 million.
So as we think about next year right will be you'll be asking us about guidance next year those are things that would not be repeatable.
Understood very helpful. Thank you.
Our next question comes from the line of Jay sole with UBS. Your line is now open.
Great. Thank you. So much I was just wondering if you can maybe walk us through some of the details within the innerwear business, how the women's intimate apparel business performed versus sort of events.
The men's business.
Yes, good morning, Jay.
So when you look at Innerwear business overall.
On a kind of a.
We had a tough quarter definitely inflation impacting it cyber event all the things that we've talked about when you break out the business not a dramatic difference between mens and womens.
They are performing pretty consistently the innovation, we're balancing is pretty consistent across the business the space gains that I referenced earlier pretty consistent across the business. So not a dramatic change when you think back to.
Challenging times in the past and how this business has performed.
Men's business tends to hold up better than women's business.
There's a lot of underlying purchasing behavior that goes into that but to date, we have not seen an inflection point between mens and womens.
Got it okay. Thank you so much.
Our next question comes from the line of Paul Kearney with Barclays. Your line is now open.
Hi, everyone. Thanks for taking my question.
I was wondering if you can comment on wholesale inventory levels, and where you think.
Retailers are rebalancing their inventory to rightsize for consumer to that.
And then my second question is can you talk about your planned price increases kind of in light of those inventory levels.
Are they going through as expected and what it's been.
Thanks.
Sure in terms of retail inventory.
<unk>.
Yes, there's pockets of inventory out there that obviously retailers have talked about their position.
But I think it's important for US is a lot of our business is replenishment business.
Four.
For them. So a lot of what they are calling out as more I think more seasonal business.
We have put that a slowdown into our second half and that's part of our view because of retail headwinds do you think about why we put the second half guidance, we put out there we've talked about the consumer and one of the things we've talked about with the retail environment. That's out there. So we factor that into our guide.
That said.
If times continue to be difficult I like our channel position I like our channel mix.
About where we are and.
Where we're going to go.
And you asked the second question I am sorry, I don't remember what it is.
Just on your planned price increases can you just comment on how those are those still going according to <unk>.
According to plan with your channel partners and what has been the consumer response. Thanks sure. Thank you.
Yes, so pricing, we talked about we put innerwear into effect mid first quarter.
That's pretty much played out the way we expected it to in the back half of this year and that's about it.
Globally around the globe not just the U S and Thats pretty much held true to form and then the back half is when champion start to hit the market and are following our assortment.
Managed through it pretty well team did a nice job partnering with our retailers consumer response has basically been in the range that we would have expected it to be and we'll continue to manage the business and think about the consumer think about competition I think about price gaps think about share think about space gains that we have all of.
That goes into how we think about pricing going forward and we're starting that step thinking about what's next and how do we think about next year and our <unk>.
Planning process.
Thank you.
Our final question will come from Tom <unk> with Wedbush Tom Your line is now open.
Hey, good morning, guys. Thanks, Thanks for taking my question.
From a modeling perspective.
How do we think about the various different segments.
In the back half, but how do we think about innerwear versus <unk> versus <unk>.
International.
So.
For Q3, we've got innerwear down high single digits.
We have.
Active wear.
Basically improving.
And the.
Give us one second and I'll make sure we get the right number here.
Yes, no problem.
Okay.
The Q3 is up high single digits.
And thats, partially because we're just rebounding up in terms of the shipments and the issues that Steve talked about.
And international is up low double digits on a constant currency basis, but as we called out we have a lot of currency challenges.
Challenges, so probably be flat.
On a reported basis.
Got it thank you.
That concludes today's question and answer session I would like to turn the call back to T. C Robillard for closing remarks.
Thanks, we'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.
The conference will begin shortly to raise Johan during Q&A you can dial one one.
[music].
Yes.
Okay.
Okay.