Q4 2023 Hanesbrands Inc Earnings Call - Q&A

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Operator: Good day, and thank you for standing by. Welcome to the HanesBrands fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker Change: Good day and thank you for standing by welcome to the Hanesbrands fourth quarter 2023 earnings Conference call.

Speaker Change: At this time all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

Speaker Change: Ask a question during the session you will need to press star one one on your telephone.

Speaker Change: We will then hear an automated message advising your hand is raised to.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, T.C. Robillard, Vice President of Investor Relations. Please go ahead.

Speaker Change: To withdraw your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to your host today T C Robillard, Vice President of Investor Relations. Please go ahead.

Thomas C. Robillard: Good morning, everyone, and welcome to the HanesBrands quarterly investor conference call and webcast. We're pleased to be here today to provide an update on our progress since the fourth quarter of 2023. Hopefully, everyone has had a chance to review the news release we issued earlier today. The news release, the updated FAQ document, and the replay of this call can be found in the investor section of our Hanes.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.

Speaker Change: Good day, everyone and welcome to the Hanesbrands quarterly Investor Conference call and webcast.

Speaker Change: We're pleased to be here today to provide an update on our progress after the fourth quarter of 2023.

Speaker Change: Hopefully everyone has had a chance to review the news release, we issued earlier today.

Speaker Change: News release updated Faq document and the replay of this call can be found in the investors section of our Hanes Dot Com website.

Speaker Change: On the call today, we may make forward looking statements either in our prepared remarks, and the associated question and answer session.

Speaker Change: 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.

Thomas C. Robillard: These risks include those related to current macroeconomic conditions, consumer demand dynamics, our ability to successfully execute our strategic initiatives, including our full potential transformation plan, the champion performance plan, and our evaluation of strategic alternatives for our global champion business. Additionally, our ability to de-leverage on the anticipated timeframe in 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.

These risks include those related to current macroeconomic conditions consumer demand dynamics, our ability to successfully execute our strategic initiatives, including our full potential transformation plan champion performance plan and our evaluation of strategic alternatives for our global champion business, our ability to deleverage on the anticipated.

Speaker Change: Frame 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.

Thomas C. Robillard: 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 Brasby, 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.

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.

Speaker Change: With me on the call today are Steve <unk>, our Chief Executive Officer, and Scott Lewis, Our Chief Financial Officer.

Speaker Change: 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.

Steve: Thank you Jessie good morning, everyone and welcome to our call.

Steven L. Marotta: Good morning, everyone, and welcome to our call. 2023 was a year marked by various challenges and hurdles but also progress in a number of areas. We experienced a sales environment that was even more challenging than our cautious few, particularly within the U.S. active wear market and in Australia. This drove sales, operating profit, and EPS results that did not meet our expectations for the quarter and the year. While we are not at all satisfied with our results, we've seen several positive indicators that demonstrate progress with our strategy and give us confidence that our margins and our leverage have reached an inflection point. Despite the top-line headwinds, we will continue to strengthen the foundation of our business in 2023. The actions we've taken to simplify our business, reduce inventory, cut costs, and reignite innerwear are working, and we're beginning to see the initial benefits of these actions in our results.

Steve: 2023 was a year marked by various challenges and hurdles, but also progress in a number of areas.

Steve: We experienced the sales environment that was even more challenging than our cautious view, particularly within U S activewear market and in Australia.

Steve: This drove sales operating profit and EPS results that did not meet our expectations for the quarter and the year.

Steve: While we are not at all satisfied with our results. We are seeing several positive indicators that demonstrate progress on our strategy and give us confidence that our margins and our leverage have reached an inflection point.

Steve: Despite the topline headwinds we continued to strengthen the foundation of our business in 2023.

Steve: The actions, we've taken to simplify our business reduce inventory cut costs and reignite innerwear are working.

Steve: We are beginning to see the initial benefits of these actions and our results.

Steven L. Marotta: We return gross margin to pre-inflation levels as expected. We exited the year with gross margin of 38%, a 400 basis point improvement over prior years. We reduced inventory by more than $600 million, unlocking working capital as planned. We returned operating cash flow to its historical 400 to 600 million dollar range. For the year, we generated $562 million of operating cash flow, exceeding our plan.

Steve: We returned gross margin to pre inflation levels as expected, we exited the year with gross margin of 38%, a 400 basis point improvement over prior year.

Steve: We reduced inventory by more than $600 million unlocking.

Steve: Unlocking working capital as planned.

Steve: We returned to operating cash flow to its historical $400 million to $600 million range.

Steve: For the year, we generated $562 million of operating cash flow exceeding our plan.

Steven L. Marotta: We paid down more than half a billion dollars of debt, which was a hundred million dollars ahead of our debt reduction target for the year. We eliminated more than $45 million of fixed costs spread across cost of goods and SG&A. And we gain market share across our U.S. interweb business, leveraging data analytics to drive better on-shelf product availability and successfully delivering our largest innovation launch in decades. Looking into 2024, we expect the challenging sales environment to continue, particularly in Q1, which Scott will discuss in a moment. That said, we're confident we can build on our progress this year.

Steve: We paid down more than half a billion dollars of debt, which was $100 million ahead of our debt reduction target for the year.

Steve: We eliminated more than $45 million of fixed cost spread across cost of goods and SG&A.

Steve: And we gained market share across our U S innerwear business, leveraging data analytics to drive better on shelf product availability and successfully delivering our largest innovation launch in decades.

Steve: Looking into 2024, we expect the challenging sales environment to continue, particularly in Q1, which Scott will discuss in a moment.

Steve: That said, we're confident we can build on our progress this year.

Steven L. Marotta: With visibility to input costs on our balance sheet and cost savings actions in our supply chain, we expect continued year-over-year improvement in gross margin. We expect another year of strong cash flow, driven by the expected recovery in profit margins and the additional opportunities we see for working capital improvement. We plan to pay down another $300 million of debt this year as we remain committed to using all of our free cash flow to reduce debt and the expected combination of debt repayment and EBITDA growth. We expect to further reduce our leverage in 2024.

Steve: With visibility to input costs on our balance sheet and cost savings actions in our supply chain. We expect continued year over year improvement in gross margin.

Steve: We expect another year of strong cash flow driven by expected recovery and profit margins and the additional opportunities we see for working capital improvement.

Steve: We plan to pay down another $300 million of debt. This year as we remain committed to using all of our free cash flow to reduce debt.

Steve: And we expect the combination of debt pay down and EBITDA growth, we expect to further reduce our leverage in 2024.

Steven L. Marotta: And we expect continued market share gains in Interware as we roll out another record year of innovation, including plans to increase our brand strength and marketing investment. Now, let me provide an update on Champion before finishing with some thoughts on our Reignite innerwear strategy. We continue to aggressively implement our Champion Performance Enhancement Plan to strengthen the brand and position Champion for long-term profitable growth. We went into the execution of our Champion strategy with a full understanding that these long-term strategic actions would create real top-line headwinds in the short term, which we're seeing play out. And not surprisingly, these headwinds have been compounded by challenges within the activewear apparel category over the past year. The combination of these two factors drove a 23% year-over-year decrease in global Champion sales during the quarter.

Steve: And we expect continued market share gains in innerwear, as we rollout another record year of innovation, including plans to increase our brand strength and marketing investments.

Now, let me provide an update on champion before finishing with some thoughts on our reignite in our strategy.

Steve: We continue to aggressively implement our champion performance enhancement plans to strengthen the brand and position champion for long term profitable growth.

Steve: We went into the execution of our champion strategy with a full understanding that these long term strategic actions would create real topline headwinds in the short term, which we're seeing play out.

Steve: And not surprisingly these headwinds have been compounded by challenges within the activewear apparel category over the past year.

Steve: The combination of these two factors drove a 23% year over year decrease in global champion sales in the quarter.

Steven L. Marotta: Despite the top-line pressure, we're progressing on a number of our actions to strengthen the business. We're cleaning up our inventory in the channel. We're implementing a disciplined product and channel segmentation strategy with a focus on our fall-winter 2024 offering. We're building brand heat within our pinnacle product and account offering, and we're gaining traction with our global Champion What Moves You marketing campaign, with plans for increased marketing investment.

Steve: Despite the topline pressure, we're progressing on a number of our actions to strengthen the brand.

Steve: We're cleaning up our inventory in the channel we are implementing a disciplined product and channel segmentation strategy with a focus on our fall winter 2024 offering.

Steve: We're building brand heat within our clinical product and account offerings are gaining traction with our global champion what moves you marketing campaign with plans for increased marketing investment this year.

Steven L. Marotta: We're confident we're taking the right steps to drive the long-term success of Champion. However, as we've previously stated, it'll take time for our strategic actions to translate into the P&L. With respect to our review of strategic alternatives for the global champion business, which I know is top of mind, the process is progressing as expected. We continue to evaluate the right path forward as we've seen strong interest from a broad and diverse group of global parties.

Steve: We're confident we're taking the right steps to drive the long term success of champion. However, as we've previously stated it will take time for our strategic actions to translate to the P&L.

Steve: With respect to our review of strategic alternatives for the global champion business, which I know is top of mind.

Steve: Process is progressing as expected.

Steve: We continue to evaluate the right path forward as we've seen strong interest from a broad and diverse group of global parties.

Steven L. Marotta: And while there's nothing specific to add at this time, we remain committed to updating you as appropriate when there's news to share. Next, I'd like to pivot the discussion to our Reignite Innerwear strategy, which continues to gain traction and build momentum. Recall when we laid out our strategy a few years ago; our underwear business in the U.S. had been consistently declining and losing market share. With our Reignite Interwear strategy, we said we'd shift this business to growth and market share gains over time. And we do this by delivering innovation that consumers want, by increasing brand marketing investments, by bringing younger consumers into our brands, and by making our products available where, when, and how consumers want to shop. We've made significant progress in executing this strategy. We've globalized our design process.

Steve: And while there is nothing specific to add at this time, we remain committed to updating you as appropriate when there is news to share.

Steve: Next I'd like to pivot the discussion to our reignite innerwear strategy, which continues to gain traction and build momentum.

Steve: Recall, when we laid out our strategy a few years ago, our innerwear business in the U S have been consistently declining and lose market share.

Steve: With our reignite Innerwear strategy, we said, we'd shift this business to growth and market share gains over time and.

Steve: And we do this by delivering innovation that consumers wanted by increasing brand marketing investments by bringing younger consumers into our brands and by making our products available where when and how consumers wanted to shop.

Steve: We've made significant progress on executing this strategy.

Steve: We've globalized our design process as a result, we're now launching cross category Cross geography products and we have a robust innovation pipeline that provides visibility to new product offerings through 2025.

Steven L. Marotta: As a result, we're now launching cross-category, cross-geography products, and we have a robust innovation pipeline that provides visibility to new product offerings through 2025. Additionally, we've improved our speed to market across a large portion of our products, with the lead time from design to on-shelf availability shortened by 30%. We've become more efficient with our inventory. We've significantly reduced SKUs to focus on higher velocity, higher margin SKUs, as well as make room for innovative products. We've leveraged our advantageous global supply chain to further improve our cost structure, and we've built our global talent, and we're seeing this translate to our innerwear results. Our U.S. underwear sales have grown at an approximate 2% compound annual growth rate over the past four years. However, certainly, the market has seen significant swings over this time, which we continue to experience. But over time, we believe this is a stable category with stable consumption.

Steve: We've improved our speed to market across a large portion of our products with the lead time from design to on shelf availability shortened by 30%.

Steve: We've become more efficient with our inventory, we've significantly reduced skus to focus on higher velocity higher margin skus as well as make room for innovation products.

We've leveraged our advantaged global supply chain to further improve our cost structure.

Steve: And we've built our global talent.

Steve: And we're seeing this translate to our innerwear results.

Our U S. Innerwear sales have grown at an approximate 2% compound annual growth rate over the past four years.

Steve: Certainly the market is seeing significant swings over this time, which we continue to experience but over time. We believe this is a stable category with stable consumption patterns.

Steven L. Marotta: We're gaining market share, which is the best indicator of future growth during challenging market environments. In the fourth quarter, we gained additional market share with both men and women in the U.S., with the strongest share gains coming from younger consumers. In fact, in the back half of the year, each one of our innerwear categories gained market share with younger consumers.

Steve: We're gaining market share, which is the best indicator of future growth during challenging market environments in the fourth quarter, we gained additional market share with both men and women in the U S with a strongest share gains coming from younger consumers in fact in the back half of the year. Each one of our innerwear categories gained share with younger consumers.

Steven L. Marotta: We return to historical segment margins while supporting higher levels of marketing investment. We're successfully delivering innovation. 2023 was our most successful innovation year in decades. Hanes Originals was the largest innovation launch in our history, spanning multiple product categories and five countries.

Steve: Tumors.

Steve: We returned to historical segment margins, while supporting higher levels of marketing investments.

We're successfully delivering innovation 2023 was our most successful innovation year in decades.

Steve: <unk> was the largest innovation launch in our history spanning multiple product categories and five countries.

Steven L. Marotta: We also built on our absorbency platforms in both Australia and the U.S., and we launched M by Maiden Form in the fourth quarter, which will be supported by a media campaign. And looking at 2024, we have a robust pipeline of new product launches, including Hanes SuperSoft, Bonds Anti-Chafe, and Bally Breeze. We believe these innovation launches, along with our planned increased investment in brand marketing, position us well to continue to grow share, especially with younger consumers. As I close, I'd like to take a moment and thank the entire HanesBrands team. Your agility, teamwork, and passion are the reason we continue to make progress on our transformation journey, despite the headwinds we face. 2023 had its challenges, especially with respect to the sales environment. However, it also had many successes.

Steve: We also built on our absorbency platforms in both Australia, and the U S and we launched and by Maidenform in the fourth quarter, which will support with immediate campaign this year.

Steve: And looking at 2024, we have a robust pipeline of new product launches, including Haynes supersonic bonds anti <unk> and Bally breed.

Steve: We believe these innovation launches along with our planned increased investment in brand marketing position us well to continue to grow share, especially with younger consumers.

Speaker Change: As I close I'd like to take a moment and thank the entire hanesbrands team.

Speaker Change: Your agility teamwork and passion are the reason we continue to make progress on our transformation journey. Despite the headwinds we faced.

Speaker Change: 2023 had its challenges, especially with respect to the sales environment.

Speaker Change: However, it also had many successes, we're making progress on our champion performance enhancement plan.

Steven L. Marotta: We're making progress on our Champion Performance Enhancement. The actions we've taken to simplify our business, reduce inventory, cut costs, and reinite innerwear are working. We reached the key milestone with the positive inflection of our margins and our leverage. And though we expect another challenging sales environment in 2024, we have solid visibility to be able to deliver continued margin improvement, strong cash generation, further debt reduction, and continued market share gains in any way. And with that, I'll turn the call over to Scott. Thanks, Steve.

Speaker Change: The actions, we've taken to simplify our business reduce inventory cut costs and reignite innerwear are working.

Speaker Change: We reached a key milestone with a positive inflection of our margins and our leverage.

Speaker Change: And then we expect another challenging sales environment in 2024, we have solid visibility to be able to deliver continued margin improvement strong cash generation further debt reduction and continued market share gains and anywhere and.

Speaker Change: And with that I'll turn the call over to Scott.

Markland Scott Lewis: Thanks, Steve Let me Echo your thanks to the global Hanesbrands team 2023, certainly presented sales challenges, but through our continued focus on executing our initiatives to simplify the business reduce costs deliver innovation and leverage our supply chain capabilities, we were able to exit the year with.

Markland Scott Lewis: Let me echo your thanks to the global HanesBrands team. 2023 certainly presented Dell's challenge, but through a continued focus on executing our initiatives to simplify the business, reduce costs, deliver innovation, and leverage our supply chain capabilities, we were able to exit the year with momentum across several key performance metrics. For today's call, I'll touch on the highlights from the quarter, our improved financial position, and then I'll provide some thoughts on our outlook. For additional details on the quarter's results and our guidance, I'll point you to our news release and FAQ document. At a high level, the fourth quarter was mixed relative to our expectations. Sales were below our outlook as the consumer environment proved more challenging than we expected. Particularly in the U.S. active retail market and in Australia, this, in turn, drove lower-than-expected operating profit in ETFs.

Speaker Change: Mmhmm across several key performance metrics.

Speaker Change: Today's call I'll touch on the highlights from the quarter, our improved financial position.

Speaker Change: Then I'll provide some thoughts on our outlook.

Speaker Change: For additional details on the quarter's results and our guidance I'll point, you to see our news release and <unk> documents.

At a high level, the fourth quarter was mixed relative to our expectations.

Speaker Change: Sales were below our outlook as the consumer environment proved more challenging than we expected.

Speaker Change: Particularly in the U S activewear market and in Australia.

Speaker Change: This in turn sort of lower than expected operating profit and EPS.

Markland Scott Lewis: That said, we continue to reduce SG&A, with expense dollars decreasing as expected. We delivered results that were ahead of our expectations for gross margin, inventory reduction, and operating cash flow, and we paid down more debt than planned. Looking at the details of the quarter, net sales were $1.3 billion. This represents a decrease of 12% versus the prior year, with 130 basis points coming from the U.S. hosiery divestiture and 40 basis points from FX hedging. On an organic, constant currency basis, net sales decreased 10% in the quarter.

Speaker Change: That said, we continue to reduce SG&A with expense dollars decreasing as expected.

Speaker Change: We delivered results that were ahead of our expectations for gross margin inventory reduction in operating cash flow and we paid down more debt in the plan.

Speaker Change: Looking at the details of the quarter net sales were $1 $3 billion.

Speaker Change: This represents a decrease of 12% versus prior year with 130 basis points coming from the U S hosiery divestiture and 40 basis points from FX headwinds.

Speaker Change: On an organic constant currency basis, net sales decreased 10% in the quarter.

Markland Scott Lewis: Touching briefly on sales by segment, our U.S. interim business was essentially in line with our outlook. For the quarter, sales decreased 1% versus last year, which compared against a 5% decrease for the overall market. However, we gained market share in the quarter driven by retail space gains, improved on-shelf availability, as well as successful consumer-led innovation and new product launches. In our international business, constant currency sales decreased 7% as macroeconomic pressures continue to weigh on consumer demand in Australia and Europe. These headwinds more than offset growth in our underwear business in the Americas and our champion business in China and in our U.S. Activewear business. Sales decreased 24% as compared to last year. The decrease was driven by the continued combination of challenges within the activewear apparel category and the expected top-line headwinds from the strategic actions taken to strengthen the champion brand and position it for long-term profitable growth. Turn the margin.

Speaker Change: Touching briefly on sales by segment.

Speaker Change: Our U S. Innerwear business was essentially in line with our outlook for the quarter sales decreased 1% versus last year, which compared against a 5% decrease for the overall market.

We gained market share in the quarter driven by retail space gains improved on shelf availability as well as successful consumer led innovation and new product launches.

Speaker Change: In our international business constant currency sales decreased 7% as macroeconomic pressures continue to weigh on consumer demand in Australia and Europe.

Speaker Change: These headwinds more than offset growth in our innerwear business in the Americas, and our champion business in China.

Speaker Change: And in our U S activewear business.

Speaker Change: Sales decreased 24% compared to last year. The decrease was driven by the continued combination of challenges within the activewear apparel category and the expected top line headwind from our strategic actions were taken to strengthen the champion brand and positioning it for long term profitable growth.

Speaker Change: Turning to margins adjusted gross margin of 38, 2% was strong and above our expectation.

Markland Scott Lewis: A just-to-gross margin of 38.2% was strong and above our expectations. This represents an increase of 395 basis points over the prior year. The year-over-year improvement was driven primarily by the benefits from our Inventory and Cost Savings Initiative, as well as lower input costs from commodities and ocean freight. These two factors more than offset the impact of wage inflation.

Speaker Change: This represents an increase of 395 basis points over prior year.

Speaker Change: The year over year improvement was driven primarily by the benefits from our inventory and cost savings initiatives as well as lower input costs from commodities and ocean freight. These two factors more than offset the impact from wage inflation.

Markland Scott Lewis: With respect to adjusted SG&A, expenses decreased $38 million as compared to last year, in line with our outlook. The lower expenses were driven by a combination of cost savings initiatives, disciplined expense management, and lower variable expenses, which more than offset increased brand marketing investment. As a percent of sales, SG&A expense increased 100 basis points over the prior year. The de-leverage, despite lower SG&A dollars, was driven primarily by the impact of lower sales and increased brand investment. This resulted in an adjusted operating margin of 8.5% for the quarter, an increase of 295 basis points over last year. Looking at the remainder of the P&L, interest and other expenses were $77 million. Adjusted tax expense was $22 million, which excludes a one-time discrete tax benefit of $81 million.

Speaker Change: With respect to adjusted SG&A expenses decreased $38 million as compared to last year.

Speaker Change: Along with our outlook.

Speaker Change: The lower expense was driven by a combination of cost savings initiatives disciplined expense management, and lower variable expense, which more than offset increased brand marketing investments.

Speaker Change: As a percentage of sales SG&A expense increased 100 basis points over prior year.

The deleverage despite lower SG&A dollars was driven primarily by the impact from lower sale.

Speaker Change: <unk> brand divestments.

Speaker Change: This resulted in an adjusted operating margin of eight 5% for the quarter, an increase of 295 basis points over last year.

Speaker Change: Looking at the remainder of the P&L interest and other expenses were $77 million adjusted tax expense was $22 million, which excludes a one time discrete tax benefit of $81 million and adjusted earnings per share for the quarter was <unk>.

Markland Scott Lewis: An adjusted earnings per share for the quarter was 3 cents. According to the balance sheet and cash flow, we continue to strengthen our balance sheet and increase our financial flexibility as we reduce inventory, pay down debt, and increase liquidity. We saw further improvement in our inventory position as we continue to implement and build our capabilities around inventory management. We ended the year with an inventory of $1.37 billion, which represents an improvement of 31%, or $612 million, as compared to last year.

Speaker Change: Turning to the balance sheet and cash flow, we continue to strengthen our balance sheet and increase our financial flexibility as we reduced inventory pay down debt and increase liquidity.

Speaker Change: We saw further improvement in our inventory position as we continue to implement and build our capabilities around inventory management.

Speaker Change: We ended the year with inventory of one $3 7 billion.

Speaker Change: Which represents an improvement of 31% or $612 million as compared to last year.

Markland Scott Lewis: This was more than $100 million ahead of our $1.5 billion target as we were progressing faster than expected on our inventory initiatives. We generated $562 million of operating cash flow for the year, which was ahead of our $500 million goal, and we successfully unlocked tied-up working capital. We paid down more than $500 million of debt for the full year, $100 million ahead of our debt reduction target, driven by higher-than-expected operating cash flow. Our leverage was 5.2 times on a net debt to adjusted EBITDA basis, below our fourth quarter covenant of 6.75 times and our peak of 5.6 times in the second quarter of 2023. We remain committed to using all of our free cash flow to pay down debt.

This was more than a $100 million ahead of our $1 $5 billion target as we are progressing faster than expected on our inventory initiatives.

Speaker Change: We generated $562 million of operating cash flow for the year, which was ahead of our $500 million goal, we successfully unlocked tied up working capital.

Speaker Change: We paid down more than $500 million of debt for the full year $100 million ahead of our debt reduction target driven by the higher than expected operating cash flow.

Speaker Change: Our leverage was five two times on a net debt to adjusted EBITDA basis was below our fourth quarter Covenant of 675 times and our peak of five six times in the second quarter of 2023.

Speaker Change: We remain committed to using all of our free cash flow to pay down debt.

Markland Scott Lewis: We expect to further reduce our leverage in 2024 driven by a combination of EBITDA growth and continued debt reduction. And all of this has led to our liquidity position increasing to more than $1.3 billion at the end of the fourth quarter. And now, turning to God.

Speaker Change: We expect to further reduce our leverage in 2024, driven by a combination of EBITDA growth and continued debt reduction.

Speaker Change: And all of this has led to our liquidity position increasing to more than $1 3 billion at the end of the fourth quarter.

Speaker Change: And now turning to guidance.

Markland Scott Lewis: All of my comments will refer to adjusted results from continuing operations and will be based on the midpoint of our guidance range. At a high level, we expect the sales environment and our categories to remain challenging in 2024, particularly in the first quarter. We expect positive progressions on top-line trends through the year, driven by two factors. First, in our global champion business, as we previously discussed, our fall-winter 2024 line is the first global offering from the new team that's based on a global segmentation approach.

Speaker Change: All of my comments will refer to adjusted results from continuing operations that will be based on the midpoint of our guidance ranges.

Speaker Change: At a high level, we expect the sales environment in our categories to remain challenging in 2020 for particularly the first quarter we.

Speaker Change: We expect positive progressions on topline trend through the year driven by two factors.

Speaker Change: First our global champion business as we've previously discussed our fall Winter 2024 line as the first global offering from the new team is based on a global segmentation approach. Therefore with the actions. We're taking are ahead of that launch, particularly on cleaning up our inventory in the channel. We believe we are moving through the trough.

Markland Scott Lewis: Therefore, with the actions we're taking ahead of that launch, particularly cleaning up our inventory in the channel, we believe we're moving through the trough of champion sales in Q1 and the first half this year. Second, in our global innerwear business, based on our forecasting analytics and consumer consumption trends. We expect the category headwinds to be most challenging in the first quarter before moderating through the rest of the year. And we expect to outperform the category as we're well positioned to gain market share behind our innovation launches and increased brand marketing and investment. We expect a challenging sales environment.

Speaker Change: Of champion sales in Q1, and the first half this year.

Speaker Change: Second in our global Innerwear business based on our forecasting analytics and consumer consumption trends, we expect the category headwinds to be most challenging in the first quarter before moderating through the rest of the year and we expect to outperform the category as we are well positioned to gain market share behind our innovation launches.

Speaker Change: And increased brand marketing investments.

Speaker Change: While we expect a challenging sales environment. We believe we are well positioned to deliver strong operating profit growth for the year.

Markland Scott Lewis: We believe we're well positioned to deliver strong operating profit growth for the year. This outlook is based on the infinite cost visibility we have on the balance sheet and our cost savings initiatives, as well as the conservatism we've layered into our profit outlook. We expect year-over-year improvement in both gross and operating margins in each quarter of 2024. And with lower interest expense due to lower outstanding debt balances, we expect earnings per share to grow even faster than operating profit for the year. With respect to our first quarter outlook, we expect net sales on a reported basis to decrease approximately 16% as compared to last year. Adjusting for the impact of the U.S. hosiery divestiture and FX headwinds, organic constant currency sales are expected to decrease approximately 14%.

Speaker Change: This outlook is based on input cost visibility, we have on the balance sheet and our cost savings initiatives as well as the conservatism we've layered into our profit outlook, we expect year over year improvement in both gross and operating margins at each quarter of 2024 and with lower interest expense due to lower outstanding debt balances we.

Speaker Change: Expect earnings per share to grow even faster than operating profit for the year.

Speaker Change: With respect to our first quarter outlook, we expect net sales on a reported basis to decrease approximately 16% as compared to last year adjusting for the impact from the <unk> divestiture and FX headwinds organic constant currency sales are expected to decrease approximately 14%.

Markland Scott Lewis: That said, we expect first quarter operating profit to increase approximately 10% over the prior year and operating margin to expand approximately 145 basis points to 6%. Additionally, with the timing of last year's refinancing, interest expense is expected to be up year over year, resulting in an EPS loss of 7 cents, which is essentially in line with last year. Turning to our full year outlook, we expect net sales on a reported basis to decrease 4% as compared to last year. However, adjusting for the impact of the U.S. hosiery divestiture and FX headwinds, organic constant currency sales are expected to decrease approximately 2%.

Speaker Change: That said, we expect first quarter operating profit to increase approximately 10% over prior year and operating margin to expand approximately 145 basis points to 6%.

Speaker Change: And what the timing of last year's refinancing interest expense is expected to be up year over year, resulting in an EPS loss of <unk> <unk>.

Speaker Change: Which is essentially in line with last year.

Speaker Change: Turning to our full year outlook, we expect net sales on a reported basis, but decreased 4% as compared to last year.

Speaker Change: I think for the impact of the U S hosiery divestiture and FX headwinds organic constant currency sales are expected to decrease approximately 2%.

Markland Scott Lewis: We expect 4-year operating profit to increase approximately 26% over the prior year and operating margin to expand approximately 225 basis points to 9.4%. And for EPS, the midpoint of our guidance range is 45 cents, which implies a 650% growth over the past years. Lastly, with our expected profit recovery and additional working capital opportunities, we expect to generate approximately $400 million in cash flow from operations for the year.

Speaker Change: We expect full year operating profit to increase approximately 26% over prior year and operating margin to expand approximately 225 basis points to nine 4%.

Speaker Change: And for EPS, the midpoint of our guidance range is 45.

Speaker Change: Which implies a 650% growth over prior year.

Speaker Change: Lastly, with our expected profit recovery and additional working capital opportunities, we expect to generate approximately $400 million in cash flow from operations for the year.

Markland Scott Lewis: So in closing, while 2023 was challenging from a sales perspective, we made significant progress across a number of key performance metrics, including reaching a positive inflection in our margins and our leverage. As we look to 2024, we expect the sales challenges to continue, particularly in the first quarter. However, with our view to input costs and cost savings initiatives, we have visibility to deliver on strong operating profit and EPS growth outlook. Furthermore, we believe we're well positioned to continue to expand margin, to deliver another strong year of operating cash flow, and to continue to de-lever our balance sheet. And with that, I'll turn the call over to TC.

Speaker Change: So in closing while 2023 was challenging from a sales perspective, we made significant progress across a number of key performance metrics, including reaching a positive inflection in our margins and our leverage.

Speaker Change: As we look to 2024, we expect the sales challenges to continue particularly in the first quarter. However, with our view of the input costs and cost savings initiatives, we have visibility to deliver strong operating profit and EPS growth outlooks.

Speaker Change: Furthermore, we believe we are well positioned to continue to expand margin.

Speaker Change: To deliver another strong year of operating cash flow and to continue to delever, our balance sheet and with that I'll turn the call over to T. C.

Thomas C. Robillard: Thanks, Scott. That concludes our prepared remarks. We'll now begin taking your questions, and we'll continue as time allows. I'll turn the call back over to the operator to begin the question and answer session. Operator? As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

T. C.: Thanks, Scott 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.

As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your.

T. C.: Your question. Please press star one one again.

Operator: Please stand by while we compile the Q&A roster. Our first question will come from the line of Jay Sole with UBS. Great, thank you so much. My first question is just about Champion.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Okay.

Speaker Change: Our first question will come from the line of Jay sole with UBS.

Jay Sole: Great. Thank you so much.

Jay Sole: My first question is just on champion.

Jay Sole: If you just talk about the margins for Champion, you talk about fiscal 23, and then maybe talk about the plan to improve the margins and, based on the 24 guidance, what's your expectation for margins for Champion in fiscal 24? And then Scott, if we can just talk about the guidance for fiscal 24, what are you expecting specifically for anywhere? I mean, you mentioned the comments about expecting to outperform the category. If you could just give us a little bit more color there, that'd be super helpful. Thank you. Good morning, Jay.

Jay Sole: Can you just talk about the.

Jay Sole: The margins of champion can you talk about fiscal 'twenty three and then maybe talk about the plan to improve the margins in base baked into 'twenty four.

Jay Sole: What's your expectations for margins for champion in fiscal 'twenty four.

Jay Sole: Scott if we can just talk about the guidance for fiscal 'twenty, but what are you expecting specifically for anywhere I mean, you mentioned the comments about expecting to outperform the category. If you can just give us a little bit more color there that'd be super helpful. Thank you.

Markland Scott Lewis: Thanks for your question. So I'll speak to margins on a couple levels. One, you were talking about Champion, but also when Overall, as we think about 2024 and kind of what to expect there, so for 23, and this applies not just to Champion in the activewear business but also to Total Company, you know, our margins were pressured by the higher inflationary costs that we saw in 23, right? And so now as we go into 24, that is largely behind us now, and we can kind of move forward with momentum with an enhanced margin recovery So some of the same elements we saw in Champion, you're going to see the total year, the input cost.

Markland Scott Lewis: Hey, good morning, Jay Thanks for your question, so I'll speak to margins on a couple of levels. One you talked about champion, but also want to stake out margin.

Markland Scott Lewis: Overall, as we think about 2024 and kind of what to expect there.

Markland Scott Lewis: So for 'twenty three and this applies not just to champion in the Activewear business, but also total company margins were pressured by the higher inflationary costs that we saw in 'twenty three right and so now as we go into 'twenty four that is largely behind US now and we can kind of move forward with momentum with an enhanced margin recovery going.

Markland Scott Lewis: Going forward. So some of the same elements again, we saw a champion of FC total year. The input costs. We also champion had little over sales volume pressure in 'twenty three than the rest of the business as you look at 2024 and the margin outlook I think a couple of things that need to keep in mind to kind of make sure you understand of the case.

Markland Scott Lewis: We also, Champion had a little more sales volume pressure in 23 than the rest of the business. As you look at 2024 in the margin outlook, I think there are a couple of things that you need to keep in mind to kind of make sure you understand the cadence from 23 to 24. So, and we talked about this at the very beginning of 23 that, you know, we expected margin recovery to the upper 30 percent range by the time you get to the fourth quarter. And we achieved that, actually overachieved that, in the fourth quarter at 38.2 percent.

Markland Scott Lewis: Thats from 23 to 24 so.

Markland Scott Lewis: Talked about this at the very beginning of 'twenty three that we expected margin recovery until the upper 30% range and by the time you get to the fourth quarter, and we achieved that actually ever achieve that in the fourth quarter at 38, 2% and so as you look at that.

Markland Scott Lewis: And so, as you look at that, and now we're back to pre-inflationary levels from a margin standpoint. As you move to 2024, our profit outlook is at 38.5% gross margin. We had that in the first quarter, and we're holding that steady throughout 2024.

Markland Scott Lewis: Now we are back to pre inflationary levels from a margin standpoint, as you move to 2024, our profit outlook.

Markland Scott Lewis: As at 38, 5% gross margin, we have that in the first quarter and we're holding that steady throughout 2024, and we have a high degree of confidence in that margin profile, because we have really good cost visibility.

Markland Scott Lewis: We have a high degree of confidence in that margin profile because we have really good cost visibility, both for my input costs as well as the cost savings that we've already put in place. So that's really important to understand as you think about margins going into 2024. Another fine point I want to make sure you hear on the profit outlook is, as we were looking at the overall view of 2024, and Steve's going to speak to the sales side, clearly there's still a lot of dynamics and a lot of pressures from the top line. The Consumer Environment is Still Changing.

Markland Scott Lewis: From a input cost as well as the cost savings that we've already put in place. So that's really important to understand as you think about margins going into 2020 for another five point I want to make sure you hear on the profit outlook as soon as we were looking at kind of the overall view of 2004 and Steve is going to speak to the sales side is clearly there's a lot of.

Markland Scott Lewis: Still a lot of dynamics in a lot of pressures from a top line standpoint.

Markland Scott Lewis: Consumer environment is still challenged.

Markland Scott Lewis: Keeping that in mind and knowing that, as we looked at our profit outlook, what we wanted to make sure we layered in some incremental conservatism in our profit outlook to make sure we can hedge and de-risk from the standpoint of managing that potential volatility on the top line that we've already considered some, but anything unanticipated beyond what we've already baked in, we want to make sure we hedged our profit for that. Now, a good example of that, as you can see, and we've talked about this before, we have really good visibility to profit, two, three quarters out from the cost of sales standpoint. We know what's on the balance sheet. We can see that roll out, and as we were, again, putting together a profit outlook, we wanted to make sure that, you know, we didn't bake all of that upside in, right? We have, again, lower input costs.

Markland Scott Lewis: Keeping that in mind, knowing that as we looked at looked our profit outlook. We wanted to make sure is we made sure we layered in from the incremental conservatism in our profit outlook to make sure we can.

Markland Scott Lewis: Chairs and de risk from the standpoint of managing that potential volatility on the top line that we've already considered some but anything unanticipated beyond what we've already baked in we want to make sure we have adequately hedged our profit for that.

Markland Scott Lewis: Good example of that as you look at and we've talked about this before we have really good visibility to profit.

Markland Scott Lewis: Three quarters out from a cost of sales standpoint, we know what's on the balance sheet, we can see that rollout and as we were again, putting near their profit outlook. We wanted to make sure that we didn't bake all of that upside in right. We have again, the lower input cost we have the cost savings we want to make sure. We protect on the downside in case again Theres unanticipated volatility.

Markland Scott Lewis: We have the cost savings. We want to make sure we protect on the downside in case, again, there's unanticipated volatility not factoring in our sales outlook. So, Steve, anything on sales you want to add to that? Yeah, thanks, Guy, and good morning, Jay.

Speaker Change: Until they are not veterinary ourselves outlooks as Steve anything on our sales are going to add to that yeah. Thanks, Scott and good morning, Jay I think when you think about the sales plan for the year the guide for the year.

Steven L. Marotta: I think when you think about the sales plan for the year, the guide for the year, you know, obviously, we start with our current environment and understand where we are. And sales have been challenging. There's no doubt about it; in the consumer environment, it's been difficult for us as we go forward.

Steve: Obviously, we start with our current environment.

Speaker Change: And understand where we are in sales have been challenging there's no doubt about it and the consumer environment has been difficult for us.

Steven L. Marotta: But we're starting to see, you know, improvement in that space, and we're pretty confident in the numbers that we delivered for the year. When you look at Champion specifically, we think the business is going to hit a trough in the first quarter and first half of this year. And, you know, we're taking actions to make sure that, you know, we clean up the channel ahead of our fall winter 24 line that's going to be launching.

Steve: As we go forward, but we're starting to see improvement in that space and we're pretty confident in the numbers that we delivered for the year. When you look at champion specifically.

Steve: We think the business is good.

Steve: <unk> in the first quarter and first half of this year and we're taking actions to make sure that we clean up the channel ahead of our fall winter for line.

Steve: It's going to be launching.

Steven L. Marotta: You know, this is going to be progressive growth throughout the year. Obviously, retailers are being a little cautious, but the category is going to be clean. Our collegiate business is going to be on a more normal cadence. You know, the fall winter line that we're going to be introducing in Champion has gotten a really strong response from Pinnacle Accounts, which, of course, is really important to set the tone for the brand. We're going to be ready for a replenishment chase model in the back half of the year.

Steve: We this is going to be a progressive growth throughout the year, obviously retailers are being a little cautious but.

Steve: Categories be clean.

Steve: Collegiate business is going to be.

Steve: A more normal cadence.

Steve: The fall winter line that we're going to be introduced.

Steve: And champion.

Steve: Really strong response from the Pinnacle accounts, which of course is really important to set the tone brand.

Steve: We're going to be ready for a replenishment chase model in the back half of the year and we're going to be spending behind the brand and really support that so we think that brand can grow in the back half of the year and start to pivot a much more positive space and the same thing for global Innerwear.

Steven L. Marotta: And we're going to be spending behind the brand and really supporting this. So we think that brand can grow in the back half of the year and start to pivot to a much more positive space. And the same thing for Global Anywhere.

Steven L. Marotta: I'm really pleased with where we're headed in the global internet business and the share gains that we're seeing. We've got pretty good forecasting analytics to understand where the category is going to be over time, and we're going to continue to take share. The category was down 5% in Q4, and we took a lot of share, and we're expecting those trends to continue in the early part of the year but then to improve. With our innovation that's coming, with our media that's coming, we're going to be leaning in, and we think the back half is going to be better than the front half for sure, and that leads to all the margin opportunities that Scott talked about. We're really confident in the profit outlook for the year, and there's some conservatism built in, as Scott said. We have a lot of known savings that haven't been included at this point, so we can adapt to a volatile top-line environment if it occurs. And if I could just add one more thing,

Steve: I'm really pleased with where we're headed and global innerwear business and the share gains that we're seeing in this business. We've got pretty good forecasting analytics to understand where the category is going to be over time, and we're going to continue to take share in.

The category was down 5% in Q4, and we took a lot of share and we're expecting those trends to continue in the early part of the year, but then to improve so.

With our innovation Thats coming with our media that's coming we're.

Steve: We're going to be leaning in and we think that the back half is going to be better than the front half for sure.

Steve: And that leads to all the margin opportunity that Scott talked about we're really confident in the profit outlook for the year.

Steve: And there is some conservatism built in as Scott said, we have a lot of known savings.

Steve: Haven't included this point, so we can adapt to volatile topline environment that occurs.

Markland Scott Lewis: Jay, you were asking about interwar margins. So one thing I think is important to keep in mind, too, is you look at, and I mentioned this earlier, about just the margin pressure we saw in 2023. Interwar, over the last five quarters, has had significant margin expansion. It was 8.3 percent in Q4 of 22, and we finished the year in Q4 at 21.1 percent. So, again, that really demonstrates where we are, and we're back to, again, that pre-inflationary margin. Got it. Thank you so much.

Speaker Change: And Matt if I could have more J.

Matt: You're asking about innerwear margins one thing I think is important to keep in mind too as you look at it and I've mentioned about this earlier about the margin pressure we saw in 2023.

Matt: And aware over the last five quarters has had significant margin expansion. It was eight 3% in Q4 'twenty two and we finished the year in Q4 at 21, 1%. So again I really demonstrates again, where we are backing in that pre inflationary margin levels.

Speaker Change: Got it thank you so much.

Jay Sole: Thank you. Our next question will come from the line of Paul Lejuez with The City. Hey, thanks, guys. I'm curious if you could talk about the permanent retail space gains that you mentioned on the innerwear side. At what retailers are you seeing those gains? And, you know, are there any places where you've seen permanent space losses that would offset those gains?

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Paul <unk> with Citi.

Paul: Hey, Thanks, guys.

Paul: So if you could talk about the permanent retail space gains that you mentioned on the innerwear side of what retailers are you seeing those gains and are there any places where you've seen permanent space losses that would offset those gains maybe if you can frame just 1% of net increase youre seeing on permanent space gains.

Steven L. Marotta: Maybe if you could frame just what percent of a net increase you're seeing on permanent space gains. And then, curious on your cash from operations guidance, what should we expect on the inventory line as we move throughout the year and at year end? How much of a benefit or drag will that be on your cash cash flow guidance? And then last, just curious, what is the size of the Australia business? Sure. Let me start with the Space Games.

Paul: And I'm curious on your cash from operations guidance, what should we expect on the inventory line.

Paul: We move throughout the year end to end the year, how much of a benefit or drag would that be on your cash cash flow guidance.

Paul: And then last just curious what is the size of the Australia business. Thanks.

Paul: Sure.

Speaker Change: Let me start with the with the space gains.

Steven L. Marotta: I've been really pleased with the Space Games that we've been getting in key accounts for us. A lot of it, but not all of it, is driven by innovation. So the products that we brought to market last year with Hanes Originals, you know, men's, women's, kids across the board, and by Made in Form that's now launching, and as we lean into the new innovation that's coming this year with Super Soft and Anti-Chafe are all taking incremental space. So that's the good news, because we sell in, we're all gaining space. And the other thing that's going on, and I don't want to talk about specific customers, but if you go out and look, you'll see us taking permanent space away from other national brands, and that's our base business, and that's because the business is performing better and turning faster for the retailers. So they're making those choices, and there are some obvious ones out there.

Speaker Change: I've been really pleased with the space gains that we've been getting in key accounts.

Speaker Change: For us a lot of it not all of that is driven by innovation. So the product that we're bringing to market.

Speaker Change: Last year with <unk>.

Speaker Change: Haynes original.

Speaker Change: Men's women's kids across the board.

Speaker Change: And by Maidenform, it's now launching and as we lean into the new innovation, that's coming this year with super soft and anti shape.

Speaker Change: Are all taking incremental space. So that's the good news is we sell in rural gaining space and the other thing that's going on in.

Speaker Change: I want to talk about specific customers, but if you go out and you look youll see.

Speaker Change: US taking permanent space away from other national brands and Thats, our base business and that's because the business is performing better.

Speaker Change: And turning faster further retail so they're making those choices there.

Steven L. Marotta: The other thing that I think is really important, and I got this question the other day as we were having a discussion, and I think it's important, is that private label is not playing the role that it has been in the past. And actually, private label is losing share in the underwear market right now, so that's an opportunity for us to continue to go out and gain that permanent space as well. So it's broad, it's across categories, it's across channels, and we're pleased because it's going to drive our business going forward. Hey, good morning, Paul.

Speaker Change: There's some obvious one only out there the other thing that I think is really important.

Speaker Change: I got this question yet those days, we were having a discussion I think is important.

Private label is not playing the role that it had been in the past and actually private with losing share in the innerwear market right. Now so that's opportunity for us to continue to go out and gain that permanent space as well so it's broad it's across categories across.

Speaker Change: It's across channels and we're pleased because it's going to drive our business going forward.

Markland Scott Lewis: Thanks for your question. So for cash flow, very proud of the team and what we delivered on cash flow in 23, really solid execution across the business that did a great job of managing working capital. We knew there was a lot of opportunity and really delivered on that in 23. So for 23, we had 562 million in cash flow, right? So that returns us back to that store's cash flow. And in fact, you know, we were guiding $500 million in cash flow for the year. We saw upside in that, and that was driven by working capital, especially inventory. We ended the year with $130 million in inventory below what we were targeting. So again, great job with execution there by the team, which accelerated cash flow and accelerated debt pay down. So as you move to 24, keep that in mind, we had a little acceleration of cash in the 23. As we look for 24, we are guiding $400 million of cash flow for the year, again, within that historical range that we've seen in the past.

Speaker Change: Hey, good morning, Paul Thanks for your question so for cash flow.

Speaker Change: Very proud of the team and what we deliver all cash flow in 'twenty, three really solid execution across the business did a great job managing working capital we know theres a lot of opportunities really delivered on that in 'twenty. Three so for 'twenty three we had $562 million of cash flow so that returns us back to that.

Speaker Change: Cash flow and in fact, we were guiding to $500 million of cash flow for the year, we saw upside in that and that was driven by working capital, especially inventory. We ended the year inventory of $130 million below what we were targeting so again, great job with execution and thereby the team which accelerated cash flow.

Speaker Change: And an accelerated debt paydown.

Speaker Change: So as you move to 'twenty four.

Speaker Change: Keeping that in mind, we began we had all accelerated into the of cash into 'twenty three as we looked for 'twenty. Four we are guiding to $400 million of cash flow for the year again within that historical range that we've seen in the past.

Markland Scott Lewis: As far as the mix, I would say, again, there's still opportunity with working capital. As you look at the overall mix of cash flow generation, I'd say about two-thirds of that's going to come from profit, and a third of that's going to come from working capital. And the working capital is going to come across all working capital inventory. There's still opportunity there. There are AR and VP opportunities.

Speaker Change: As far as the mix I would say again theres still opportunity with working capital.

Speaker Change: As you look at the overall mix of cash flow generation I would say about two thirds of that from income from profit and a third of that come from working capital and the working capital is going to come across all working capital inventory.

Speaker Change: Phil opportunity, there Theres ADR, and we pay opportunities and we've got a good.

Markland Scott Lewis: And we've got a good track record of managing working capital. Our team is very focused, especially on the cash conversion cycle. As I look at that, I can really see opportunities beyond what we've already achieved in our working capital. And I think your final question was about Australia and how big that is.

Speaker Change: Track record of managing working capital.

Speaker Change: Our team is very focused especially electric cash conversion cycle.

Speaker Change: Look at their I can really see opportunities beyond what we've already achieved our working capital as we get into 'twenty.

Speaker Change: And I think your final question was about Australia, and how big that is.

Markland Scott Lewis: We don't release the exact number, but 18% of total HBI is the right number for you to anchor on. And the majority of that business is an internet business. Got it.

Speaker Change: <unk> released the exact number but.

Speaker Change: Low teens percent of total HDI is right number for you to anchor on the majority of that businesses in innerwear business.

Speaker Change: Got it.

Paul Lejuez: Our next question will come from the line of Paul Kearney with Barclays. Thanks for taking my question. Can you go over where the inventory levels are by brand for Hanes versus Champion? You mentioned cleaning out the channels inventories for Champion.

Speaker Change: Our next question will come from the line of Paul Kearney with Barclays.

Great. Thanks for taking my question.

Paul Lejuez: Can you.

Paul Lejuez: Where our inventory levels by brand for Haynes versus champion you mentioned cleaning out the channel inventories for champion, So where do you see channel inventories, particularly there.

Markland Scott Lewis: So where do you see channel inventories, particularly there? And it goes back to the first question, but with the Q1 guidance for organic sales down 14 and full year down two, what gives you all the confidence that the business can reaccelerate through the year? And what are the main drivers behind that improvement? Thanks.

Paul Lejuez: It goes back to the first question, but with the Q1 guidance for organic sales down 14 full year down to what gives you all the confidence that the business you can reaccelerate through the year and what are the main drivers behind that improvement. Thanks.

Steven L. Marotta: So, from an inventory perspective, we don't break it out by business, but closing the year at 1.37 puts us in a really good position. I think we're balanced across our portfolio. Our inventory reduction actions and process improvement through management capabilities, life cycle planning, skewed discipline, that applies pretty consistently across the business. So, the actions we're taking are consistent, and we use the same methodology and the same mindset, if you will, and philosophy of how we manage inventory across the business. So we feel like we're in good shape across the total business. In terms of... Sales. Maybe I'll go a little deeper than some of the things that I talked about earlier.

Speaker Change: Sure. So from an inventory perspective, we don't break it out by business, but.

Speaker Change: That closing the year at 137 puts us in a really good position I think we're balanced across our portfolio our inventory reduction actions.

Speaker Change: And process improvement.

Through management capabilities lifecycle planning SKU discipline that applies pretty consistently across the business. So the actions we're taking.

Speaker Change: Our consistent and we same methodology same mindset, if you will.

Speaker Change: And philosophy of how we manage inventory across the business. So we feel like we're in good shape across the total business.

In terms of <unk>.

Speaker Change: Sales, maybe I'll go a little deeper on some of the things that I talked about earlier.

Steven L. Marotta: You know, we have a pretty good understanding, particularly in interware, of predictive capability, where the market is right now and understanding where it's going. And, you know, that's based on forecasting analytics and predictive algorithms that are tied to historical correlations of the business along with macroeconomic metrics. So we think we're in pretty good shape to understanding where the category is going, and we think it will improve throughout the year. But, you know, for Interware, if we look at where we are today, there's some shipment timing things, there's some inventory actions things, the innovation timing, you know, all the innovation that we're bringing, which is going to be our biggest year yet, you know, 2023 was a historical year. We're going to have another one this year on top of that, with the launches across Hanes, across Bally, across Bonds, which I'm very encouraged about, and we're going to lean into that with the media spending at higher levels than we have in the past, so I think you're going to see a ramp in the Interware business as we go forward, and I'm comfortable with that, and the Champions, the same thing, you know, I think this business is going to drop out in the first half, and, you know, we're taking a lot of actions to prepare ourselves for the fall winter business that's coming, so that we're clean, and that we have enough room to sell that in, and it's flowing in well, you know, retailers are a bit cautious, but we think the cleaning up that we're doing is working well, and then you're going to see some, you know, the college business is going to rebound for us, it's been choppy the last couple years, I mean, last year, you know, the heat that we had in the back half of the year affects that business, we think it's going to be a more normal year, the pinnacle accounts are excited about our business that's coming in, that's going to land in the back half, we are focusing more on our punishment model than a made to order model this year, that's going to allow us to leverage our supply chain strengths and capture demand in real time, so we have a process around never out skews, that's more disciplined than it's been in the past on Champions, it's going to help drive that business, we're going to be spending more behind the brand, the market campaign that we've been driving is working, it's working globally, and we're going to lean into that, and, you know, there's spots around the world that are continuing to grow, like our China growth has continued to accelerate with our partner there, so we think the business is going to move forward throughout the year, we've got a lot of activity coming, we're ready as a company, we have the cost structure in place, it's got, as you mentioned earlier, the profits going to come with that in the back half, so we feel like we've got sales kind of nailed down and we've got the programming to drive the business. Thank you. Thanks a lot.

Speaker Change: We have a pretty good understanding, particularly in innerwear predictive capability, where the market is right now and I understanding where it's going and that's based on <unk>.

Speaker Change: Forecasting analytics and predictive algorithms that are tied to historical correlations of the business along with macroeconomic metrics. So we think we're in pretty good shape to understanding where the category is growing and we think it will improve throughout the year.

Speaker Change: But for for Innerwear, if we look at where we are today.

Speaker Change: There's some shipment timing things there.

Speaker Change: Inventory actions things.

Speaker Change: Innovation timing all the innovation that we're bringing which is going to be our biggest year. Yet 2023 was a historical year, we're going to have another one this year on top of that with the launches across haynes across bally across bonds, which I'm very encouraged about and we're going to lean into that with the media spending at higher <unk>.

Speaker Change: Levels than we have in the past so I think youre going to see a ramp in the innerwear business as we go forward.

Speaker Change: And I'm comfortable with that and the champions same thing I think this business is going to drop out in the first half and we're taking a lot of actions to prepare ourselves for the fall winter business, that's coming out so that we're clean in that we have enough room to sell that in and it's flowing in well.

Speaker Change: Retailers are a bit cautious, but we think the cleaning up that we're doing is working well and then youre going to see some.

Speaker Change: <unk> business is going to rebound for us it's been choppy. The last couple of years I mean last year.

The heat that we had in the back half of the year effects that business, we think it's going to be a more a more normal year.

Speaker Change: Clinical accounts are excited about our business that's coming in that's going to land in the back half.

Speaker Change: We are focusing more on a replenishment model than a made to order model.

This year, that's going to allow us to leverage our supply chain strengths and capture demand in real time. So we have a process around never out skus that is more disciplined than it's been in the past our champions can help drive that business, we're going to be spending more behind the brand marketing campaign that we've been driving is working it's working globally, and we're going to lean into that and.

Speaker Change: Spots around the world that are continuing to grow like our China growth has continued to accelerate with our partner. There. So we think the business is going to move forward throughout the year, we've got a lot of activity coming.

Speaker Change: Ready as a company.

Speaker Change: We have the cost structure in place and Scott as you mentioned earlier the profit is going to come with that in the back half. So we.

We feel like we've got sales kind of nail down and we've got the programming to drive the business from here.

Speaker Change: Thank you best of luck.

Ike Boruchow: Our next question will come from the line of Ike Boruchow with Wells Fargo. Hey, good morning everyone. A couple questions from me, more follow-ups on some of the answers you guys gave. Steve, just to make sure I heard right, I think you said for the year you're expecting the gross margin to be about 38.5%. Was that, did I hear that right?

Speaker Change: Our next question will come from the line of Ike <unk> with Wells Fargo.

Speaker Change: Yeah.

Ike: Hey, good morning, everyone.

Ike: A couple of questions from me.

Ike: More follow ups to some of the answers you guys gave Steve.

Ike: Steve I think just to make sure I heard right I think you said through the year, you're expecting the gross margin to be about 38, 5% was up.

Markland Scott Lewis: That's correct, Ike. Okay. And then I was just kind of curious, is there seasonality to it? The business has changed a lot, but it is usually one Q a little bit higher than that, and the rest of the year, kind of similar, like similar Q2 to Q4. Is there any seasonality we should kind of keep in mind? Yeah, we do have seasonality in the business, but as I look at 24, I would just kind of hold more of a steady gross margin rate is what I would anticipate and I would guide you to throughout the year. You know, the cash flow is seasonal. I mean, typically, in the first half, it's more of a break-even cash flow.

Steve: That's correct.

Steve: Okay, and then I was just kind of curious is there seasonality to it.

Steve: The business has changed a lot, but it is usually <unk> a little bit higher than that in the rest of the year kind of more similar Q2 to Q4 is there any seasonality, we should kind of keep in mind.

Speaker Change: Yes, we do have seasonality with the business.

Speaker Change: Look at 24, I will just kind of hold more of a steady gross margin rate.

Speaker Change: As what I would anticipate that our <unk> throughout the year.

Speaker Change: Flow is seasonal typically in the first half it's more of a breakeven cash flow or the cash flow is more generated in the back half, but I think from a gross margin standpoint, I would say that again more of a steady again like I mentioned earlier to the earlier question again, we've got great visibility to the cost dry in certain input costs that are lower the cost savings that are.

Markland Scott Lewis: The cash flow is more generated in the back half. But I think from a gross margin standpoint, I would say that, again, it's more of a steady. Again, like I mentioned earlier in the earlier question, we have great visibility into costs, right? And so from the input costs that are lower, the cost savings that are, you know, also on the balance sheet, we can see this roll out over the course of the quarters. And again, and that's not all in the guide.

Speaker Change: You can also with on the balance sheet, we can see this rollout over the course of the quarters.

Speaker Change: Again, and that's not all in the guide we've not baked all of that and we took incremental conservative assumption.

Markland Scott Lewis: We've not baked all that in. We took incremental conservative assumptions from a profit standpoint to make sure we can de-risk and hedge from a sales outlook perspective. Got it. And then just one last quick one.

Speaker Change: Fit standpoint to make sure we can de risk and hedged from a sales outlook there.

Speaker Change: Got it.

Speaker Change: And then just last quick one is there any chance you guys would give a specific.

Ike Boruchow: Is there any chance you guys could give a specific guide for both Champion and Innerwear for Q1 and for the fiscal year? And if not, I guess what I'm just trying to understand, because it sounds like there's confidence growing for Innerwear and Champion Trophic, but you also, you know, the year-over-year decline you're guiding to in 1Q is worse than the decline you had in 4Q, which missed your plan So I'm just trying to kind of square that up a little bit. If you can, if there's any way to kind of, you know, give us a little bit more info, that'd be great.

Speaker Change: Guide for both champion in Innerwear for Q1 and for the fiscal year.

Speaker Change: And if not I guess, what I'm, just trying to understand because it sounds like there's confidence growing on innerwear.

Speaker Change: And champion shopping, but Youre also.

Speaker Change: The year over year decline Youre guiding to in <unk> is worse than the decline you had in <unk>, which missed your plans. So I'm just trying to I'm trying to kind of square that up a little bit if theres any way to kind of.

Speaker Change: Give us a little bit more info that that'd be great.

Markland Scott Lewis: Yes, so we don't guide by segments, but let me give you some directional kind of thoughts about the first quarter for segments, top line, and Steve, feel free to chime in on that detail. So on U.S. interwear, we expect the U.S. interwear business to be down mid single digits year over year. That's in line with where the category is for the first quarter. On the international side, the international business, it'll be down low double digits on a reported basis and down around 10% constant currency. Again, some of the challenges that we talked about earlier that Steve referenced with Australia, and then just a cautious view from a European retailer standpoint. On U.S. activewear, there are a couple things to keep in mind.

Speaker Change: Yesterday, we don't guide by segment, but let me give you some directional kind of thoughts about the first quarter for segments topline as steel Stifel free to chime in on that detail. So on U S. Innerwear, we expect.

Speaker Change: And our business to be down mid single digits year over year, that's in line with.

Speaker Change: Where the category is for the first quarter on the international side the international business.

Speaker Change: It'll be down low double digits on a reported basis and down 10% constant currency and some of the challenges that we've talked about earlier that Steve referenced with Australia, and then just cautious view from a Europe retailer standpoint on U S. Activewear Theres a couple of things to keep in mind, we're expecting that to be down roughly 30%.

Markland Scott Lewis: We're expecting that to be down roughly 30% in the first quarter, kind of the same headwinds that we've been talking about. It's important to note there, though, that about two-thirds of that decline is the kind of more of the kind of lapping some timing issues from last year. If you remember last year, in the first quarter, we implemented SAP, so there was some timing and acceleration of shipments ahead of that SAP implementation. We also benefited from timing from a collegiate business standpoint. There were some unseasonably strong sales in Q1 of last year that we are lapping. And then the last piece of that is just with our kids' business.

Speaker Change: In the first quarter kind of same headwinds that we've been talking about it but it's important to note there, though about two thirds of that decline is the kind of more of the kind of lapping some timing issues from last year. If you remember last year in the first quarter, we implemented Asap. So there was some timing acceleration of shipments.

Speaker Change: Ahead of the SAP implementation and we also had benefited from.

Speaker Change: Some comments on the collegiate business standpoint, just there are some unseasonably strong sales in Q1 of last year that we are that we are lapping and then the last piece of that business with our kids business, we move that to a license fee model and so you have some some changes year over the year for that as against two thirds of the.

Markland Scott Lewis: We moved that to a licensee model, and so you have some changes year over year for that. So, again, that's two-thirds of the fluctuation from year to year. Got it. Thanks so much.

Speaker Change: But the fluctuation from year to year so.

Speaker Change: Got it thanks, so much.

Ike Boruchow: Our next question will come from Hale Holden with Barclays. Your line is now open. Hey, good morning. I was wondering if you could just give us some context on why you think the underwear category has been down so much over the course of the year and projected to be down in the first quarter. It just feels like a lot for what has historically been a replenishment category, understanding that you're gaining share within the category. Yeah, thanks for the question.

Speaker Change: Our next question will come from the line of Hale Holden with Barclays. Your.

Hale Holden: Your line is now open.

Hale Holden: Okay.

Hale Holden: Hey, good morning.

Hale Holden: I was wondering if you could just give us some context on why you think the innerwear category has been down so much over the course of the year and projected down in the first quarter feels like a lot for them.

Speaker Change: What has historically been a replenishment category.

Speaker Change: Anything that you're gaining share within the category.

Steven L. Marotta: You know, I think when you go back and look at last year, the category was down about 3%, and then it decelerated a little bit in Q4 to about 5. And we're expecting a little bit of that to continue into Q4. When you go back and look at the past, this category has been roughly a 1% unit growth business. And, you know, we would expect that the category is going to bounce back to that. You know, you go back and look at the last four years, all the volatility that we've had through. Thank you. So, I'm going to start with the question about the category. When you look at the supply chain and everything that's gone on, it's been a certainly a volatile couple years. The category has actually grown roughly 1%. I know it doesn't feel like that, but you've had, you know, a huge spike in 21, and it's been down.

Speaker Change: Yes, thanks for the question.

Speaker Change: I think when you go back and you look at last year. The category was down about 3% and then decelerated a little bit in Q4 to about five and we're expecting a little bit of that continuation into Q4. When you go back and you look at historically this category has been rough.

Speaker Change: Roughly a 1% unit growth business and we would expect that the category is going to bounce back to that.

Speaker Change: You go back and look over the last four years with all the volatility that we've had through supply chain and everything that's gone on it's been a certainly a volatile couple of years.

Speaker Change: The category has actually grown roughly that 1% and I know it doesn't feel like that but <unk> had a huge spike in 'twenty, one that's been down and our growth during that time, it's been about 2%. So.

Steven L. Marotta: And our growth during that time has been about 2%. So, when you look at this in the macro, the category has actually been behaving at historical levels, and we've been outpacing that category. And, you know, from the beginning, we've been saying our goal is we're going to grow two times the category rate. And if you look at it over four years, that's what we've done.

Speaker Change: When you look at this in macro.

Speaker Change: Category has actually been behaving at historical levels, and we've been outpacing the category and from the beginning we've been saying our goal is we're going to grow two times the category rate and if you look at it over four years, that's what we've done.

Steven L. Marotta: Again, it doesn't feel like that quarter to quarter, and it's very, very choppy, but we expect that the category is going to return to historical levels. It's going to be a good, stable category that we'll continue to take share in and, you know, We're better prepared to do that in the past. There was a time when we were losing share, there was a time when we weren't growing, but we pivoted that, and the reinvigoration of our underwear business is working now, and the innovation we're coming up with this year is going to have a big Great, thank you very much.

Speaker Change: Again, it doesn't feel like that quarter to quarter, and it's very very choppy, but we expect that the category is going to return to historical levels, it's going to be a good stable category at work do you take share in <unk>.

Speaker Change: We are better prepared to do that in the past.

Speaker Change: There was a time when we were losing share there was a time when we're growing but we pivoted that and the reignited our innerwear business is working now and the innovation. We're calling this year is going to be a big impact on that.

Hale Holden: Thank you. Our next question will come from the line of Carla Casella with JPMorgan. Hi, thank you for all the color you've been giving on the global... Roast, That That That, Thanks, Cora. The Global Champion number, you know, historically, that number you were using is roughly right.

Speaker Change: Great. Thank you very much.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: Our next question will come from the line of Carla Casella with JP Morgan.

Hi, Thank you for all the color you've been giving on the global champion growth figures have you or can you give us a sense for how big that is as a global brand I remember years ago, a couple of years ago. It was about a $2 billion.

Carla Casella: I'm, assuming some of the declines are slower, but any ballpark figures the global champion side.

Carla Casella: Okay.

Speaker Change: Thanks Carl.

Speaker Change: The <unk>.

Speaker Change: Global champion.

Speaker Change: Number historically that number you are using is is roughly right.

Steven L. Marotta: You know, obviously, we've talked about the strategic process that we're going on through right now, so I don't want to be sensitive to the numbers that we share, but, you know, that $2 billion number, the business has declined a little bit in the last couple of years, so it's a little smaller than that by, you know, maybe $200-$300 million is roughly the number, and then... about the new launch, get back The Bulletproof Executive 2013, are lost in space. Sure. When you think about that business, you know, it's seasonal. So you have your spring, summer, business; you have your fall, and winter. So there are a lot of resets that happen every single year.

Speaker Change: <unk>.

Speaker Change: Obviously, we've talked about the strategic process that were going on right now so I'll be sensitive to the numbers that we share but.

Speaker Change: That $2 billion number that business has declined a little bit the last couple of years. So it's.

Speaker Change: It's all smaller than that.

Speaker Change: By maybe two or $300 million is roughly the number of years.

Speaker Change: Okay.

Speaker Change: And then.

Speaker Change: Can you talk about new launches and champion topping out in the first half with growth in the back half.

Speaker Change: Is there any risk that you've lost shelf space that you won't be able to get back or I guess, how much of the decline that you've seen in that brand or loss.

Speaker Change: Versus less.

Speaker Change: Less new product low returns.

Speaker Change: Sure when you think about that business.

Speaker Change: It is seasonal so you have your spring summer business you have your fall winter. So theres a lot of resets that happen every single year. The key is to show up with innovative product that is very consumer relevant and very brand relevant.

Steven L. Marotta: The key is to show up with innovative products that are very consumer relevant and very brand relevant. And I feel like coming into fall and winter, we have done a good job of that. And our customers are very receptive to what we have. So I feel good about our space.

Speaker Change: And I feel like coming into fall winter, we have a good job of that and.

Speaker Change: Our customers are very receptive to what we have.

Speaker Change: So I feel good about our space and where we're going to play and how we're going to compete in the market. When you look historically.

Steven L. Marotta: And where we're going to play and how we're going to compete in the market. When you look historically at what's driven down business, part of it's the category. You know, the category has certainly struggled the last couple years, and we are certainly no exception to that. That said, we have declined faster than the category, and that's why we are going through the big changes that we have gone through as a business. Really refocusing on creating, you know, heat behind the brand, which we lost, and making sure that we have a very clear product and channel segmentation strategy as we go to market. Building behind the champion, what moves do you make in your campaign?

Speaker Change: What's driven down the business part of it as a category.

Speaker Change: The category is certainly struggled the last couple of years and we are certainly no exception to that that said, we have declined faster than the category.

Speaker Change: And that's why we're going through the big changes that we've gone through as a business really.

Speaker Change: On trading heat behind the brand, which we lost making.

Speaker Change: Making sure that we have a very clear product and channel segmentation strategy as we go to market building behind the champion what moves you campaign.

Steven L. Marotta: We're operating as a more global company than we have in the past, so our work on global platforms for products, which makes us much, much more efficient and faster to market. So we put in a lot of strategic initiatives to address our performance in the market. And, you know, they're starting to come together, and that's why we're starting to see the business is going to improve in the back half of this year as that strategy is realized.

Speaker Change: We're operating as a more global company than we have in the past. So that are working on global platforms for product, which makes us much much more efficient faster to market.

Speaker Change: So we put in a lot of strategic initiatives to address our performance in the market and with.

Speaker Change: They are starting to come together and that's why we're starting to see that.

Speaker Change: This is going to improve in the back half of this year as that strategy is realized.

Thomas C. Robillard: That concludes today's question and answer session. I'd like to turn the call back to T.C. Robillard for closing remarks. 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.

That concludes today's question and answer session I would like to turn the call back to T. C Robillard for closing remarks.

Speaker Change: We'd like to thank everyone for attending our call today, and we look forward to speaking with you soon have a great day.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].