Q1 2024 Hanesbrands Inc Earnings Call

Okay.

Operator: Good day, and thank you for standing by. Welcome to the HanesBrands first quarter 2024 earnings conference call.

Speaker Change: Good day and thank you for standing by welcome to the Hanesbrands first quarter 2024 earnings Conference call.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this 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: At this time all participants are in a listen only mode.

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

Speaker Change: To ask a question during the session you'll need to press star one one on your telephone you will there.

Speaker Change: And here an automated message advising your hand is raised.

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 T.C. Robillard, Vice President, Investor Relations. Please go ahead.

Speaker Change: Draw. Your question. Please press star one again.

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

Speaker Change: I would now like to hand, the conference over to 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 are pleased to be here today to provide an update on our progress after the first quarter of 2024. Hopefully, everyone has had a chance to review the news release we issued earlier today.

Speaker Change: Good day, 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 after the first quarter of 2024.

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

Thomas C. Robillard: The news release, 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. These risks include those related to current macroeconomic conditions.

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

Thomas C. Robillard: Consumer Demand Dynamics, our ability to successfully execute our strategic initiatives, including our full potential transformation plan, the champion performance plan, and our evaluation of strategic alternatives for our global champion business. Our ability to deleverage within the anticipated time frame and the inflationary environment.

Thomas C. Robillard: 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 release. The company does not undertake to update or revise any forward-looking statements, which speak only to the time at which they are made. Unless otherwise noted, today's references to our consolidated financial results and guidance exclude all restructuring and other action-related charges. Additional information, including a reconciliation of these and other non-GAAP performance measures to GAAP, can be found in today's news release.

Speaker Change: Scenario environment.

Speaker Change: 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.

Speaker Change: Unless otherwise noted today's references to our consolidated financial results and guidance exclude all restructuring and other action related charges additional information, including a reconciliation of these and other non-GAAP performance measures to GAAP can be found in today's news release.

Thomas C. Robillard: With me on the call today are Steve Bratspies, our Chief Executive Officer, and Scott Lewis, our Chief Financial Officer. For today's call, Steve and Scott will provide some brief remarks, and then we'll open it up to your questions. I will now turn the call over to...

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.

Speaker Change: I will now turn the call over to Steve.

Stephen B. Bratspies: Thank you, TC. Good morning, everyone, and welcome to our call. HanesBrands delivered solid first quarter results with sales at the midpoint of our outlook. Better than expected operating profit, positive cash flow generation, and further reduction of our leverage. The year is unfolding as anticipated, and given our strong visibility to our operating profit and cash flow guidance, we reiterated our full year outlook. In addition, we further strengthened our market leadership position in interware, and we continued our progress on Champion.

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

Speaker Change: Thanks brands delivered solid first quarter results with sales at the midpoint of our outlook better.

Steve: Better than expected operating profit positive cash flow generation and further reduction of our leverage.

Steve: The year is unfolding as anticipated and given our strong visibility to our operating profit and cash flow guidance, we reiterated our full year outlook.

Steve: In addition, we further strengthened our market leadership position in Innerwear, we continued our progress on champion.

Stephen B. Bratspies: And with a positive inflection in margins and our lower fixed cost structure, we believe we're well positioned to accelerate earnings growth and further reduce debt, putting in place a flywheel for shareholder value creation over the next several years. For today's call, I'll briefly touch on our Innerwear and Champion business. Then, I'll discuss the value creation opportunity we see ahead of us by looking at our global interwebs. As expected, apparel sales globally remain under pressure as stretched consumers limit their spending.

Steve: And with a positive inflection in margins and a lower fixed cost structure. We believe we are well positioned to accelerate earnings growth and further reduce debt putting in place a flywheel for shareholder value creation over the next several years.

Speaker Change: For today's call I'll briefly touch on our Innerwear and champion businesses.

Speaker Change: Then I'll discuss the value creation opportunity, we see ahead of us.

Speaker Change: Looking at our global Innerwear business as expected apparel sales globally remain under pressure as stretched consumers limit their spending.

Stephen B. Bratspies: However, despite the headwind, we focused on strengthening our market-leading innerware business, and our strategy of consumer centricity is working as we gain share and outperform the market. We're launching new consumer-led innovation, including Made in Form M, Bonds, Shape Up, and the second phase of our successful Hanes Originals platform called SuperSoft. With our robust product pipeline, we expect 2024 to be another record year of innovation.

Speaker Change: However, despite the headwind we focused on strengthening our market leading innerwear businesses.

Speaker Change: And our strategy of consumer Centricity is working as we gained share and outperformed the market.

Speaker Change: We're launching new consumer led innovation, including Maidenform N bonds, J pop and a second phase of our successful Haynesville original platform called supercell.

Speaker Change: With a robust product pipeline, we expect 2024 to be another record year of innovation.

Stephen B. Bratspies: We're increasing brand marketing investment to support our current and future innovation launches, build greater brand relevance with younger consumers, gain incremental shelf space and seasonal programming, and further solidify the leadership position of our brand portfolio. In parallel, we continue to improve our operating model, including better inventory management capabilities and skewed discipline, improved service and on-shelf availability, as well as a lower fixed cost. As a result of our strategic work over the last three years, our brands are healthy.

Speaker Change: We're increasing brand marketing investments to support our current and future innovation launches build greater brand relevance with younger consumers gain incremental shelf space in seasonal programming and further solidify our leadership position of our brand portfolio.

Speaker Change: In parallel we continue to improve our operating model, including better inventory management capabilities, and SKU discipline improved service and on shelf availability as well as a lower fixed cost structure.

Speaker Change: As a result of our strategic work over the last three years, our brands are healthier our product pipeline is full and is resonating with consumers. Our gross margin is back to historical levels, we're investing more in marketing than we have in over a decade.

Stephen B. Bratspies: Our product pipeline is full and is responding with consumers. Our gross margin is back to historical levels. We're investing more in marketing than we have in over a decade, and we're seeing all this reflected in our markets, particularly with younger consumers, as we gained another 50 basis points of market share during the quarter across both men's and women's in the U.S. We're widening the gap against our competitors, and we're well-positioned for growth as the category returns to its historical trend of steady growth.

Speaker Change: And we're seeing all of this reflected in our market share, particularly with younger consumers as we gained another 50 basis points of market share during the quarter across both men's and women's in the U S.

Speaker Change: We're widening the gap against our competitors and we are well positioned for growth as a category returns to its historical trend of steady growth.

Stephen B. Bratspies: We're aggressively implementing our performance enhancement plan designed to strengthen the brand and position Champion for long-term profitable growth. We have also continued our focus on building brand heat, particularly with younger consumers, including strategic collaborations as well as targeted new product offerings in key channels. We moved our kids' business to a license model, which is part of our strategic plan to optimize the portfolio.

Speaker Change: Turning to champion we are aggressively implementing a performance enhancement plan designed to strengthen the brand and position champion for long term profitable growth.

Speaker Change: We also continued our focus on building brand heat, particularly with younger consumers, including strategic collaborations as well as targeted new product offerings in key channels.

Speaker Change: We moved our kids business to a license model, which is part of our strategic plan to optimize the portfolio.

Stephen B. Bratspies: And, as we highlighted last quarter, we're increasing marketing investments to build on the momentum of our Champion What Moves You campaign ahead of our new fall winter product offer. It's early, but we've seen some initial green shoots that our marketplace segmentation strategy is working. As we've previously stated, it will take time for our strategic actions to fully translate to the P&L. Global Champion sales in the first quarter decreased 25% on a constant currency basis.

Speaker Change: And as we highlighted last quarter, we're increasing marketing investments to build on the momentum of our champion what moves you campaign ahead of our new fall winter product offering.

Speaker Change: It's early but we've seen some initial green shoots that are marketplace segmentation strategy is working.

Speaker Change: As we've previously stated it will take time for our strategic actions to fully translate to the P&L.

Speaker Change: Global champion sales in the first quarter decreased 25% on a constant currency basis. During the quarter. We began to plan strategic move of our kids business to a license model. This move accounted for approximately 500 basis points of the decline.

Stephen B. Bratspies: During the quarter, we began the planned strategic move of our kids' business to a license model. This move accounted for approximately 500 basis points of the decline. Normalizing for this, we saw a sequential improvement in champions year-over-year. We expect the sales decline to continue to moderate in the second quarter.

Speaker Change: Normalizing for this we saw a sequential improvement in champions year over year trends.

Speaker Change: We expect the sales declines continue to moderate in the second quarter.

Stephen B. Bratspies: And we continue to expect champion sales to trough in the first half as we move past our channel cleanup actions, our collegiate business returns to its normal seasonal cadence, and we build on our momentum in April. With respect to our review of strategic alternatives for the global champions, 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. 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.

Speaker Change: And we continue to expect champion sales to trough in the first half as we move past our channel cleanup actions, our collegiate business returns to its normal seasonal cadence and we build on our momentum in Asia.

Speaker Change: With respect to our review of strategic alternatives for the global champion business.

Speaker Change: The process is progressing as expected.

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

Speaker Change: 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.

Stephen B. Bratspies: Now we'd like to turn to the significant value creation opportunity we see over the next several years. The underlying financial model of this company has always been strong, with healthy margins and consistent cash generation. While inflation, market disruption, and the challenging consumer demand environment have masked this for some time, this strength is once again visible.

Speaker Change: Now I would like to turn to the significant value creation opportunity, we see over the next several years.

Speaker Change: The underlying financial model of this company has always been strong with healthy margins and consistent cash generation.

Speaker Change: While inflation market disruption in a challenging consumer demand environment have masked this for some time. This strength is once again visible.

Stephen B. Bratspies: And over the past three years, we've taken necessary actions across the business to further enhance our operating and financial model. We've built new capabilities around brand building, data analytics, as well as inventory management and skew disk. We've added talent. We've streamlined our supply chain and extended our advantage. And we've taken out more than $200 million of fixed costs, nearly half of which were in SG&M.

Speaker Change: And over the past three years, we've taken necessary actions across the business to further enhance our operating and financial models, we've built new capabilities around brand building data analytics as well as inventory management and SKU discipline. We've added talent, we streamlined our supply chain and extended our advantages.

Speaker Change: And we've taken out more than $200 million of fixed costs nearly half of which were in SG&A.

Stephen B. Bratspies: With our leading brand positions, lower fixed cost structure, reestablished gross margin, consistent cash generation, and a commitment to reduce debt, we have created a flywheel for shareholder value creation. One that we believe positions us over the next several years to accelerate earnings growth, drive faster the leverage of our balance sheet, as well as free up incremental capital to invest in growth. As I close, I'd like to take a moment and thank the entire HanesBrands team. Your dedication, teamwork, and commitment to our transformation journey is beginning to show in our results.

Speaker Change: With our leading brand positions.

Speaker Change: Fixed cost structure reestablished gross margin consistent cash generation and our commitment to reduce debt. We have created a flywheel for shareholder value creation. When we believe positions us over the next several years to accelerate earnings growth drive faster deleverage of our balance sheet as well as free up incremental capital to invest.

Speaker Change: And growth initiatives.

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

Speaker Change: Your dedication teamwork and commitment to our transformation journey is beginning to show in our results we.

Stephen B. Bratspies: We delivered a solid first quarter in a difficult consumer and apparel market. We have strong visibility to achieving our outlook for the year. We strengthened the long-term operating and financial models of the company, and we believe we're well-positioned to unlock shareholder value over the next several years. And with that, I'll turn the call over to Scott.

Speaker Change: We delivered a solid first quarter in a difficult consumer and apparel market.

Speaker Change: We have strong visibility to achieving our outlook for the year with.

Speaker Change: We strengthened the long term operating and financial models for the company and we believe we are well positioned to unlock shareholder value over the next several years.

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

Scott Lewis: Thanks Steve. At a high level, we delivered solid first quarter results as we met or exceeded guidance across all of our key metrics. And as I look at our results, I'm reminded of where we were a year ago and the progress we've made delivering on the core financial objectives we laid out. Gross margins are back to historical levels, and we are taking costs out of this. We're also continuing to strengthen our operating model, increase brand investment, and rolling out even greater levels of product innovation, all of which is expected to generate strong earnings growth this year, as well as position us for more consistent top and bottom line growth over time. On today's call, I'll touch on the highlights from the quarter. I approve the financial positions, and then I'll provide some thoughts on our outlook.

Scott Lewis: Thanks, Steve.

Scott Lewis: At a high level, we delivered solid first quarter results as we met or exceeded guidance across all of our key metrics.

Scott Lewis: And as I look at our results a reminder of where we were a year ago and the progress we've made delivering on our core financial objectives, we laid out.

Scott Lewis: Gross margins are back to historical levels.

Scott Lewis: Taking cost out of the business are generating consistent cash flow.

Scott Lewis: Our paying down debt and reducing leverage.

Scott Lewis: We're also continuing to strengthen our operating model.

Speaker Change: Our increasing brand investments.

Speaker Change: Rolling out even greater levels of product innovation, all of which is expected to generate strong earnings growth. This year as well as position us for more consistent top and bottom line growth over time.

Speaker Change: For today's call I'll touch on the highlights from the quarter.

Speaker Change: Our improved financial position and then I'll provide some thoughts on our outlook for additional.

Scott Lewis: For additional details on the quarter's results and our guidance, I'll point you to our news release at FAQ.com. Looking at the details of the quarter, net sales of $1.16 billion were at the midpoint of our guidance range. This represents a decrease of $233 million, or nearly 17% versus prior years. Of this decrease, approximately $15 million was from FX. $20 million was from the U.S. hosry divestiture last year, and $65 million was from discrete timing-related items within the activewear segment that we discussed on last quarter's call. These include the strategic shift of the Champion Kids business to a license model.

Speaker Change: Details on the quarter's results and our guidance are fortunate to our news release and <unk> documents.

Speaker Change: Looking at the details of the quarter net sales of $1 6 billion, which at the midpoint of our guidance range.

Speaker Change: This represents a decrease of $233 million or nearly 17% versus prior year.

Speaker Change: This decrease approximately $15 million was from FX.

Speaker Change: $20 million was from a U S hosiery divestiture last year and.

Speaker Change: And $65 million for some discrete timing related items within the activewear segment that we discussed on last quarter's call.

Speaker Change: These include the strategic shift of the champion Kids business, So a license model.

Scott Lewis: Accelerated orders from customers ahead of our SAP implementation and Shippen Atomic within our collegiate business, all of which benefited last year's first quarter. Adjusting for these, the comparable sales base of our business decreased approximately 10% year-over-year in the first quarter.

Speaker Change: Accelerated orders from customers ahead of our SAP implementation and.

Speaker Change: And shipment timing within our collegiate business, all of which benefited last year's first quarter.

Speaker Change: Adjusting for days, the comparable sales base of our business decreased approximately 10% year over year in the first quarter.

Speaker Change: Looking at sales by segment.

Scott Lewis: Within US Interwear, as expected, the category remained challenging in the quarter, and sales decreased 8% as compared to the prior year. This was roughly 200 basis points below our outlook, driven by a higher than anticipated level of inventory management actions by select retailers. However, we are seeing that our strategy is working, and we are winning in the marketplace.

Speaker Change: Within U S innerwear as expected the category remained challenging in the quarter sales decreased 8% as compared to prior year.

Speaker Change: This was roughly 200 basis points below our outlook driven by higher than anticipated level of inventory management actions by select retailers.

Speaker Change: However, we are seeing that our strategy is working we are winning in the marketplace.

Scott Lewis: Our point of sale trends outperform the market as we gain another 50 basis points of share in the quarter. In our U.S. activewear business, sales decreased approximately 31%, or $97 million, as compared to the prior year, which was in line with our outlook for the year ahead. Approximately $65 million, or two-thirds of the decline, was driven by the previously mentioned timing-related items in the prior year quarter. Adjusting for this, activewear sales decreased nearly 14%, which represents a sequential improvement in the underlying year-over-year trends in both the Champion brand and the activewear sector.

Speaker Change: Our point of sale trends outperformed the market as we gain another 50 basis points of share in the quarter.

Speaker Change: And our U S activewear business sales decreased approximately 31% or $97 million as compared to prior year, which was in line with our outlook.

Speaker Change: Approximately $65 million or two thirds of the decline was driven by the previously mentioned timing related items in the prior year quarter.

Speaker Change: Adjusting for this activewear sales decreased nearly 14%, which represents a sequential improvement in the underlying year over year trends in both the champion brand and the Activewear segment.

Scott Lewis: And in our international business, constant currency sales decreased 9% compared to last year, which was in line with our outlook. For the quarter, growth in Latin America, Japan, and China was more than offset by decreases in Europe and Australia as macroeconomic headwinds continue to impact demand in these regions.

Speaker Change: And in our international business constant currency sales decreased 9% compared to last year, which was in line with our outlook.

Speaker Change: For the quarter.

Speaker Change: In Latin America, Japan, and China were more than offset by decreases in Europe, and Australia as macroeconomic headwinds continued to impact demand in these regions.

Scott Lewis: During the quarter, gross margin of 39.9% was strong, coming in 140 basis points above our outlook. As compared to last year, gross margin increased 720 basis points, driven primarily by the benefits from lower input costs, cost savings initiatives, as well as the impact from business net. With respect to SG&A, we decreased expenses by $13 million as compared to last year in line with our application. The lower expense was driven primarily by the benefits from cost savings initiatives and Discipline Expense Management. These savings help fund a 50% increase in brand marketing investment, which was focused on U.S. Interware and global champion businesses during the Cold War.

Speaker Change: Turning to margins gross margin of 39, 9% was strong coming in at 140 basis points above our outlook.

Speaker Change: As compared to last year gross margin increased 720 basis points, driven primarily by the benefits from lower input costs cost savings initiatives as well as the impact from business mix.

Speaker Change: With respect to SG&A, we decreased expenses $13 million as compared to last year in line with our outlook. The lower expense was driven primarily by the benefits from cost savings initiatives and disciplined expense management.

Speaker Change: Savings helped fund a 50% increase in brand marketing investments, which was focused on our U S Innerwear and global champion businesses in the quarter.

Scott Lewis: This resulted in an operating margin of 7.3% for the quarter, an increase of 270 basis points over last year and ahead of our expectation, driven by the strong gross margin performance. Looking at the remainder of the P&L, interest and other expenses were $76 million.

Speaker Change: This resulted in an operating margin of seven 3% for the quarter, an increase of 270 basis points over last year and ahead of our expectation driven by the strong gross margin performance.

Scott Lewis: Looking at the remainder of the P&L.

Speaker Change: Interest and other expenses were $76 million.

Scott Lewis: Tax expense was $15 million, and earnings per share for the quarter were a loss of 2 cents, which was ahead of our outlook. Turning to cash flow and the balance sheet, we continue to strengthen our balance sheet and our financial flexibility during the quarter. We generated cash flow from operations of $26 million. This was driven by better-than-expected profit performance and disciplined working capital management. Leverage at the end of the quarter was five times on a net debt to adjusted EBITDA basis, which was nearly a half a turn lower than last year.

Scott Lewis: Tax expense was $15 million and earnings per share for the quarter was a loss of <unk>, which was ahead of our outlook.

Scott Lewis: Turning to cash flow and the balance sheet, we continue to strengthen our balance sheet and our financial flexibility in the quarter.

Scott Lewis: We generated cash flow from operations of $26 million. This was driven by better than expected profit performance and disciplined working capital management.

Speaker Change: Leverage at the end of the quarter was five times on a net debt to adjusted EBITDA basis, which is nearly a half a turn lower than last year.

Scott Lewis: The improvement in our leverage was driven by lower debt, reflected in the $500 million of debt we paid down last year. All of this has led to a strong liquidity position of more than $1.2 billion at the end of the first quarter. Now, turning to guidance.

Scott Lewis: The improvement in our leverage was driven by lower debt reflected a $500 million of debt, we paid down last year.

Scott Lewis: All of this has led to a strong liquidity position of more than $1 $2 billion at the end of the first quarter.

Scott Lewis: All of my comments refer to adjusted results and will be based on the midpoint of our guidance range. We reiterated our full year guidance for sales, operating profit, earnings per share, and operating cash flow. Our view for the year is unchanged since our previous call. As a reminder, we highlighted that we expect the macro consumer environment to remain challenging for our categories in 2024, with progression into year-over-year sales trends as we move through the year.

Speaker Change: And now turning to guidance all of my comments will refer to adjusted results and will be based on the midpoint of our guidance ranges.

Scott Lewis: We reiterated our full year guidance for sales operating profit earnings per share and operating cash flow.

Scott Lewis: Our view for the year is unchanged since our previous call. As a reminder, we highlighted that we expect the macro consumer environment to remain challenging for our categories in 2024 with progression and the year over year sales trends as we move through the year.

Scott Lewis: We continue to remain highly confident in our Operating Profit Guide, which implies 26% growth over the last year, as we believe we have appropriately de-risked in this uncertain consumer environment. Our confidence in delivering $500 to $520 million of operating profit is based on visibility to input costs on our balance sheet for the rest of the year and our proven cost savings programs that continue to exceed our expectations. With respect to our second quarter outlook, we expect net sales on a reported basis to decrease approximately 6% as compared to last year.

Scott Lewis: We continue to remain highly confident in our operating profit guide, which implies 26% growth over last year as we believe we have appropriately de risked and as uncertain consumer environment.

Scott Lewis: Our confidence in delivering $500 million to $520 million of operating profit is based on our visibility to input cost on our balance sheet through the rest of the year and our proven cost savings programs that continue to exceed our expectations.

Scott Lewis: With respect to our second quarter outlook, we expect net sales on a reported basis to decrease approximately 6% as compared to last year.

Scott Lewis: Adjusting for the impact of the U.S. Treasury divestiture and FX headwinds, organic constant currency sales are expected to decrease approximately 3%. That said, we expect second quarter operating profit to increase approximately 40% over the prior year and operating margin to expand nearly 300 basis points to 9%, driven by the benefits from lower input costs and our cost savings initiative. Given the lower debt balances, we expect interest expense to decrease year-over-year, resulting in earnings per share of $0.09 as compared to a loss of $0.01 last year.

Scott Lewis: Looking for the impact from the <unk> divestiture and FX headwinds organic constant currency sales are expected to decrease approximately 3%.

Scott Lewis: That said, we expect second quarter operating profit to increase approximately 40% over prior year and operating margin to expand nearly 300 basis points to 9% driven by the benefits from lower input costs and our cost savings initiatives.

Scott Lewis: And given the lower debt balances, we expect interest expense to decrease year over year, resulting in earnings per share of <unk> as compared to a loss of one staff last year.

Scott Lewis: So in closing, the year has unfolded as anticipated. We have confidence and visibility in our full-year outlook. Paying down debt and lower interest expenses. We're increasing investments to drive growth. This has created a multi-year flywheel to generate meaningfully higher earnings and significantly reduced debt, which we believe will draw strong shareholder returns over the next several years. And with that, I'll turn the call over to TC.

TC: So in closing the year is unfolding as anticipated.

TC: We have confidence and visibility in our full year outlook for.

TC: We're paying down debt at lowering interest expense or.

TC: Our increasing investments to drive growth there.

TC: This has created a multiyear flywheel to generate meaningfully higher earnings and significantly reduce debt, which we believe will drive strong shareholder returns over the next several years.

TC: 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?

TC: 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.

Operator: As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your touchtone telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from the line of Jay Sole with UBS. Great, thank you so much. Steve, you touched on this.

Operator: As a reminder, if you'd like to ask a question at this time. Please press star one one on your Touchtone telephone and wait for your name to be announced.

Operator: To withdraw your question. Please press star one again.

Operator: Our first question comes from the line of Jay sole with UBS.

Jay Daniel Sole: Great. Thank you so much Steve you touched on this in your prepared remarks, a little bit but can you just elaborate on the visibility you feel like you have into the Companys profit recovery and maybe just touch on the long term earnings algorithm.

Jay Daniel Sole: Margins coming back.

Jay Daniel Sole: How do you see if you could give us a little bit more color there that'd be great. Thank you. Thanks.

Stephen B. Bratspies: Thanks, Jay. You know, I think when you think about profit, as we say in the remarks, we are highly confident in the operating profit guide that we have for the year and we continue to expect that year over year improvement each quarter, in both gross and operating The macro-consumer environment is going to remain challenging for us, and we think we've factored that in appropriately, but when we look at the input to the visibility costs that we have on the balance sheet through the remainder of the year, the cost savings programs that we have in place, which continue to over-deliver, so I thank the team for the hard work that they're doing there.

Speaker Change: Thanks Jay.

Stephen B. Bratspies: I think when you think about profit.

Stephen B. Bratspies: As we stated remarks, we are highly confident in the operating profit guide that we half of the year, we continue to expect that year over year improvement each quarter and both gross and operating margins.

Stephen B. Bratspies: The macro consumer environment remained challenging for us and we think we factored that in appropriately but.

Stephen B. Bratspies: When we look at the input to the visibility costs that we have on the balance sheet through the remainder of the year the cost savings programs that we have in place which continue to over deliver so I. Thank the team for the hard work that they're doing their.

Stephen B. Bratspies: We're really confident that we've got the $500 million to $520 million guide covered. And we think we see risks appropriately. We haven't put all the cost savings in. So despite a challenging sales environment, we feel pretty good about where we are and where we are going.

Stephen B. Bratspies: We're really confident that we've got the.

Stephen B. Bratspies: $500 million to $520 million guide.

Stephen B. Bratspies: Covered and we think we see risks appropriately we haven't put all the cost savings and so despite a challenging sales environment, we feel pretty good about where we are and where we can take it going forward.

Speaker Change: Got it okay. Thank you so much.

Operator: Our next question will come from the line of Paul Lejuez with Citi.

Stephen B. Bratspies: Our next question will come from the line of Polish Wang with Citi.

Stephen B. Bratspies: Hey everyone, this is Brandon Cheatham. I'm Paul Lejuez. I just wanted to dig in around gross margin reported for the quarters, you know, above expectations, I guess. What are you expecting for the rest of the year? Why wouldn't you be able to achieve a similar rate in the back half? What are some of the puts and takes there?

Paul Lawrence Lejuez: Hey, everyone. This operating to the month of.

Stephen B. Bratspies: Just wanted to dig in on.

Speaker Change: On the gross margin, we reported for the quarter Rose.

Stephen B. Bratspies: My expectation I guess.

Stephen B. Bratspies: We expect to improve our full year why wouldnt, you be able to achieve a similar rate.

Stephen B. Bratspies: In the back half.

Stephen B. Bratspies: Thanks Brandon, why don't I start, and Scott can come in behind me. I think we are very confident in our gross margin for the rest of the year. And while there are business mix changes that happen throughout the year, when you think about some of the key components, whether it's cotton, whether it's distribution, we have really good visibility into that, and it's already on the balance sheet, so we know what's going to roll off throughout the year.

Stephen B. Bratspies: Some of the puts and takes there.

Speaker Change: Thanks, Brian why don't I start and Scott you can comment I think we are very confident our gross margin for the rest of the year.

Stephen B. Bratspies: While this business mix changes that happened throughout the year. When you think about some of the key components, whether that cotton with its distribution, we have really good visibility to that and it's already on the balance sheet. So we know what's going to roll off throughout throughout the year. So obviously, we had a really strong first quarter at 39.

Stephen B. Bratspies: So, obviously, we had a really strong first quarter at 39.9, and we're really pleased with where that is, and we feel really good about where we've been. Our guide is actually relatively conservative overall, but we have a lot of confidence that we can get there based on what we know about our business already.

Stephen B. Bratspies: And are really pleased with where that is and we feel really good about where we've been.

Stephen B. Bratspies: Our guide is actually relatively conservative overall, but.

Stephen B. Bratspies: A lot of confidence that we can get there based on what we know about our business already and just to add a little bit of color to that for the first of all it rightly.

Scott Lewis: And just to add a little bit of color to the first quarter, like Steve said, a great start to the year. The next point, and something I think you probably recall this, is that in the first quarter, we had a heavier mix of sales in our international business, which has a higher concentration of retail. And so that has a higher gross margin rate but also a higher SG&A rate. And we saw that in the first quarter.

Scott Lewis: Like Steve said, a great start to the year, the mix point and something.

Scott Lewis: I think you probably recall this like one in the.

Scott Lewis: First quarter, we have had a heavier mix of sales in our international business, which has a higher concentration of retail and so that has a higher gross margin rate, but also a higher SG&A rate. So we saw that in the first quarter. That's a normal seasonal trend that you see in the first quarter and over the course of the year and like Steve said at rest of the year.

Scott Lewis: That's a normal seasonal trend that you see in the first quarter and over the course of the year. And like Steve said, the rest of the year, we have great visibility into the input cost. And as you think about From a modeling perspective, for the second quarter, I would guide you to a 38 and a half to 39% gross margin rate. And then, as you think about the rest of the year, for the full year, I would continue to use that 38 and a half to 39% rate for gross margin, and great visibility. We have the cost, we identify it, we know what's going to roll off, we have cost savings that Again, we de-risk that profit guide, so it gives us a lot of confidence that we know we can deliver that profit.

Scott Lewis: We have great visibility to it.

Scott Lewis: <unk> cost and as you think about from a modeling perspective for the second quarter I would guide you to a 38, 5% to 39% gross margin rate.

Scott Lewis: And then as you think about the rest of the year and the full year I would continue to use that at $38, 5% to 39% rate for gross margin get great visibility we have the cost.

Scott Lewis: Identify we know what's going to roll off we have cost savings that are in place I think we've derisked that profit guide. So it gives us a lot of confidence that we know we can deliver that profit number.

Stephen B. Bratspies: Got it. And just to clarify, are you not seeing any pricing pressure to pass through some of those cost agents?

Speaker Change: Got it and just.

Stephen B. Bratspies: Clarify youre not seeing any.

Stephen B. Bratspies: Pricing pressure to pass through some of those cost savings.

Stephen B. Bratspies: So we've lost the last part of your question. Could you say it again?

Stephen B. Bratspies: So we lost the last part of your question could you say it again.

Brandon Babcock Cheatham: Sure, yeah, and just to clarify, are you not seeing any pricing pressure to pass through some of the statements that you're receiving in the copy?

Speaker Change: Sure, Yes, and just to clarify you're not seeing any pricing pressure to pass through some of the states.

Brandon Babcock Cheatham: Some of the costs.

Stephen B. Bratspies: on cotton. No, we actually think we're in a really good position. And, you know, we have really good visibility on cotton all the way through this year. We know where we're going to be. So if there's any movement, it's not going to be anything this year that we incur at all.

Speaker Change: Yes, no we actually think we're in a really good position.

Stephen B. Bratspies: And we have really good visibility cotton all the way through this year.

Stephen B. Bratspies: No. We're we're going to be so if.

Stephen B. Bratspies: If there's any movement, it's not going to be anything this year that we incur at all.

Brandon Babcock Cheatham: Okay, and one more. Sorry if my line is breaking up.

Speaker Change: Okay, and one more sorry, if my line is breaking up can you quantify the Pos trends that you're seeing right now in the retailers' decision, we take down their inventory.

Stephen B. Bratspies: Can you qualify the POS trends that you're seeing right now and the retailer's decision to take down inventory? Is there potentially a restocking opportunity there eventually? And can they continue to restock? Because I feel like we've heard about them continuing to restock that channel for a while now. So I would suspect that their inventories are pretty low.

Stephen B. Bratspies: There are potentially a restocking opportunities eventually.

Stephen B. Bratspies: Yes, so let me talk about POS overall, then I'll talk about inventory. When you came through the quarter, the beginning of the quarter was softer on POS than the month of March was. Some of that is just strengthening in business. Some of that is that there's an Easter flip in there.

Stephen B. Bratspies: But March was definitely stronger than January and February. And as we get through the Easter flip, we're starting to see that more positive trend in POS as we start to commit to April. So we feel pretty good about our POS performance, although category is still struggling.

Stephen B. Bratspies: There's no doubt about that, and it's soft, but our POS is definitely outperforming, and that's why we got. When you think about the inventory, as we planned Q1, and guided, we expected some inventory reduction to be there. It turned out to be a little more than we expected, but it was only about 10 to $15 million lower than we expected.

Stephen B. Bratspies: We don't think this is a business model shift. There are always some changes and adjustments that are made. But we don't anticipate this being an ongoing challenge because movement in inventory will be a restocking challenge. Look, we're always trying to find opportunities for inventory out there. We work very closely with our partners to find opportunities where there are gaps in assortment or gaps in inventory all the way down to the store level. We've built a lot of data analytics to help us do that and really partner with them, and we have a really good working relationship on that front. But overall, we have not put a restock into our guide going forward, and just maybe a little bit more.

Stephen B. Bratspies: More than we expected, but it was only it's about $10 million to $15 million lower than we expected. We don't think this is a business model shift theres always some changes and adjustments that are made.

Stephen B. Bratspies: And just maybe with one more point on the earlier comment about cotton, because you may also be asking about from a pricing standpoint, like we said over the last year, we did not fully price for the inflationary peak. So if that's stabilizing off, we do not anticipate, again, any pricing pressure on that side of the market.

Stephen B. Bratspies: Mmm currently Bang for your Buck.

Stephen B. Bratspies: Yeah.

Stephen B. Bratspies: [inaudible]

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

Operator: Our next question comes from the line of Ike Boruchow with Wells Fargo.

Speaker Change: Hi, everyone. Good morning, maybe Steve could you talk.

Irwin Bernard Boruchow: A little bit too, maybe a little bit more granular on some of the categories that are key to you guys there've been some kind of reach them, sending your competitors I think on the underwear category you know being under the most pressure kind of curious if you can kind of parse out the different pieces of innerwear interesting kind of varying degrees of demand and just any other color would would.

Irwin Bernard Boruchow: It'd be kind of helpful. When you think about that <unk>.

Irwin Bernard Boruchow: Sure I can as you think about the categories.

Irwin Bernard Boruchow: At the most macro level, it's pretty consistent performance. When you when you look at P. O S. And you know if you look at our share gains pretty consistent across the business, which add up to that 50 basis points.

Irwin Bernard Boruchow: You will see that men's underwear is outperforming more than other businesses and it's always been probably the strongest category for this company and you know we're gonna continue obviously to lean into that we've got all the innovation in that space with Super soft, which is doing extremely well I'm in.

Irwin Bernard Boruchow: Courage to about what's happening with maidenform and with the launch of am in Bali with breathe coming at the end of the year. So we're looking for some some impact in the back half on that but the categories of raw fish not major differences across the board. There's puts it takes and you know one month's over another but it's.

Irwin Bernard Boruchow: Relatively consistent.

Irwin Bernard Boruchow: Yeah, and maybe add a little bit too I like like on the gods standpoint, how we don't got Simon So let me give you some directions on the.

Irwin Bernard Boruchow: The U S N number of business I Hope you have the 8% decline in Q1, but I just look at Q2, we can we expect that moderating Trent to continue and also we're going to continue to outperform the category for all the things that she was talking about we got brain investments. According to your devices that are coming so I should think about <unk> regarding that can directionally to for you to four per cent.

Irwin Bernard Boruchow: Your over your decline laughing all of that and and then just a touch on while we're talking about sacraments, just real quick on the international thought as you think about modeling for Q2, I would say that would be down the single digit solid reported basis, essentially flat on a constant currency basis.

Irwin Bernard Boruchow: And then an active where in the U S. I would gouge down to <unk> can that compares to down 14% in the first quarter on that adjusted basis, when he factor and take out the timing us what we talked about earlier.

Irwin Bernard Boruchow: Oh your remarks.

Irwin Bernard Boruchow: Got it thanks, so much.

Irwin Bernard Boruchow: Hi everyone. Good morning.

Irwin Bernard Boruchow: Our next question comes from the line of David Schwartz with Morningstar.

Stephen B. Bratspies: Maybe, Steve, can you talk a little bit about, maybe a little bit more granular on some of the categories that are key to you guys? There have been some kind of readings from some of your competitors, I think, on the underwear category, which is, you know, being under the most pressure. I'm kind of curious if you can kind of parse out the different pieces of underwear and if you're seeing kind of varying degrees of demand, and just any other color would be kind of helpful when you think about that in the 2Q and beyond.

Irwin Bernard Boruchow: Good morning, Thanks for taking my question. Firstly can you, let us know if you're seen any differences in trends in Australia, and if it seems like that business is getting better or has it remained under pressure. Secondly are you confirming that you have.

Steve: Decided to maintain control of champion and will not be selling the business. Thanks.

Stephen B. Bratspies: Sure, Ike. As you think about the categories, at the most macro level, it's pretty consistent performance when you look at POS and, you know, if you look at our share gains. Pretty consistent across the business, which adds up to that 50 basis points. You will see that men's underwear is outperforming more than other businesses, and it's always been probably the strongest category for this company, and we're going to continue, obviously, to lean into that.

Steve: So in terms of Australia, we're starting to see some improvement and it really depends on the business over their response business over there as we continue to do particularly sure it's been particularly <unk> wholesale business in the grocery channel D. D to see business with Verizon thinks has remained a little bit softer, but we're starting to see.

Stephen B. Bratspies: We've got all the innovation in that space with Super Soft, which is doing extremely well. I'm encouraged about what's happening with Made in Form and with the launch of M and Valley with Breathe coming at the end of the year, so we're looking for some impact in the back half on that. But the categories overall, there's not major differences across the board. There's puts and takes in one month over another, but it's relatively small. Yeah, and maybe add a little bit too, like, from a God standpoint, I know we don't always understand God.

Stephen B. Bratspies: Little bit of improvement, we are expecting some tax relief in the back half of this year and anticipating a little bit of interest rate improvement. Although there is some uncertainty right there but.

Stephen B. Bratspies: <unk> compares get easier as we go into the second half. So we anticipate that business starting to rebound I would tell you I'm I'm really pleased with the work team is doing over there I'm excited about the innovation baby in advance chafe off products. So we're leaning in we have.

Stephen B. Bratspies: Some aggressive advertising campaigns that are going on right now that are that are resonating. So I feel good about that business as we go forward in terms of champions, we're not saying, making any announcement today in terms of <unk>.

Stephen B. Bratspies: Keeping the business as you ask a question or selling it.

Stephen B. Bratspies: [noise] processes, continuing we're gonna continue to evaluate the right path forward. The process is progressing as we expected and you know in pair with that we're going to continue to implement the longterm growth strategy. Like we said, we always have and you know we will follow the same protocol as we have in the past and we will update you as appropriate when there is news for us.

Speaker Change: Okay. Thanks, one.

Stephen B. Bratspies: Our next question comes from the line of Paul Kearney with Barclays.

Scott Lewis: Yeah, and maybe to add a little bit too, I'm a guide from a standpoint. I know we don't guide by segments, but let me give you some directions on the U.S. interwar business.

Scott Lewis: We had the 8% decline in Q1, but as you look at Q2, again, we expect that moderating trend to continue. And also, we're going to continue to outperform the category on all the things that Steve was talking about. We've got brand investment supporting the innovations that are coming.

Speaker Change: Good morning, and thanks for taking my question.

Scott Lewis: As you think about the U.S. interwar, we're guiding, again, directionally, to a 3% to 4% year-over-year decline, factoring all that in. And then just to touch on while we're talking about segments, just real quick, on the international side, as you think about modeling for Q2, I would say that would be down mid-single digits on a reported basis and essentially flat on And then on active wear in the US, I would guide you down to mid to high single digits. And that compares to down 14% in the first quarter on that adjusted basis when you factor in and take out the timing odds that we talked about in our earlier remarks.

Speaker Change: Brian marketing opportunities and investments, you're making tango over what you were doing differently today, and where the marketing investments are concentrated any kind of the timing of those through the year. Thanks.

Operator: Our next question comes from the line David Swartz with Morningstar.

Speaker Change: Sure as I said, we you know we increased our investment pretty significantly in the first quarter and this has been a bill over the last couple of years, you know one of the things that we've been focused on.

David Swartz: Morning, thanks for taking my question. Firstly, can you let us know if you're seeing any differences in trends in Australia and if it seems like that business is getting better, or is it remaining under pressure? Secondly, are you confirming that you have decided to maintain control of Champion and will not be selling the business? Thanks.

Stephen B. Bratspies: So in terms of Australia, we're starting to see some improvement, and it really depends on the business over there. Bond's business over there has continued to do particularly well; it's been particularly strong, particularly in the wholesale business and the grocery channel. The D2C business with bras and other things has remained a little bit softer, but we're starting to see a little bit of improvement. We are expecting some tax relief in the back half of this year and anticipating a little bit of interest rate improvement, although there is some uncertainty right there, but the comps and compares get easier as we go into the second half.

Stephen B. Bratspies: So we anticipate that business is starting to rebound. I would tell you, I'm really pleased with the work the team is doing over there. I'm excited about the innovation in Baby and the Bond's Chafe-Off product.

Stephen B. Bratspies: So we're leaning in. We have some aggressive advertising campaigns that are going on right now that are responding. So feel good about that business as we go. In terms of champions, we're not making any announcement today in terms of us keeping the business, as you asked the question, or selling it. The process is continuing. We're going to continue to evaluate the right path forward. The process is progressing as we expected, and in parallel with that, we're going to continue to implement the long-term growth strategy as we said we always have, and we will follow the same protocol as we have in the past, and we will update you as appropriate when there's news for us to share.

Stephen B. Bratspies: Okay, thanks a lot. Our next question comes from the line of Paul Kearney with Barclays.

Paul David Kearney: For Awhile now is strengthening our branch and I think these branch have been under invested in for a long period of time and you want to be a consumer centric company you Wanna be a brand driven company you Wanna be an innovation driven company you have to invest and have to continue to lean in to your branch the.

Stephen B. Bratspies: <unk> of our advertising in the near term has been around and is going to continue to be around innovation. It's leveraged the brand, but talk about the news and the news last year was really around original so this year, it's around and buy maidenform. It's the next stage of originals, which is super soft.

Stephen B. Bratspies: On a champion inside it's going to continue to talk about the brand and our positioning and how you know what that brand represents really leaning in when we have our our new fall Winter line, that's coming as we go forward and along with that in the back half will have valley breathe. So when you think about our advertising you think about our media.

Paul David Kearney: Think about it as bleeding in behind Brandon innovation, and I think that's the best way for us to talk about the mix overtime is gonna continue to change and depending upon the branch. So pains will go to market differently than champion it'll go to market it'll show up in different channels, whether that many or T V or that <unk>.

Stephen B. Bratspies: Direct to consumer channels and what gives me confidence is we're starting to see the results of that so take EM, Maine form. It for example, when we started to literally lead into that the first part of this year. We saw P. O S jump 18 per cent and that business. So we've got confidence that our messaging is right. Our approach is right.

Stephen B. Bratspies: And we're going to continue to make those investments over time.

Stephen B. Bratspies: Tying back to some of the things we talked about earlier are cost physician and the way we continue to take costs out gross margin improvements yesterday and a focus enables us to fund those investments and we're gonna continue to find that right balance as we go forward.

Paul David Kearney: Thank you.

Operator: Good morning. Thanks for taking my question.

Paul David Kearney: Our next question.

Paul David Kearney: Question comes from the line of hail holding with Barclays.

Stephen B. Bratspies: Sure. As you said, we, you know, we increased our investment pretty significantly in the first quarter. And this has been a build-up over the last couple years; one of the things that we've been focused on for a while now is strengthening our brands. And I think these brands have been under-invested in for a long period of time. And if you want to be a consumer-centric company, you want to be a brand-driven company, you want to be an innovation-driven company, you have to invest, and you have to continue to lean into your brands.

Stephen B. Bratspies: The bulk of our advertising in the near term has been around and is going to continue to be around innovation. It leverages the brand, but it talks about the news. And the news last year was really around originals. This year, it's around and by made in form. It's the next stage of originals, which is super soft.

Paul David Kearney: Hi, Good morning last couple of corners, we've talked about declines M. A U S anywhere.

Stephen B. Bratspies: Industry not necessarily your segment, but the whole.

Speaker Change: Sort of <unk> Theresa.

Stephen B. Bratspies: And I was wondering it sounds like you've seen a stabilized.

Stephen B. Bratspies: In the next quarter and maybe if you could give us some some dynamic for about what you're saying in a second.

Stephen B. Bratspies: Yeah, I think when you when you think about Theodore segment I think you have to think more broadly about the consumer environment and and where it is you know overall consumer demand remains challenging for apparel across the board and you would S. U S. Europe, Australia, we've been seeing those headwinds for several quarters, whether it's interest rate impact inflation.

Stephen B. Bratspies: Consumers are definitely seeking value, we can see their activity of shopping events and you definitely see that in a P. O S. When we look at the category from a long-term perspective, I got a ton of confidence that it's going to rebound to historical levels, which is you know one per cent plus growth.

Stephen B. Bratspies: You've seen that you'd go back to 0809, when all the challenges in the market right. There in the category was impacted and then it rebounded we expect that's gonna happen overtime. If you don't if you look at the last three years on average.

Stephen B. Bratspies: Category performed a historical right. It's just been incredibly disruptive 2001 paid to go back that far was such a massive throat 24 25 per cent and then you know it can be challenged ever since but we expect that to moderate over time, we're starting to see some stability over time and we have a lot of confidence this category will perform too it's.

Stephen B. Bratspies: Longterm run right as we go forward.

Speaker Change: Great. Thank you very much.

William Michael Reuter: Our next question comes from the line is William writer with Bank of America.

Speaker Change: Good morning.

Speaker Change: For the sales decreases a champion I was wondering if you could talk a little bit about what channels those decreases in whether those.

Stephen B. Bratspies: We're kind of specialty channels, whether they were off price channels mass versus department stores, where did you see the biggest declines in your sales into.

Stephen B. Bratspies: Yeah. Thanks for the question when you think about it it really varies by geography in terms of Overperforming in the U S. It's really kinda generally cross most channels are all channels and that is a lot cause he was cleaning up of inventory that's been out there and I think we've finally reposition ourselves to a.

Stephen B. Bratspies: On the champion side, we're going to continue to talk about the brand and our positioning and how what that brand represents and really leaning in when we have our new fall winter line that's coming as we go forward. And along with that, in the back half, we'll have Valley Breed. So when you think about our advertising, think about our media, think about it as leaning in behind branded innovation. And I think that's the best way for us to talk about it.

Stephen B. Bratspies: Place, where the channels are cleaner and we can prepare to move forward and as I mentioned earlier, we are excited about the fall winter line, that's coming and think that that's gonna help start to rebuild the business as we go forward.

Stephen B. Bratspies: Europe wholesale it's been it's been challenging and you know contribute to the customers are just being conservative with you know they've been an inventory challenges in the past I'll take care of <unk>. When you look at Asia, H perform pretty well Japan's up China's up. We're you know we're seeing opportunities there to continue to grow in those.

Stephen B. Bratspies: Those markets have rebounded from where they've been the last couple of years. So I I think it's a mixed by geography, but I think going forward, we're well positioned across all the different channels. If you look at your on the U S. R E Commerce business was up 12%.

Stephen B. Bratspies: The mix over time is gonna continue to change, and depending upon the brand, so Hanes will go to market differently than Champion will go to market. It'll show up in different channels, whether that's linear TV or that's more direct to consumer. And what gives me confidence is we're starting to see the results of that. So take M, the main form.

Stephen B. Bratspies: For example, when we started to really lean into that in the first part of this year, we saw POS jump 18% in that business. So we've got confidence that our messaging is right, our approach is right, and we're going to continue to make those investments over time. Tying back to some of the things we talked about earlier, our cost position and the way we continue to take costs out, and of course, margin improvement, the SG&A focus enables us to fund those investments, and we're going to continue to find that right balance.

Stephen B. Bratspies: In the first quarter. So we're starting to build some momentum there and more importantly, the programming that we have now is channels specific and I think that's what has been missing in the past we weren't.

Operator: Our next question comes from Hale Holden with Barclays.

Stephen B. Bratspies: We don't differentiate it enough by channel, we weren't segmented enough by channel one by product and the product that we have going forward accomplishes all that we've instituted a more global approach to how we go to market and that's really what's gonna make a difference for us in terms of global platforms.

Operator: Product on <unk> on color all those different things are going to help us win across channels and something that we haven't done very well in the past.

Hale Holden: Good morning. The last couple quarters, we've talked about declines in the US innerwear industry, not necessarily your segment, but the whole thing. It sounds like you've seen that stabilize this quarter and into next quarter, and maybe you could give us some dynamics about what you're seeing in the segment.

Hale Holden: I guess, it's one of the little more specifically on that were their intentional reductions to off price that impacted the sales of champion.

Hale Holden: No nothing intentional you know, we're managing through or had been <unk> managing through high inventory positions in the channels and consistently looking for opportunities as we go there. We think the brand can play very effectively across a lot of different channels and will continue to activate that way.

Speaker Change: Great. That's all for me thank you.

Hale Holden: Our last question today will come from Michael Coupla with J P. Morgan.

Stephen B. Bratspies: I think when you think about the indoor segment, I think you have to think more broadly about the consumer environment and where it is. Overall, consumer demand remains challenging for apparel across the board in the US, Europe, and Australia. We've been seeing those headwinds for several quarters, whether it's interest rate impact, inflation. Consumers are definitely seeking value. We can see their activity at shopping events, and you definitely see that in the POS.

Stephen B. Bratspies: When we look at the category from a long-term perspective, I've got a ton of confidence that it's going to rebound to historical levels, which is 1% plus growth. You've seen that; you go back to 08, 09, when all the challenges in the market right there affected the category, and then it rebounded. We expect that's going to happen over time. If you look at the last three years, on average, the category performed at a historical race.

Speaker Change: Good morning, and thanks for taking our questions. The first one we had was on the champion kids licensing deal Uhm. If you guys received any cash payment for that and you know I know you kind of call that there was a 500 basis point impact of revenue just how are we thinking about revenue in Martin's pro forma for that going forward.

Stephen B. Bratspies: It's just been incredibly disruptive. You know, 2001, I hate to go back that far, was such massive growth, 24, 25%, and then it's been challenged ever since. But we expect that to moderate over time. We're starting to see some stability over time, and we have a lot of confidence that this category will perform to its long-term run rate. Great, thank you very much.

Operator: Our next question comes from the line of William Reuter with Bank of America.

William Michael Reuter: Good morning. With regard to the sales decreases for Champion, I was wondering if you could talk a little bit about what channels.

Stephen B. Bratspies: Yeah, thanks for the question. When you think about it, it really varies by geography in terms of over-performing. In the U.S., it's really kind of generally across most channels or all channels, and that has a lot to do with cleaning up the inventory that's been out there. And I think we've finally repositioned ourselves to a place where the channels are cleaner, and we can prepare to move forward. And as I mentioned earlier, we're excited about the fall winter line that's coming, and think that that's going to help start to rebuild the business as we go forward. In Europe, wholesale has been challenging, and customers are just being conservative. They've been involved in inventory challenges in the past.

Stephen B. Bratspies: [inaudible] If you look at, you know, in the U.S., our e-commerce business was up 12%. [inaudible] We didn't differentiate it enough by channel. We weren't segmented enough by channel and by product, and the product that we have going forward accomplishes all that. We've instituted a more global approach to how we go to market, and that's really what's gonna make a difference for us in terms of global platforms for product. All those different things are going to help us win across channels, and it's something that we haven't done very well before.

William Michael Reuter: Great. That's all for me. Thank you.

Stephen B. Bratspies: I guess just one, a little more specifically on that, were there intentional reductions to off-price that impacted the sales of Champion?

Stephen B. Bratspies: No, nothing intentional. Um, you know, we're managing through or have been managing through high inventory positions in the channels and consistently looking for opportunities as we go there. We think the brand can play very effectively across a lot of different channels, and we'll continue to act. Okay, that's all for me.

Speaker Change: Yeah that wasn't a transaction, where we can resolve some savings to convert it into more of a a top on wholesale model to a to a license model. So we get a royalty income stream going forward.

Operator: Our last question today will come from Michael Coppola with J.P. Morgan.

Speaker Change: Gotcha. Thank you yeah yeah.

Michael Coppola: Good morning, and thanks for taking our questions. The first one we had was on the Champion Kids licensing deal. Did you guys receive any cash payment for that? And, you know, I kind of called out there was a 500 basis point impact on revenue, just how we think about revenue and margins pro forma for that going forward. Yeah, that wasn't it.

Michael Coppola: Alright, and you'll see that was the biggest headwinds from that will be in Q1, and it'll moderate as we go forward.

Scott Lewis: Yeah, that wasn't a transaction where we sold something; we actually converted it to more of a top-line wholesale model to a licensed model, so we get a real income stream going forward.

Speaker Change: Okay, great. Thank you and then the second one I'm gonna get going to reaffirm that you're planning on paying down about $300 million this year.

Scott Lewis: Thank you.

Scott Lewis: Any communist where you prefer to go after term loan or bonds for that as well or does it <unk>.

Scott Lewis: And you'll see that the biggest headwind from that will be in Q1, and it'll moderate.

Scott Lewis: Anyway, you're thinking about that.

Speaker Change: Yeah, great. Thanks for your question again.

Scott Lewis: You know, we pay down 500 million last year up that we've got another 300 plus occurring at this year, but really good about the cash flow generation, we're talking about the closet driving that working capital is coming through as you think about how to apply that 300 million applause Sir.

Scott Lewis: Okay, great. Thank you. And the second one, I'm going to get going to reaffirm that you plan on paying down about $300 million in debt this year. You know, if you have any comment on where you prefer to go after term loans or bonds for that as well, or if there's any way you're thinking about that.

Scott Lewis: Thanks for your question. Again, we paid down $500 million in debt last year. We've got another $300 million-plus. So I'm really good about the cash flow generation. We talked about the profit driving that, and working capital coming through. As you think about how to apply that $300 million plus of debt paydown, you know, we have a lot of flexibility with our debt structure. Within our Senior Secured Credit Facility, we have the Term A and Term B loans that are prepayable without any penalty. And so that's higher-rate debt, it's prepayable, and that's what we'll focus on, the debt paydown.

Scott Lewis: Pay now you know we have a lot of flexibility with our desk structure with our senior secure credit facility. We have a terminal and term P. Laws are prepayable without any penalty. So that's higher rate that is prepayable and that's what we'll focus on.

Scott Lewis: Pay them.

Michael Coppola: Great. Thank you very much, and I'll pass it on.

Speaker Change: Great. Thank you very much and I'll pass it off.

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.

Speaker Change: That concludes today's question and answer session I'd like to turn the call back to <unk> for closing remarks.

Thomas C. Robillard: We'd like to thank everyone for attending our call today, and we look forward to speaking with you soon.

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

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

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

Operator: [music].