Q2 2024 Hanesbrands Inc Earnings Call

August 8, 2024

Good day and thank you for standing by. Welcome to the HanesBrands Second Quarter 2024 Earnings Conference Call.

Operator: At this time, all participants are in a listen-only mode.

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 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. 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 of Investor Relations. Please go ahead.

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 your hand is raised. To withdraw your question, please press star 1-1 again.

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

To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again.

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

T.C. Robillard: I would now like to hand the conference over to T.C. Robillard by President of Investor Relations.

please be advised or today's conference is being recorded

T.C. Robillard: Please go ahead. Good day, everyone, and welcome to the HanesBrands quarterly investor conference call-and-webcast. We are pleased to be here today to provide an update on our progress after the second quarter of 2024.

I would now like to hand the conference over to T.C. Robillard, Vice President of Investor Relations. Please go ahead.

Operator: 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 since the second quarter of 2024.

T.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 since the second quarter of 2024.

T.C. Robillard: Good day everyone and welcome to the HanesBrands Quarterly Investor Conference Call and Webcast. We are pleased to be here today to provide an update on our progress after the second quarter of 2024.

Scott Lewis: Hopefully, everyone has had a chance to review the news release we issued earlier today. Beginning with second quarter results, we have reclassified our global champion business and our US outlet store business to discontinued operations, and we have re-aligned our segment reporting. This was not contemplated in our initial second quarter guidance back on May 9. Therefore, second quarter results from continuing operations are not directly comparable to our previous guidance, quarter current consensus estimates.

Operator: Hopefully, everyone has had a chance to review the news release we issued earlier today. One is a supplemental financial packet with recast historical financial data. 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. Additional information, including a reconciliation of these and other non-GAAP performance measures to GAAP, can be found in today's news release. With me on the call today are Steve Bratspies, our Chief Executive Officer, and Scott Lewis, our Chief Financial Officer. For today's call, Steve and Scott will provide some brief remarks, and then we'll open it up to your questions.

T.C. Robillard: Hopefully, everyone has had a chance to review the news release we issued earlier today. Beginning with the second quarter results, we have reclassified our Global Champion business and our U.S. Outlet Store business as discontinued operations, and we have realigned our segment reporting.

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

Speaker Change: beginning with second quarter results we have reclassified our global champion business in our u s outletts store business to discontinued operations

T.C. Robillard: This was not contemplated in our initial second quarter guidance back on May 9th. Therefore, second quarter results from continuing operations are not directly comparable to our previous guidance or to current consensus estimates. In addition to our earnings release, an FAQ doc, we have provided two additional documents today. One is a supplemental financial packet with recast historical financial data. The other is an earnings handout that provides an overview of the go-forward business, as well as a bridge from second quarter results to our prior guidance.

And we have realigned our segment reporting. This was not contemplated in our initial second quarter guidance back on May 9th. Therefore, second quarter results from continuing operations are not directly comparable to our previous guidance or to current consensus estimates.

Scott Lewis: In addition to our earnings release and FAQ document, we have provided two additional documents today. One is a supplemental financial packet with recast historical financials. The other is an earnings handout that provides an overview of the Go Forward business as well as a bridge from second quarter results to our prior guidance.

in addition to our earnings release and ffaq document we have provided two additional documents today

One is a supplemental financial packet with recast historical financials.

The other is an earnings handout that provides an overview of the go-forward business, as well as a bridge from second quarter results to our prior guidance.

Scott Lewis: All documents, as well as 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, consumer demand dynamics, our ability to successfully execute our strategic initiatives, including our restructuring and other action-related items, our ability to de-leverage on the anticipated time frame, and the inflationary environment.

T.C. Robillard: All documents, as well as 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, consumer demand dynamics, our ability to successfully execute our strategic initiatives, including our restructuring and other action items, our ability to deleverage within the anticipated timeframe, and the inflationary environment.

Speaker Change: All documents, as well as the replay of this call, can be found in the investor section of our Hanes.com website.

T.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 include all restructuring and other action-related charges and speak to continuing operations.

on the call today we may make forward-looking statements either in our prepared remarks 'rein 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.

These risks include those related to current macroeconomic conditions, consumer demand dynamics, our ability to successfully execute our strategic initiatives, including our restructuring and other action-related items, our ability to deleverage on the anticipated timeframe, and the inflationary environment.

Scott Lewis: These risks also include those detailed and our various filings with the SEC, which may be found on our website as well as in our news releases. The company does not undertake to update or revise any forward-looking statements, which speak only to the time at which they are made. Unless otherwise noted, today's references to our consolidated financial results and guidance exclude all restructuring and other action-related charges and speak to continuing operations.

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.

Speaker Change: The company does not undertake to update or revise any forward-looking statements which speak only to the time at which they are made.

unless otherwise noted today's references to our consolidated financial results and guidance exclude all restructuring and other action-related charges and speaks to continuing operation additional information including a reconciliation of these and other non-gaap performance measures to gaap can be found in today's news release

Scott Lewis: Additional information, including a reconciliation of these and other non-GAAP performance measures to GAAP, can be found in today's news release.

T.C. Robillard: Additional information, including a reconciliation of these and other non-GAAP performance measures to GAAP, can be found in today's news release. With me on the call today are Steve Bratspies, our Chief Executive Officer, and Scott Lewis, our Chief Financial Officer. For today's call, Steve and Scott will provide some brief remarks, and then we'll open it up to your questions. I'll now turn the call over to Steve. Thank you.

T.C. Robillard: With me on the call today, are Steve Braskees, 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.

Speaker Change: With me on the call today are Steve Bratspies, 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.

Steve Braskees: I'll now turn the call over to Steve. Thank you, T.C. Good morning, everyone, and welcome to our second quarter earnings call. Since we last spoke, we've taken strategic actions and made several decisions that will drive a new direction in the future for Haines Brands. As we announced in June, we've reached an agreement to sell our global champion business and will use the $900 million of net sale proceeds to pay down debt and further de-lever our balance sheet. We also completed the exit of our remaining U.S. Outlet Store.

Steve Bratspies: Thank you, TC. Good morning, everyone, and welcome to our second quarter earnings call. Since we last spoke, we've taken strategic actions and made several decisions that will drive a new direction and future for HanesBrands. As we announced in June, we've reached an agreement to sell our global champion, and we'll use the $900 million of net sale proceeds to pay down debt and further delever our balance. We also completed the exit of our remaining U.S. outlet store building.

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

Steve Bratspies: Since we last spoke, we've taken strategic actions and made several decisions that will drive a new direction and future for HanesBrands. As we announced in June, we reached an agreement to sell our global champion, and we also completed the exit of our remaining U.S. outlet store buildings.

Steve Bratspies: Thank you TC. Good morning everyone and welcome to our second quarter earnings call. Since we last spoke, we've taken strategic actions and made several decisions that will drive a new direction and future for Hanes Brands.

Speaker Change: as we announced in june we've reached an agreement to sell our global champion business

Steve Bratspies: And we'll use the $900 million of net sale proceeds to pay down debt and further de-lever our balance sheet.

Steve Braskees: By exiting these lower margin businesses, we have fundamentally strengthened the company, creating a more focused, simplified business, one with more consistent top-line growth, higher margins, strong cash generation, a wide competitive moat, and multiple levers to unlock shareholder value over the next several years.

Steve Bratspies: By exiting these lower-margin businesses, we have fundamentally strengthened the company, creating a more focused, simplified business. One with more consistent top-line growth, higher margins, strong cash generation, a wide competitive moat, and multiple levers to unlock shareholder value over the next several years. Before I get into why I'm so confident about the GoForward business, I'll briefly touch on the quarter. In addition to all the strategic activity in the quarter, our HanesBrands team did a tremendous job operating the business.

Steve Bratspies: By exiting these lower-margin businesses, we have fundamentally strengthened the company, creating a more focused, simplified business. Before I get into why I'm so confident about the GoForward business, I'll briefly touch on the quarter. In addition to all the strategic activity in the quarter, our HanesBrands team did a tremendous job operating the business, given that we moved certain businesses to discontinued operations, which was not contemplated in our initial second quarter guidance.

Speaker Change: We also completed the exit of our remaining U.S. outlet store business.

Speaker Change: By exiting these lower margin businesses, we have fundamentally strengthened the company, creating a more focused, simplified business, one with more consistent top line growth, higher margins, strong cash generation, a wide competitive moat, and multiple levers to unlock shareholder value over the next several years.

Steve Braskees: Before I get into why I'm so confident about the Go Forward business, I'll briefly touch on the quarter. In addition to all the strategic activity in the quarter, our HanesBrands team did a tremendous job operating the business. We delivered strong second quarter results with better than expected performance from our interwear business in the US, strong cash conversion, and continued expansion above our growth and operating profit margins. Given that we moved certain businesses to discontinued operations, which was not contemplated in our initial second quarter guide, page three of the earnings handout shows the bridge from our results to our prior guide.

Speaker Change: Before I get into why I'm so confident about the GoForward business, I'll briefly touch on the quarter.

Speaker Change: in addition to all the strgic activity in the quarter our hangeees brands team did a tremendous job operating the business

Steve Bratspies: We delivered strong second quarter results with better than expected performance from our innerwear business in the U.S., Strong Cash Conversion, and Continued Expansion of both our Gross and Operating Profits. Given that we moved certain businesses to discontinued operation, which was not contemplated in our initial second quarter guidance.

Speaker Change: We delivered strong second quarter results with better than expected performance from our innerwear business in the U.S. Strong cash conversion and continued expansion of both our gross and operating profit margins.

Speaker Change: Given that we moved certain businesses to discontinued operations, which was not contemplated in our initial second quarter guide, page three of the earnings handout shows the bridge from our results to our prior guide. As you'll see, on a total company basis,

Steve Bratspies: Page three of the earnings handout shows the bridge from our results to our prior guide, as you'll see on a total company basis. Sales for the Quarter, we're at the midpoint of our guidance. And we were above the high end of our range for gross margin, operating profit, and earnings per share. Now, let me turn the discussion to our business on a go-forward basis and what HanesBrands looks like post-divestiture. HanesBrands is a powerhouse in basics and innerwear with a global footprint.

Steve Braskees: As you'll see on a total company basis, sales for the quarter were at the midpoint of our guidance range, and we were above the high end of our range for growth margin, operating profit, and earning per share.

Speaker Change: Sales for the Quarter, we're at the midpoint of our guidance range.

Speaker Change: and we were above the high end of our range for gross margin operating profit and earnings per share

Steve Braskees: Now let me turn the discussion to our business on a go forward basis, and what HanesBrands looks like post divestiture. HanesBrands is a powerhouse in basics and interwear with a global footprint. We're relatively evenly split between men's and women's, and we operate in a category that is core and essential for consumers. While the pandemic and the current macroeconomic environment have created a period of volatility, long-term, we're confident this remains an attractive and stable category. We own a portfolio of iconic brands that hold the number one or number two market share position in their categories, including Hanes, Bonds, Valley, and Main Form.

Steve Bratspies: Page three of the earnings handout shows the bridge from our results to our prior guide. Now, let me turn the discussion to our business on a go-forward basis and what HanesBrands looks like post-divestiture. HanesBrands is a powerhouse in basics and innerwear with a global footprint. We're relatively evenly split between men's and women's clothing, and we operate in a category that is core and essential for consumers, including Hanes, Bonds, Bally, and Mayden.

Speaker Change: Now let me turn the discussion to our business on a go-forward basis and what Hanes Brands looks like post-divestiture.

Steve Bratspies: We're relatively evenly split between men's and women's clothing, and we operate in a category that is core and essential for consumers. While the pandemic and the current macroeconomic environment have created a period of volatility, long term, we're confident this remains an attractive and stable category.

Speaker Change: HanesBrands is a powerhouse in basics and innerwear with a global footprint. We're relatively evenly split between men's and women's.

Speaker Change: and we operate in a category that is core and essential for consumers

Speaker Change: While the pandemic and the current macroeconomic environment have created a period of volatility, long term, we're confident this remains an attractive and stable category.

Steve Bratspies: We own a portfolio of iconic brands that hold the number one or number two market share position in their category, including Hanes, Bonds, Bally, and Maynard. Our brands are synonymous with comfort and have been trusted by consumers for generations. We have a proven global consumer-centric innovation process that is driving market share gains, new retail space, and is making our brands increasingly the choice of younger consumers. In the U.S. alone, Innovation Product has contributed over a half a billion dollars in sales in the last 18 months.

Speaker Change: We own a portfolio of iconic brands that hold the number one or number two market share position in their categories including Hanes, Bonds, Bally and Mainform.

Steve Bratspies: Our brands are synonymous with comfort and have been trusted by consumers for generations. Our products are available in every channel, including leading retailers that are winning with consumers and through our own direct-to-consumer offer. In addition, we're well-positioned and highly confident in further marches. We have the natural recovery of our gross margin and the benefits from our existing cost savings, which are driving margin expansion. We're also strengthening our balance sheet through debt paydown and a focus on driving faster inventory turns.

Steve Braskees: Our brands are synonymous with comfort, and have been trusted by consumers for generations. We have a proven global consumer-centric innovation process that is driving market share gains, new retail space, and is making our brands increasingly the choice of younger consumers. In the US alone, innovation product has contributed over a half a billion dollars of sales in the last 18 months, and our innovation pipeline is full, giving us visibility to new product launches and brand programming into 2026. We have global go-to-market capabilities and distribution scale that is unmatched, allowing us to capture demand wherever the consumer wants to shop.

Speaker Change: our brands are synonymous with comfort and have been trusted by consumers for generations

Speaker Change: we have a proven global consumer-centric innovation process that is driving market share gains new retail space and is making our brands increasingly the choice of younger consumers

Speaker Change: in the u us alonean innovation product has contributed over a half a billion dollars of sales in the last eighteen months and our innovation pipeline is full giving us visibility to new product launches and brand programming into two thousand and twenty six

Steve Bratspies: And our innovation pipeline is full, giving us visibility into new product launches and brand programming into 2026. We have global go-to-market capabilities and distribution scale that is unmatched, allowing us to capture demand wherever the consumer wants to shop. Our products are available in every channel, including leading retailers that are winning with consumers and through our own direct-to-consumer offer. And we have an advantaged world-class manufacturing and sourcing operations. This is a powerful asset base and capability that we are already leveraging to further widen our competitive moat, to extend our market share lead, and to generate consistent top-line growth over time. In addition, we're well-positioned and highly confident in further marches.

Speaker Change: We have global go-to-market capabilities and distribution scale that is unmatched, allowing us to capture demand wherever the consumer wants to shop.

Steve Braskees: Our products are available in every channel, including leading retailers that are winning with consumers, and through our own direct-to-consumer offerings. And we have advanced world-class leaf factoring and sourcing operations. This is a powerful asset-based and capability that we are already leveraging to further widen our competitive mode, to extend our market share lead, and to generate consistent top-line growth over time. In addition, we're well-positioned and highly confident in further margin improvement. We have the natural recovery of our gross margin, and the benefits from our existing cost savings programs, which are driving margin expansion this year.

Speaker Change: our products are available in every channel including leading retailers that are winedninging with consumers and to our own direct to consumer offerings

Speaker Change: and we have advantaged world-class manufacturing and sourcing operations.

Speaker Change: This is a powerful asset base and capability that we are already leveraging to further widen our competitive moat, to extend our market share lead, and to generate consistent top-line growth over time.

Steve Bratspies: We have the natural recovery of our gross margin and the benefits from our existing cost savings, which are driving margin expansion. Beyond that, the divestiture of Champion and the exit of our U.S. outlet stores have created the opportunity to deliver a step-function change in our overall cost structure and improve our operational efficiency. We've identified three key areas and have specific plans in place to further reduce costs. First, we're resuming our migration to a consistent modern technology platform across the global organization that will enable better business analytics and planning, improve forecasting, and drive greater automation.

Speaker Change: In addition, we're well positioned and highly confident in further margin improvement.

Speaker Change: We have the natural recovery of our gross margin and the benefits from our existing cost savings program.

Steve Braskees: Beyond that, the divestiture of Champion and the exit of our US outlet stores has created the opportunity to deliver a step-function change in our overall cost structure and improve our operational costs. Efficiency.

Speaker Change: which are driving margin expansion this year

Speaker Change: Beyond that, the divestiture of Champion and the exit of our U.S. outlet stores has created the opportunity to deliver a step-function change in our overall cost structure and improve our operational efficiency.

Steve Braskees: We've identified three key areas and have specific plans in place to further reduce costs. First, we're resuming our migration to a consistent modern technology platform across the global organization that will enable better business analytics and planning, improve forecasting, and drive greater automation. Second, we're further optimizing our supply chain with the divestiture, as well as the benefits from automation and our skew management initiatives. We're able to exit several manufacturing distribution facilities while maintaining capacity for growth. These actions are expected to further simplify operations, reduce overhead, drive greater utilization, and improve customer service and end stocks.

Speaker Change: We've identified three key areas and have specific plans in place to further reduce costs.

Speaker Change: First, we're resuming our migration to a consistent, modern technology platform across the global organization that will enable better business analytics and planning, improve forecasting, and drive greater automation.

Steve Bratspies: Second, we're further optimizing our supply chain. With the divestiture, as well as the benefits from automation and our SKU management initiatives, we are able to exit several manufacturing distribution facilities while maintaining capacity for growth. These actions are expected to further simplify operations, reduce overhead, drive greater utilization, and improve customer service and efficiency. This is all of the non-revenue generating spend within SG&A. We're creating the right cost structure for a simpler and more focused. The supply chain optimization and SG&A reduction actions represent the vast majority of the savings, and we expect these two initiatives to be complete by the end of 2025.

Speaker Change: Second, we're further optimizing our supply chain.

Speaker Change: with the divestiture as well as the benefits from automation and our SKU management initiatives.

Speaker Change: were able to exit several manufacturing distribution facilities while maintaining capacity for growth. These actions are expected to further simplify operations, reduce overhead, drive greater utilization, and improve customer service and end stocks.

Steve Braskees: And third, we're attacking SG&A overhead. This is all of the non-revenue generating spend within SG&A. We're creating the right cost structure for a simpler and more focused company.

Speaker Change: And third, we're attacking SG&A overhead. This is all of the non-revenue generating spend within SG&A. We're creating the right cost structure for a simpler and more focused company.

Steve Braskees: The supply chain optimization and SGNA reduction actions represent the vast majority of the savings, and we expect these two initiatives to be complete by the end of 2025. We're also strengthening our balance sheet through debt paydown and a focus on driving faster inventory turns. With higher margins, lower interest expense, and working capital productivity, we're confident we are positioned to generate strong double-digit EPS growth for the next several years.

Speaker Change: The supply chain optimization and SG&A reduction actions represent the vast majority of the savings, and we expect these two initiatives to be complete by the end of 2025.

Steve Bratspies: We're also strengthening our balance sheet through debt paydown and a focus on driving faster inventory turns. With higher margins, lower interest expense, and working capital productivity, we're confident we are positioned to generate strong, double-digit EPS growth for the next several years. We believe HanesBrands will generate consistent top-line growth, a gross margin in the low 40% range, an operating margin of more than 15%, and more than $400 million in cash flow from operations per year.

Speaker Change: We're also strengthening our balance sheet through debt pay down and a focus on driving faster inventory turns. With higher margins, lower interest expense, and working capital productivity, we're confident we are positioned to generate strong double-digit EPS growth for the next several years.

Steve Bratspies: With higher margins, lower interest expense, and working capital productivity, we're confident we are positioned to generate strong, double-digit EPS growth for the next several years. We believe HanesBrands will generate consistent top-line growth, a gross margin in the low 40% range, an operating margin of more than 15%, and more than $400 million in cash flow from operations per year.

Steve Braskees: We believe Haines Brands will generate consistent top line growth, a gross margin in the low 40% range, an operating margin of more than 15%, and more than $400 million a year of cash flow from operations.

Speaker Change: We believe HanesBrands will generate consistent top-line growth, a gross margin in the low 40% range, an operating margin of more than 15%, and more than $400 million a year of cash flow from operations.

Steve Bratspies: So in closing, we delivered solid second-quarter results in a challenging consumer and apparel market through the actions we've taken to exit lower-margin businesses. We fundamentally strengthened the company, creating a more focused, simplified business. We are now even better positioned to accelerate the flywheel of increased earnings growth and faster de-leverage of the balance, which provides us with multiple levers to unlock shareholder value over the next several years.

Speaker Change: so in closing we delivered solid second quarter results in a challenging consumer in apparel market

Speaker Change: Through the actions we've taken to exit lower margin businesses, we've fundamentally strengthened the company, creating a more focused, simplified business.

Steve Braskees: We are now even better positioned to accelerate the flywheel of increased earnings growth and faster D leverage of the balance sheet, which provides us with multiple levers to unlock shareholder value over the next several years.

Speaker Change: we are now even better positioned to accelerate the fly wheel of increased earnings growth and faster de leverage of the balance sheet which provides us with multiple levers to unlock shareholder value over the next several years

Scott Lewis: And with that, I'll turn the call over to Scott. Thanks, Steve. I want to echo your confidence on what the future holds for Haines Brands with a simplified and strengthened business model. I believe we're well positioned to generate strong shareholder returns over the next several years, with a combination of double-digit earnings growth, paying down debt and, in the long return, returning capital as shareholders.

Scott Lewis: Steve, I want to echo your confidence in what the future holds for HanesBrands. With a simplified and strengthened business model, I believe we're well-positioned to generate strong shareholder returns over the next several years through a combination of double-digit earnings growth, paying down debt, and, in the longer term, returning capital to shareholders. As a result of the strategic actions we have implemented, our global leader and our U.S. outlet store business. We saw sequential improvement and top-line trends, all of which drove a 650% increase in earnings per share. For the quarter, net sales were $995 million in the U.S., where possibly 90% of the business is innerwear.

Scott Lewis: Steve, I want to echo your confidence in what the future holds for HanesBrands. With a simplified and strengthened business model, I believe we're well positioned to generate strong shareholder returns over the next several years with a combination of double-digit earnings growth, paying down debt, and, in the longer term, returning capital to shareholders. As a result of the strategic actions we have implemented, our global champion and our U.S. outlet store business have been reclassified to discontinued operations, and we have realigned our segment reporting. For recast historical financials, please see the Supplemental Financial Packet as posted on our Investor Relations website. For today's call, I'll focus on continuing operations.

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

Scott Lewis: Thanks Steve. I want to echo your confidence on what the future holds for HanesBrands.

Scott Lewis: With a simplified and strengthened business model, I believe we're well positioned to generate strong shareholder returns over the next several years through a combination of double-digit earnings growth, paying down debt, and in the longer term, returning capital to shareholders.

Scott Lewis: As a result of the strategic actions we have implemented, our global champion and our U.S. Allies for businesses have been reclassified to discontinued operations, and we are real on our segment reporting.

Scott Lewis: As a result of the strategic actions we have implemented, our global champion and our U.S. outlet store businesses

Scott Lewis: For recast historical financials, please see the supplemental financial pocket that's posted on our Investor Relations website. For today's call, I'll focus on continuing operations for additional details on the quarter's results and our guidance. I'll point you to our news release, second quarter earnings handout, and FAQ document. Overall, we delivered strong second quarter results. We saw sequential improvement in top line trends; operating profit increased 46% over prior year, as we returned a double digit operating market. and interest expense decreased due to lower level of the debt. All of Lister are at 650% increase in earnings per share.

Scott Lewis: have been reclassified to discontinu operations and we are realon our segment reporting

Scott Lewis: For recast historical financials, please see the Supplemental Financial Packet as posted on our Investor Relations website.

Scott Lewis: For additional details on the quarter's results and our guidance, I'll point you to our news release, second quarter earnings handout, and FAQ document. Overall, we delivered strong second quarter results. You saw sequential improvement and top-line trends. Operating profit increased 46% over the prior year as we return to a double-digit operating market, and interest expense decreased due to lower levels of debt, all of which drove a 650% increase in earnings per share. For the quarter, net sales were $995 million.

Speaker Change: For today's call, I'll focus on continuing operations. For additional details on the quarter's results and our guidance, I'll point you to our news release, second quarter earnings handout, and FAQ document.

Scott Lewis: Overall, we delivered strong second quarter results.

Scott Lewis: We saw sequential improvement and top-line trends.

Scott Lewis: Operating profit increased 46% over prior year as we returned to double-digit operating margins, and interest expense decreased due to lower levels of debt.

Scott Lewis: For the quarter, net sales were $995 million. This represents a decrease of 4% versus prior year, with 150 basis points coming from FX head now, and 130 basis points from last year's U.S.

Speaker Change: all of us d the six hundred fifty percent increase in earnings per share

Scott Lewis: This represents a decrease of 4% versus prior year, with 150 basis points coming from the FX headwind and 130 basis points from last year's U.S. Hosiery Divestiture. On an organic, constant currency basis, net sales decreased 1% in a quarter.

Speaker Change: For the quarter, net sales were $995 million. This represents a decrease of 4% versus prior year, with 150 basis points coming from FX headwinds and 130 basis points from last year's U.S. hosiery divestiture.

Scott Lewis: Hozary Investiture. Now organic cost of currency basis net sales decreased 1% in a quarter. Looking at our segments, in the U.S., were approximately 90% of the businesses in our way. Fills decreased 1% compared to last year, which exceed our expectations. I'll be continuing to face the challenging environment with consumer spending headwind and high inventory management of select retailers. We're seeing that our strategy is working, and we're continuing to win the marketplace. In the quarter, we gained another 40 basis points of market share in an aware, as increased marketing investment and product innovation on driving point of sell trends that continued to outperform the market.

Scott Lewis: Looking at our segment, in the U.S., where possibly 90% of the business is innerwear, bills decreased 1% compared to last year, which exceeded our expectations. While we continue to face a challenging environment with consumer spending headwinds and tight inventory management by select retailers, we're seeing that our strategy is working, and we're continuing to win in the marketplace. In the quarter, we gained another 40 basis points of market share in Interware, as increased marketing investment and product innovation are driving point-of-sale trends that continue to outperform the market.

Speaker Change: an organic constant currentcy basis net sales decrease one percent in the quarter

Speaker Change: Looking at our segments, in the U.S. we're possibly 90% of the business is interweaver.

Steve Bratspies: While we continue to face a challenging environment with consumer spending headwinds and tight inventory management by select retailers, we're seeing that our strategy is working, and we're continuing to win in the marketplace. In our international business, sales increased 2% over the prior year on a constant currency basis. Despite the macroeconomic headwinds and the consumer's focus on value, we are continuing to find solutions to drive brand relevance and consumer engagement. For example, we launched our Bonds Everyday Value product, which is an extension of one of our U.S. products.

Speaker Change: Bills decreased 1% compared to last year, which exceeded our expectations.

Speaker Change: While we continue to face a challenging environment with consumer spending headlines and tight inventory management by select retailers, we're seeing that our strategy is working, and we're continuing to win in the marketplace.

Speaker Change: In the quarter, we gained another 40 basis points of market share in Interware, as increased marketing investment and product innovation are driving point-of-sale trends that continue to outperform the market.

Scott Lewis: With respect to innovation, we saw strong growth in our hands, originals, and made-and-form end product models. And we lost Valley Brief, which is our biggest innovation behind the brand in over a decade. In our international business, Fills increased 2% every prior year on a cost of currency basis. Australia business, which represents roughly two-thirds of the segment, decreased at a mid-single-digit rate as lingering high interest rates continued to weigh on consumer spending. But we're not standing still in Australia; despite the macroeconomic headwinds and the consumer's focus on value, we are continuing to find solutions to draw a brand relevant and consumer engagement.

Scott Lewis: With respect to innovation, we saw strong growth in our Hanes Originals and Made in Form M product lines, and we launched Bally Breathe, which is our biggest innovation behind the brand in over a decade. In our international business, sales increased 2% over the prior year on a constant currency basis. Australia Business, which represents roughly two-thirds of the segment, decreased at a mid-single-digit rate as lingering high interest rates continue to weigh on consumer spending. We're not standing still in Australia.

Speaker Change: With respect to innovation, we saw strong growth in our Hanes Originals and Made in Form M product lines.

Speaker Change: and we lost valley brief which is our biggest innovation behind the brand in overa decade

Speaker Change: in our international business fills increased two percent a prior year in a constant currency basis

Speaker Change: Our Australia business, which represents roughly two-thirds of the segment, decreased at a mid-single-digit rate as lingering high interest rates continue to weigh on consumer spending.

Scott Lewis: Despite the macroeconomic headwinds and the consumer's focus on value, we are continuing to find solutions to drive brand relevance and consumer engagement. For example, we launched our Bonds Everyday Value product, which is an extension of one of our U.S. products. This addressed a gap in our sold net that aligns with the current buying behavior of the Australian consumer while maintaining a strong margin profile. Touching briefly on our other segment, this segment historically held our U.S. hosiery business, as well as sales from a transition service agreement between our supply chain and our previously owned European underwear business. All the year-over-year sales decrease in the quarter was due to the divestiture of our hosiery business and the completion of a supply chain service agreement. Plain to Margin.

Speaker Change: We're not standing still in Australia. Despite the macroeconomic headwinds and the consumers' focus on value, we are continuing to find solutions to drive brand relevance and consumer engagement.

Scott Lewis: For example, we launched our Bonds Every Day Value product, which is an extension of one of our U.S. products. This addressed a gap in our soil net that aligns with the current fine behavior of the Australia consumer while maintaining a strong mortgage and fertile.

Speaker Change: For example, we launched our Bonds Everyday Value product, which is an extension of one of our U.S. products. This addressed a gap in our assortment that aligns with the current buying behavior of the Australian consumer while maintaining a strong margin profile.

Steve Bratspies: This addressed a gap in our assortment that aligns with the current buying behavior of the Australian consumer while maintaining a strong margin profile. The Operating Margin increased 525 basis points to 39.8%, and the Operating Margin increased 430 basis points to 12.7%. With respect to EPS, our focus on paying down debt yielded more than $8 million of lower interest expense in the quarter as compared to last year. And now, I turn to God. That's it.

Scott Lewis: That's being briefly in our other segment. This segment historically held our U.S. Heresy business, as well as sales from a transition service agreement between our supply chain, our previously on European and Interwear business. All of the year-to-year sales decrease in the quarter was due to the divestiture of our Hoetry business and the completion of a supply chain service agreement. Turning to margins, we saw significant year-to-year improvement in both our gross and operating margins in the quarter, while simultaneously increasing brand marketing investments by 125 basis points. For the quarter, first margin increased by 125 basis points to 39.8%; the operating margin increased 430 basis points to 12.7%.

Speaker Change: Touching briefly on our other segment, this segment historically held our U.S. hosiery business, as well as sales from a transition service agreement between our supply chain and our previously owned European underwear business.

Speaker Change: all of the year-over-year sales decrease in the quarter was due to the divestiture of our haryy business and the completion of a supply chain service agreement

Scott Lewis: We saw significant year-over-year improvement in both our gross and operating margins in the quarter, while simultaneously increasing brand marketing investments by 125 basis points. The operating margin increased 430 basis points to 12.7%. The margin improvement was driven by lower input costs, as we have moved past the impact from peak inflation, as well as the benefits from our existing cost savings and income. This allowed us to increase brand marketing investments to support growth-related initiatives, contributing to our market share gain. A good example that underscores the success of our financial strategy is the return on our marketing staff.

Sandra: and Sandra Margins.

Sandra: We saw significant year-over-year improvement in both our gross and operating margins in the quarter, while simultaneously increasing brand marketing investments by 125 basis points.

Sandra: For the quarter, gross margin increased 525 basis points to 39.8%. The operating margin increased 430 basis points to 12.7%.

Scott Lewis: The margin improvement was driven by lower input cost as we had loophast the impact from peak inflation, as well as the benefits from our existing cost savings initiatives. This allowed us to increase brand marketing investments to support growth-related initiatives, which is contributing to our market share gains. A good example of the underscores was the success of our financial strategy as the return on our marketing step. I was pleased to see the investments we made behind our Haynes brand at one of our largest customers through nearly 400 basis points of share gains with other consumers. and our existing cost savings programs. We're confident that we can continue to expand our gross and operating margins in the second half of the year.

Sandra: the margin improvement was driven by lower input cost as we have lo past the impact from peep inflation as well as the benefits from our existing cost savings initiatives

Sandra: this allows us to increase brandmarkeking investments to support growth -related initiatives

Sandra: which is contributing to our market share gains.

Sandra: A good example that underscores the success of our financial strategy is the return on our marketing staff.

Scott Lewis: I was pleased to see the investments we made behind our HanesBrands at one of our largest customers drew nearly 400 basis points of share gains with another consumer. With our visibility to input costs and our existing cost savings programs, we're confident that we can continue to expand our gross and operating margins in the second half of the year. And with the incremental cost savings initiatives that Steve highlighted, we see a long runway for significant margin expansion in 2025 and beyond.

Speaker Change: i was pleased to see the investments we madeave behind our hainzes brands that one of our largest customers drewve nearly four er basis points of share gains with other consumers

Speaker Change: With our visibility to input costs and our existing cost savings programs, we're confident that we can continue to expand our gross and operating margins in the second half of the year.

Scott Lewis: And, with the incremental cost savings initiative, as Steve highlighted, we see a long runway for significant margin expansion in 2025 and beyond. In respect to EPS, our focus on paying down debt yielded more than $8 million of lower interest expense in the quarter as compared to last year. The lower interest expense coupled with higher profit margins for EPS are 15 cents up, 650 percent of two cents last year.

Speaker Change: And, with the incremental cost savings initiatives that Steve highlighted, we see a long runway for significant margin expansion in 2025 and beyond.

Scott Lewis: With respect to EPS, our focus on paying down debt yielded more than $8 million of lower interest expense in the quarter as compared to last year. The lower interest expense, coupled with higher profit margins, drove EPS to $0.15, up 650% from $0.02 last year. And now, I turn to God.

Speaker Change: With respect to EPS, our focus on paying down debt yielded more than $8 million of lower interest expense in the quarter as compared to last year.

Speaker Change: The lower interest expense coupled with higher profit margins drove EPS a 15 cent up 650% from 2 cent last year.

Scott Lewis: And now turn to Goddard's. All of my comments were referred to adjust results from continuing operations and will be based on the midpoint of our Goddard's range. I would like to point out that with a reclassification of global champion and U.S.

Scott Lewis: All of my comments were referred to adjust results from continuing operations and will be based on the midpoint of our guidance range. I would like to point out that with a reclassification of global champion and U.S. outlet store businesses to discontinued operations, our current guidance is not comparable to our prior guidance given on May 9th. That's it.

Speaker Change: And now I'll turn to guidance. All of my comments were referred to adjust results from continuing operations and will be based on the midpoint of our guidance range.

Scott Lewis: Outlook store businesses to discontinued operations, our current guidance is not comparable to our prior Goddard's. Get it on May 9th. That said, in comparing our current full-year outlook on an apples-to-apples basis, our sell-out look is unchanged. However, the increase in our operating profit and EPS outlook as we continue to outperform on delivering cost savings. Looking at sales, we continue to expect some financial improvement in a year-of-a-year sales trends. On our organic cost and currency basis, we expect net sales to decrease 2 percent for the full year and 1 percent for the third quarter. Turning to operating profit, as we've highlighted all year, we have strong visibility to input cost and cost savings on our balance sheet to the rest of the year and into early next year.

Sandra: we would like to point out that with a reclassification of global champion and u s outlook store businesses to discontinued operations our current guidance is not comparable to our prior guidance given on may nine

Scott Lewis: Comparing our current full-year outlook on an apples-to-apples basis, our sales outlook is unchanged. However, we increase our operating profit and EPS outlook as we continue to outperform on delivering cost savings. On an organic constant currency basis, we expect net sales to decrease 2% for the full year and 1% for the third quarter. With our commitment to pay down debt and our outlook for continued margin improvement, we believe we are well positioned for strong double-digit EPS growth next year. We expect our year-round leverage ratio to decline approximately 1.5 times year over year and to end 2025 at approximately three times on a net debt to adjusted EBITDA basis.

Scott Lewis: Comparing our current full-year outlook on an apples-to-apples basis, our sales outlook is unchanged. However, we increased our operating profit and EPS outlook as we continue to outperform on delivering cost savings. Looking at sales, we continue to expect sequential improvement in the year-over-year sales trend. On an organic constant currency basis, we expect net sales to decrease 2% for the full year and 1% for the third quarter.

Speaker Change: That's it.

Speaker Change: In comparing our current full-year outlook on an apples-to-apples basis, our sales outlook is unchanged. However, we increase our operating profit and EPS outlook as we continue to outperform on delivering cost savings.

Speaker Change: but

Speaker Change: looking at sales we continue to expect quinential improvement in the year-over-a-year sales trends

Speaker Change: on organic constant currency basis we expect net sales to decrease two percent for the full year and one percent for the third quarter

Scott Lewis: Turning to operating profit, as we've highlighted all year, we have strong visibility to input costs and cost savings on our balance sheet for the rest of the year and into early next year. For the full year, we expect operating profit to increase 36% and operating margin to expand 330 basis points to 11.2%. For the third quarter, we expect operating profit to increase 34% and operating margin to expand 330 basis points to 12%.

Speaker Change: Turning to operating profit, as we've highlighted all year, we have strong visibility to input cost and cost savings on our balance sheet through the rest of the year and into early next year.

Scott Lewis: For the full year, we expect operating profit to increase 36 percent and operating margin to expand 330 basis points to 11.2 percent. For the third quarter, we expect operating profit to increase 34 percent and operating margin to expand 330 basis points to 12 percent. For our input cost visibility and the new cost savings programs we just put in place, we are well-positioned for continued expansion of both our gross and operating margins next year. Looking at EPS, for the full year, we expect EPS to increase 670 percent to 34 cents. For the third quarter, we expect EPS to increase 650 percent to 11 cents.

Speaker Change: For the full year we expect operating profit to increase 36% and operating margin to expand 330 basis points to 11.2%.

Speaker Change: For the third quarter, we expect operating profit to increase 34 percent.

Scott Lewis: With our input cost visibility and the new cost savings programs we just put in place, we are well positioned for continued expansion of both our gross and operating margins next year. Looking at EPS, for the full year, we expect EPS to increase 670% to 34 cents. For the third quarter, we expect EPS to increase 650% to 11%. With our commitment to pay down debt and our outlook for continued margin improvement, we believe we are well positioned for strong double-digit EPS growth next year.

Speaker Change: an operating margin to expand three hundred verting basis points to twelve percent

Speaker Change: with our infoit cost visibility and the new cost savings programs we just put in place we are well positioned for continued expansion of both our growth and operating margins next year

Speaker Change: Looking at EPS, for the full year, we expect EPS to increase 670% to 34 cents.

Scott Lewis: With our commitment to pay down debt and our outlook for continued margin improvement, we believe we are well-positioned for strong double-digit EPS growth next year. And we respect the leverage for the proceeds from the announced champions sale and internal cash generation. We expect to pay down an incremental $1 billion of debt in the second half of this year. We expect our year-end leverage ratio to decline of approximately 1.5 turns year over year and end 2025 at approximately three times on a net debt to adjusted EBITDA basis.

Speaker Change: for the third quarter we expect eps to increase six hundred fifty percent to eleven cents

Speaker Change: With our commitment to pay down debt and our outlook for continued margin improvement, we believe we are well positioned for strong double-digit EPS growth next year.

Scott Lewis: And with respect to leverage, with the proceeds from the announced sale of the Champion brand and internal cash generation, we expect to pay down an incremental $1 billion of debt in the second half of this year. We expect our year-round leverage ratio to decline approximately 1.5 times year over year and to end 2025 at approximately three times on a net debt to adjusted EBITDA basis. So, in closing, we delivered solid second-quarter results with sequential improvement in our year-over-year sales trends, strong growth in profit and earnings per share, and lower debt.

Scott Lewis: and respect to leverage with the proceeds from the announced champion sale and internal cash generation we expect to pay down and incremental one billion doars of debt in the second half of this year

Speaker Change: we expect our year-end leverage ratio to decline approximately one point five turns theyear-over-year and to end two thousand and twenty five approximately three times on a net debt to adjusted ebitda basis

Scott Lewis: So, in closing, we delivered solid second quarter results with sequential improvement in our year-over-year sales trends, strong growth in profit and earnings per share, and lower debt. These results underscore our strategic direction and operational strength.

Speaker Change: so in closing which delivered solid second quarter results with sequential improvement in our year-over-year sales trends strong growth in profit and earnings per shaer and lower debt

Scott Lewis: Looking forward, HanesBrands is taking a new direction. For a simplified strength and business model, we are confident in our ability to generate strong shareholders returns the next several years to a combination of double-digit earnings credit and continued debt reduction.

Scott Lewis: These results underscore our strategic direction and operational strength. Looking forward, HanesBrands is taking a new direction. With a simplified, strengthened business model, we are confident in our ability to generate strong shareholder returns over the next several years through a combination of double-digit earnings growth and continued debt reduction. And with that, I'll turn the call over to TC.

Speaker Change: These results underscore our strategic direction and operational strength.

Speaker Change: looking forward hs brands is taking a new direction

Scott Lewis: For a simplified, strengthened business model, we are confident in our ability to generate strong shareholder returns the next several years through a combination of double-digit earnings growth and continued debt reduction.

T.C. Robillard: With that, I'll turn the call over to TC. Thanks, Scott.

Operator: 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?

T.C. Robillard: 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, if you'd like to,

T.C. Robillard: That concludes our prepared remarks. We'll now begin taking your questions, and we'll continue as time allows.

TC: And with that, I'll turn the call over to TC.

Operator: thankscot

Operator: I'll turn the call back over to the operator to begin the question-and-answer session.

Operator: That concludes our prepared remarks. We'll now begin taking your questions and will continue as time allows. I'll turn the call back over to the operator to begin the question and answer session. Operator?

Operator: Operator? As a reminder, if you'd like to ask a question at this time, 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. Please stand by when we compile the Q&A roster.

Operator: As a reminder, if you'd like to ask a question at this time, please press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Our first question will come from the line of Jay Sole with UBS.

Speaker Change: as a reminder if you'd like to ask a question at this time please press star one one on your telephone and wait for your name to be announced to withdraw your question please press star one one again

Jay Sole: Our first question will come from the line of J-Sold with UBS. Super, thank you so much. I have a few questions. My first question is about how you feel about the portfolio today after the sale of Champion business. Are there any parts of the business that maybe you're considering doing something with, or do you feel like the portfolio today is to go forward, portfolio expect to have over the next few years? Scott, you mentioned that the EPS guidance on an apples-to-apples basis might give us a little bit, give us an idea of how much it would have went up and what the drivers were.

Operator: Our first question will come from the line of Jay Sole with UBS.

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

Jay Sole: Super, thank you so much. Stephen, I have a few questions. My first question is about how you feel about the portfolio today after the sale of Champion Business. Are there any parts of the business that maybe you're considering doing something with, or do you feel like the portfolio today is the go-forward portfolio you expect to have over the next few years? And then, Scott, for you, just a moment, you mentioned that the EPS guidance on an apples-to-apples basis went up.

Speaker Change: Super, thank you so much.

Steph: steph my quit i'would see questions my first question is about

Jay Sole: how you feel about the portfolio today after

Jay Sole: the Sailor Champion business. Are there any parts of the business that maybe you're...

Speaker Change: consideringdoing something wor do youfeel like the pfolio today goforward portfolioyou expect to have over the next few years and then scot you just you mention that the e ps guidance on apple to applees basis went maybe give us maybe dimensional a little bit an idea of how much it would have went up and what for drivers where and then lastly do you have a new target netdeb to ebitda ratio where you want the business to be over the next couple of years thank you so much

Jay Sole: Can you maybe give us, maybe dimensionalize that a little bit, give us an idea of how much it would have gone up and what the drivers were? And then lastly, do you have a new target net debt to EBITDA ratio of where you want the business to be over the next couple of years? Thank you so much.

Jay Sole: Can you maybe give us, maybe dimensionalize that a little bit, give us an idea of how much it would have gone up and what the drivers were? And then, lastly, do you have a new target net debt to EBITDA ratio of where you want the business to be over the next couple of years? Thank you so much.

Jay Sole: Lastly, do you have a new target debt to EBITDAO ratio where you want the business to be over the next couple of years?

Jay Sole: Thank you so much.

Steve Braskees: Good morning, Jay. Thanks for the questions. In terms of the portfolio, the shorter answer is yes; I really like the portfolio that we have today on a go-forward basis. When you look at the brands that we have, the markets that we're in, I think we're in the right places. There's opportunity to grow in those markets and the power brands that we have with their tains, bonds, valley made and formed. They're all top-tier brands in their segments, number one, number two position. And I think they all represent growth opportunities, both in their course segments and opportunities to expand beyond.

Steve Bratspies: Sure. Good morning, Jay.

Steve Bratspies: Thanks for the questions. In terms of the portfolio, the shorter answer is yes. I really like the portfolio that we have today. When you look at the brands that we have, and the markets that we're in, I think we're in the right places. There's opportunity to grow in those markets, and, you know, the power brands that we have with their Tains, Bonds, Valley, Maidenform, they're all top-tier brands in their segments, number one or number two positions.

Speaker Change: Good morning, Jay. Thanks for the questions. In terms of the portfolio, the shorter answer is yes, I really like the portfolio that we have today on a go-forward basis.

Speaker Change: when you look at the brands that we have the markets that we're in

Speaker Change: i think we're inthe right places there's opportunity to grow in those markets

Speaker Change: and, you know, the power brands that we have with their canes, bonds, Valley Maiden forms.

Steve Bratspies: And I think they all represent growth opportunities, both in their core segments and opportunities to expand beyond. So we have nothing planned beyond what we've just done. We like the portfolio, we like the growth opportunities, and importantly, the margin opportunities that come along with it.

Speaker Change: They're all top-tier brands.

Speaker Change: in their segments, number one, number two position.

Scott Lewis: So we have nothing planned beyond what we've just done. We like the portfolio, we like the growth opportunities, and importantly, the margin opportunities to come along with it.

Speaker Change: And I think they all represent growth opportunities both in their core segments and opportunities to expand beyond. So we have nothing planned beyond what we've just done. We like the portfolio. We like the growth opportunities. And importantly, the margin opportunities that come along with it.

Scott Lewis: Yeah, good morning, Jay. Thanks for your questions. On the full-year guide, it's a great question. And I mean, first day, we're really pleased with Q2 results; why we delivered strong results in a tough environment. And we feel good about the second half.

Scott Lewis: Yeah, good morning, Jay. And thanks for your questions. On the full-year guidance, it's a great, great question. And let me first say, we're really pleased with Q2 results, right? We've delivered strong results in a tough environment, and we feel good about the second half.

Scott Lewis: Yeah, good morning, Jay, and thanks for your questions.

Scott Lewis: On the full year guide, it's a great question, and let me first say, we're really pleased with Q2 results. We've delivered strong results in a tough environment.

Scott Lewis: As you think about the full-year outlook, and We talked about this in our earlier remarks. With the reclassification of Champion in the U.S. stores to discontinued operations, our prior full-year guidance that was based on telecompanies is not comparable when you look at our updated guidance that's based on continuing operations. For operating profit and ETS, we've actually raised our full-year outlook. In our previous guide, the midpoint was $510 million. And it included around $120 million in operating profit for Champion and the US stores.

Scott Lewis: As you think about the full-year outlook, and we talked about this in our earlier remarks, with a reclassification of champion in the US store wars to discontinue operations, our prior full-year guidance, that was based on tele company, is not comparable when you look at our updated guidance that's based on continuing operations. Now, let me walk you through that and kind of walk you through how that reconciles. So, for sales, we're essentially holding sales flat to our prior guide; no change there. If you consider our midpoint of our guide for sales was $5.41 billion. We had about $1.8 billion of sales between Champion in the US store, so when you pack that out, you pretty much arrive right at the midpoint of our current guide of $3.61 billion.

Scott Lewis: And we feel good about the second half. As you think about the full-year outlook and...

Scott Lewis: As you think about the full year outlook, and We talked about this in our earlier remarks, with the reclassification of Champion in the U.S. stores to discontinued operations, our prior full-year guidance that was based on telecompanies is not comparable when you look at our updated guidance that's based on continuing operations. And let me walk you through that, and kind of walk you through how that reconciles, how that works.

Scott Lewis: We talked about this in our earlier remarks, with the reclassification of Champion in the U.S. stores to discontinued operations, our prior full-year guidance that was based on telecompanies is not comparable when you look at our updated guidance that's based on continuing operations.

Scott Lewis: So for sales, we're essentially holding sales flat to our prior guide, no change there. If you consider that our midpoint of our guide for sales was $5.41 billion. We had about $1.8 billion in sales between Champion and the U.S. store, so when you back that out, you pretty much arrive right at the midpoint of our current guide of $3.61 billion. For operating profit and ETS, we've actually raised our full year outlook. In our previous guide, the midpoint was $510 million.

Scott Lewis: And let me walk you through that and kind of walk you through how that reconciles.

Scott Lewis: here now.

Scott Lewis: so for sales we're essentially holding sales flat tar prior guide no change there if you consider our midpoint of our guide for sales was

Speaker Change: the stop point full uppoint for one billion dollars we had about one point eight billion dollars of sales between champion the u s stores when you back that out you pretymuch a rock road at midpoint of our current got of three point six one billion dollars

Scott Lewis: For operating profit and ETS, we've actually raised our full-year outlook. Our previous guide, the midpoint, was $510 million, and it included around $120 million of operating profit for Champion in the US stores. So, with the midpoint, you factor that in, you arrive about $390 million back and out that profit. Our updated guide for our profit is $4.5 million, and so we're essentially pulling through the Q2 date, and factoring the momentum incremental upside in the second half.

Scott Lewis: And it included around $120 million of operating profit for Champion and the US stores. So with the midpoint, you factor that in, you're about $390 million backing out that profit. Our updated guide for our profit is $405 million. And so we're essentially flowing through the Q2 date and factoring in some incremental upside in the second half. So Dan, you also asked about leverage, and we also feel really good about that. Continued focus on debt reduction.

Scott Lewis: So with the midpoint factored in, you're about $390 million backing out that profit. Our updated guide for our profit is $405 million. And so we're essentially flowing through the Q2 date and factoring in some incremental upside in the second half.

Scott Lewis: So, with the midpoint and you factor that in, you arrive at about $390 million dollars backing out that profit. Our updated guide for our profit is $405 million dollars, and so we're essentially flowing through the Q2 beat and factoring in some incremental upside in the second half.

Scott Lewis: So then, and you also asked about leverage, and we also feel really good about that. Continue focus on debt reduction; we talked about it in the early remarks. In the back half, we're going to pay down a billion dollars of debt, and when you look at that by the end of the year, we're going to be down a turn to half year by the end of this year, and then looking forward. Now, we're not guiding for 25, but as you think about next year, the margin expansion that we're expecting to continue debt pay down, we expect to end next year around three times on a leverage basis.

Speaker Change: So Dan, you also asked about leverage, and we also feel really good about that.

Scott Lewis: We talked about in the earlier remarks that in the back half, we're gonna pay down a billion dollars of debt. And when you look at that by the end of the year, we're gonna be down a turn and a half year over year by the end of this year. And then looking forward, now we're not guiding for 25, but as you think about next year, the margin expansion that we're expecting, the continued debt paydown, we expect to end next year right around three times on the leverage base.

Speaker Change: continued fucused on debt reduction we talked about in the orli remarks in the backhalfwe're going to pay down a billion dollars of debt and when you look at that by the end of the year we're going to be down a turn a half year overa year by the end of this year

Speaker Change: and then looking forward now we're not gudting for twenty-five but as you think about next year the margin expansion that we're expecting the continued debt pay down we expect to end next year year run around three times on a leverage basis

Scott Lewis: And Jay, just one more thing, kind of beyond 2025, you know, we've said previously that our range guide is two to three times the number of times the population is currently growing, and, you know, we've gotten asked the questions previously, you know, is that too high, and what I would say is, you know, we're going to get back to two to three times the number of times the population is currently growing, and then we' I think you can probably anticipate it would be towards the lower end of two to three times, if not lower going forward, but we'll get back into that range, and then we will evaluate and talk about where we're going to be.

Scott Lewis: And, Jay, just one more thing, kind of beyond 2025, you know, we said previously that our range guide was two to three times the amount of the current level, and, you know, we've gotten asked the questions previously, you know, is that too high, and what I would say is, you know, we're going to get back to two to three times the amount of the current level, and then we'll step back and evaluate, is I think you can probably anticipate it would be towards the lower end of two to three times, if not lower going forward, but we'll get back into that range, and then we will evaluate and talk about where we're going to be.

Scott Lewis: And, Jay, just one more thing, kind of beyond 2025. We said previously that our range guide is two to three times, and we've gotten asked the questions previously: is that too high? And what I would say is we're going to get back to the two to three times, and then we'll step back and evaluate: is that the right measure going forward? I think to probably anticipate we'll be towards the lower end of two to three times, if not lower going forward, but we'll get back into that range, and then we will, we'll evaluate and then talk about where we're going to be.

Scott Lewis: And, Jay, just one more thing, kind of beyond 2025, you know, we've said previously that our

Scott Lewis: Our range guide is 2-3 times. We've gotten asked the question previously, is that too high? What I would say is, we're going to get back to the 2-3 times.

Scott Lewis: and then we'll step back and evaluate is that the right measure going forward i think it' probably anticipate would be towards the lower end two to three times if not lower going forward but we'll get back into that range and then we will will evaluate and talk about we're going to be

Jay Sole: Fantastic. Very helpful. Thank you so much.

Jay Sole: Thank you.

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

Ike Boruchow: Our next question will come from the line of Ike Boruchau with Wells Fargo. Thank you, everyone. Good morning. I guess just two questions for me. We have the guidance for the gross margins, but I don't think you guys have momentum on the cost side into next year. So, the gross margin that you guys end this year at, I guess slightly above 40, I think is your guide. Where do you kind of see this new, with the new portfolio, or the adjusted portfolio, where is the gross margin structure likely to head? And then just from a growth rate, for lack of better word, the algorithm of this business, how do you see growth?

Speaker Change: Fantastic. Very helpful. Thank you so much. Thank you.

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

Ike Boruchow: Hey, everyone. Good morning.

Ike Boruchow: everyone good morning i guess just two questions for me we have the guidance ser for the gross margins but

Ike Boruchow: Sounds like you guys have momentum on the cost side into next year.

Ike Boruchow: So, the gross margin that you guys end this year at, I guess, slightly above 40, I think, is your guide.

Ike Boruchow: I guess I have two questions for you. We have the guidance for gross margins, but it sounds like you guys have momentum on the cost side into next year. So the gross margin that you guys end this year at, I guess, slightly above 40, I think is your guide. Where do you kind of see, with the new portfolio or the adjusted portfolio, where is the gross margin structure likely to head? And then just from a growth rate, you know, for lack of a better word, the algorithm of this business, how do you see growth? How should we be planning this portfolio to grow, you know, relative to the one that you, you know, you had just recently? Sure.

Ike Boruchow: Where do you kind of see this new, with the new portfolio or the adjusted portfolio, where is the gross margin structure likely to head? And then just from a growth rate, you know, for lack of a better word, the algorithm of this business.

Ike Boruchow: How should we be planning this portfolio to grow relative to the one that you had just recently? Sure.

Ike Boruchow: how do you see growth how should we be planning this portfolio to grow relative to the one that you you had just recently

Steve Bratspies: Thanks for the questions. In terms of gross margin, I think again, you know, we're not officially guiding for next year. But as I said, we think this business, over time, will operate in the low 40% range. So there's continued growth to be had there.

Scott Lewis: Sure. Good morning, Ike.

Steve Bratspies: Sure. Good morning, Ike.

Ike Boruchow: I guess I have two questions for you. We have the guidance for gross margins, but it sounds like you guys have momentum on the cost side into next year. So the gross margin that you guys end this year at, I guess, slightly above 40, I think, is your guide. Where do you kind of see, with the new portfolio or the adjusted portfolio, where is the gross margin structure likely to head? And then just from a growth rate, you know, for lack of a better word, the algorithm of this business, how do you see growth? How should we be planning this portfolio to grow, you know, relative to the one that you, you know, you had just recently? Sure.

Steve Braskees: Good morning, Ike. Thanks for the questions. In terms of gross margin, I think, again, we're not officially guiding for next year, but as you said, we think this business over time will operate in a low 40% range. So there's continued growth to be had there. And that'll come from some really strong cost actions that we have been taking and will continue to take. Obviously, there's still some natural recovery of our gross margin based on impact costs that we will continue to benefit from. We've also been very focused on cost savings initiatives that continue to overperform for us.

Scott Lewis: Thanks for the questions. In terms of gross margin, I think, again, you know, we're not officially guiding for next year. But as I said, we think this business, over time, will operate in the low 40% range. So there's continued growth to be had there.

Speaker Change: sure good morning i thanks for questions

Scott Lewis: In terms of gross margin, I think, again, you know, we're not officially guiding for next year, but as I said, we think this business, over time, will operate in the low 40% range, so there's continued growth to be had there, and that'll come from some really strong

Scott Lewis: And that'll come from some really strong The divestiture creates an opportunity to go further and for us to look at the business differently. In terms of growth, I think the way you should think about this business is a more stable, more consistent growth business. And, you know, obviously today as we sit here, there are huge headwinds out there.

Steve Bratspies: And that'll come from some really strong cost actions that we have been taking and will continue to take. Obviously, there's still some natural recovery of our gross margin based on input costs that we will continue to benefit from. We've also been very focused on cost savings initiatives that continue to overperform. And with the inflection point of

Speaker Change: Cost actions that we have been taking and will continue to take. Obviously, there's still some natural recovery of our gross margin based on input costs that we will continue to benefit from. We've also been very focused on cost-savings initiatives that continue to overperform for us.

Steve Braskees: And with the inflection point of the divestiture, it creates an opportunity to go for it, and for us to look at the business difference. and we have some new savings programs that we're putting in. Some of whom are powered by the technology platforms that we're going to be putting in, and we slow down that process; we're re-energizing that. We have opportunities to get better on our analytics, our forecasting, and more automation in our business that are going to continue to help us drive costs. Our supply chain, we're going to take some actions, and that's some from the changing the portfolio, but it's also all the hard work we're doing.

Steve Bratspies: The divestiture creates an opportunity to go further and for us to look at the business differently. And we have some new savings programs that we're putting in, some of which are powered by the technology platforms that we're gonna be putting in. We slowed down that process; we're re-energizing that. We have opportunities to get better at our analytics, our forecasting, and more automation in our business that are gonna continue to help us drive costs.

Scott Lewis: and with the inflection point of...

Scott Lewis: the divestiture it creates opportunity to go for and for us to look at the business different

Scott Lewis: And we have some new savings programs that we're putting in, some of whom are powered by the technology.

Scott Lewis: platforms that we're going to be putting in, and we slowed down that process, we're re-energizing that. We have opportunities to get better on our analytics, our forecasting, more automation in our business that are going to continue to help us drive costs.

Steve Bratspies: Our supply chain, we're gonna take some actions, and that includes some from changing the portfolio, but it's also all the hard work we've been doing on inventory management, our SKU program, which enables us to move capacity around and take some facilities offline, but still have room to grow. So we're attacking costs on all fronts that are gonna continue to help us grow our gross margin and our operating margin over time as we go forward.

Scott Lewis: Our supply chain, we're going to take some actions.

Steve Braskees: We've been doing on inventory management. Our skew program enables us to move capacity around and take some facilities offline, but still have room to grow. So we're attacking costs on all fronts that are going to continue to help us grow our gross margin and our out margin over time as we go forward. In terms of growth, I think the way you should think about this business is more stable and more consistent growth business as we go through. And obviously, today as we sit here, huge headwinds out there, it's a tough business to operate in, but we see this business growing in the low single digits as we go forward.

Scott Lewis: that's su from the changing the portfolio but it's also all the hardwork we've been doing on inventory management

Speaker Change: Our SKU program enables us.

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

Scott Lewis: to move capacity around and take some facilities offline.

T.C. Robillard: I would now like to hand the conference over to T.C.

Scott Lewis: We're attacking costs on all fronts that are going to continue to help us grow our gross margin and our op margin over time as we go forward. In terms of growth,

T.C. Robillard: Robillard by President of Investor Relations. Please go ahead.

Steve Bratspies: In terms of growth... I think the way you should think about this business is a more stable, more consistent growth business. And, you know, obviously, today, as we sit here, with huge headwinds out there, it's a tough business to operate in.

T.C. Robillard: Good day, everyone, and welcome to the HanesBrands quarterly investor conference call-and-web cast. We are pleased to be here today to provide an update on our progress after the second quarter of 2024. Hopefully, everyone has had a chance to review the news release we issued earlier today.

Scott Lewis: I think the way you should think about this business is a more stable, more consistent growth business as we go forward.

Steve Bratspies: But we see this business growing in low single digits as we go forward. We think we have lots of different growth opportunities that we can go after, including just our core business and getting better at that. And ultimately, when we have that level of growth, we're still going to have our operating profit growing faster than our sales. We think our profit will grow at double-digit rates, and then EPS will grow faster than our profit at double-digit rates. So there's a flywheel here that we continue to generate.

Steve Braskees: Beginning with second quarter results, we have reclassified our global champion business and our US Outlet Store business to discontinued operations, and we have re-aligned our segment reporting. This was not contemplated in our initial second quarter guidance back on May 9. Therefore, second quarter results from continuing operations are not directly comparable to our previous guidance quarter current consensus estimates.

Scott Lewis: It's a tough business to operate in, but we see this business growing in the low single digits as we go forward. We think we have lots of different growth opportunities that we can go after, including just our core business and getting better at that. And ultimately, when we have that level of growth, we're still going to have our operating profit growing faster than our sales. We think our profit will grow at double-digit rates, and then EPS will grow faster than our profit at double-digit rates. So there's a flywheel here that we continue to generate.

Scott Lewis: And, you know, obviously, today, as we sit here,

Scott Lewis: Huge headwinds out there. It's a tough business to operate in, but we see this business growing in the low single digits as we go forward. We think we have lots of different growth opportunities that we can go after including just our core business and getting better at that business.

Steve Braskees: I think we have lots of different growth opportunities that we can go after, including just our core business and getting better at that business. And ultimately, when we have that level of growth, we're still going to have our operating profit growing faster than our sales. Within our profit growth, double digit, and an EPS will grow faster than our profit at double digit. So there's a flywheel here that we continue to generate. The P&L is going to continue to generate cash. We're going to continue to be investing in the business. We're going to continue to be able to pay down that.

Scott Lewis: And ultimately, when we have that level of growth, we're still going to have our operating profit growing faster than our sales. We think our profit will grow at double-digit, and then EPS will grow faster than our profit at double-digit. So there's a flywheel here that we continue to generate. The P&L is going to continue to generate cash. We're going to continue to be able to invest in the business. We're going to continue to be able to pay down debt so our interest costs go down. So we like the shape of the P&L as we go forward.

Steve Braskees: In addition to our earnings release and FAQ document, we have provided two additional documents today. One is a supplemental financial packet with recast historical financials. The other is an earnings handout that provides an overview of the Go Forward business as well as a bridge from second quarter results to our prior guidance.

Steve Bratspies: The P&L is going to continue to generate cash, so we're going to continue to be able to invest in the business. We're going to continue to be able to pay down debt so our interest costs go down. So we'd like the shape of the P&L as we go forward and what that looks like. What I would tell you, and I think it's really important, with all the challenges in the economy right now, with the consumer, just the broader market.

Scott Lewis: The P&L is going to continue to generate cash, so we're going to continue to be able to invest in the business. We're going to continue to be able to pay down debt so our interest costs go down. So we'd like the shape of the P&L as we go forward and what that looks like. What I would tell you, and this is really important, with all the challenges in the economy right now, with the consumer, just the broader market, the margin improvement that we're forecasting is going to happen whether the consumer turns around or not. And I think it's a really important point for us.

Steve Braskees: So our interest costs go down. So we'd like to shape the P&L as we go forward, and what that looks like.

Steve Braskees: What I would tell you, and I think it's really important, with all the challenges in the economy right now, with the consumer, just the broader markets. The margin improvement that we're forecasting is going to happen whether the consumer turns around or not. And I think it's really important for us now. We've been talking the last couple quarters around margin improvement, and you're going to continue to see margin improvement from. You've seen that the last couple quarters; you're going to see that in the quarters going forward. So when we start to talk about gross margin improvement, profit improvement, you're getting that this is not a hockey stick idea.

T.C. Robillard: All documents as well as the replay of this call can be found in the investor section of our Hanes.com website.

Scott Lewis: and what that looks like what i would tell you and i think it's really important with all the challenges in the economy right now with the consumer just a broader markets

T.C. Robillard: 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, consumer demand dynamics, our ability to successfully execute our strategic initiatives, including our restructuring and other action-related items, our ability to de-leverage on the anticipated time frame and the inflationary environment.

Steve Bratspies: The margin improvement that we're forecasting is going to happen whether the consumer turns around or not, and I think it's a really important point for us. We've been talking about the last couple quarters about margin improvement, and you're going to continue to see margin improvement from us. You've seen that in the last couple quarters; you'll see that in the quarters going forward. So when we start to talk about gross margin improvement, operating profit improvement, this is not a hockey stick idea; this is quarter over quarter you're going to see improvement on.

Scott Lewis: The margin improvement that we're forecasting is going to happen whether the consumer turns around or not. And I think it's a really important point for us to emphasize.

Scott Lewis: we've been talking the last couple of quarters around margin improvement and you're going to continue to see margin improvement from you've seen that the last couple of quarters

Scott Lewis: You're going to see that in the quarters going forward. So when we start to talk about gross margin improvement, op profit improvement, this is not a hockey stick idea. This is quarter over quarter. You're going to see improvement on the margin line.

Steve Braskees: This is quarter over quarter. You're going to see improvement. That's helpful, Steve.

T.C. Robillard: These risks also include those detailed and our various filings with the SEC, which may be found on our website as well as in our news releases. The company does not undertake to update or revise any forward-looking statements, which speak only to the time at which they are made. Unless otherwise noted, today's references to our consolidated financial results and guidance exclude all restructuring and other action-related charges and speak to continuing operation. Additional information, including a reconciliation of these and other non-gap performance measures to gap, can be found in today's news release.

Steve Bratspies: Got it. That's helpful, Steve. And then if I could ask one more question, just on cotton, specifically the AUC that you guys have on that. You know, there's been a few companies that have been giving a little bit more detail on cotton costs and the flow through. I think one company yesterday actually said they expect a sizable benefit, but they kind of explained it as half of that benefit flows through this year and half of the benefit coming next year.

Ike Boruchow: And then, if I can ask one more, is on the cotton specifically the AUC that you guys have on that. You know, there's been a few companies that have been giving a little bit more detail on cotton costs in the flow through. I think one company yesterday actually said they expect a sizable benefit that they kind of explained it is. Half of that benefit flows through this year, and half of the benefit coming next year. Can you kind of comment on that? Is that kind of mirror what you're expecting in terms of how we should expect the benefit from those costs from that specific.

Speaker Change: think soand

Speaker Change: Got it. That's helpful, Steve. And then if I could ask one more, just on the cotton, specifically the AUC that you guys have on that, you know, there's been a few companies that have been giving a little bit more detail on cotton costs and the flow-through. I think one company yesterday actually said they expect a sizable benefit, but they kind of explained it as...

Steve Bratspies: Can you kind of comment on that? Does that kind of mirror what you're expecting in terms of how we should expect the benefits from those costs from that specific cost item to flow through? Yeah, sure. Happy.

Speaker Change: Half of that benefit flows through this year and half of the benefit coming next year. Can you kind of comment on that? Does that kind of mirror what you're expecting in terms of how we should expect the benefits from those costs from that specific cost item to flow through?

T.C. Robillard: With me on the call today, our Steve Braskees, 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.

Steve Braskees: Call further to flow through. Yeah, sure, happy to talk about it. When you think about cotton and you think about how it flows through, for us, we're looking to next year. We're called roughly 60% fixed on cotton going into next year, so you know cotton is relatively low right now, so we're estimating that would definitely be a tailwind for us as we go into next year. So if you know some of the other commodities, say outside, we think we're going to have some cost tailwind as we go forward based on cotton, so we're feeling pretty good about our position right now.

Scott Lewis: Yeah, sure, happy to talk about it. When you think about cotton and you think about how it flows through for us, we're, if you look into next year, we're, call it roughly 60% fixed on cotton going into next year. So, you know, cotton is relatively low right now, so we're estimating that would definitely be a tailwind for us as we go into next year. So if, you know, some of the other commodities stay all flat, we think we're going to have some cost tailwinds as we go forward based on cotton. So we're feeling pretty good about our position right now.

Steve Bratspies: Yeah, sure, happy to talk about it. When you think about cotton and you think about how it flows through for us, we're, if you look into next year, we're, call it roughly 60% fixed on cotton going into next year. So, you know, cotton is relatively low right now, so we're estimating that would definitely be a tailwind for us as we go into next year. So if, you know, some of the other commodities fall flat, we think we're going to have some costs, and tailwinds as we go forward based on cotton. So we're feeling pretty good about our position right now. Thank you. Thank you.

Scott Lewis: Yeah, sure, happy to talk about it. When you think about cotton and you think about how it flows through for us, we're looking to next year

Steve Braskees: I'll now turn the call over to Steve. Thank you, T.C., good morning everyone and welcome to our second quarter earnings call. Since we last spoke, we've taken strategic actions and made several decisions that will drive a new direction in future for Haines Brands.

Scott Lewis: We're call it roughly 60% fixed on cotton going into next year. So, you know, cotton is relatively low right now So we're estimating that would definitely be a tailwind for us as we go into next year

Steve Braskees: As we announced in June, we've reached an agreement to sell our global champion business and will use the $900 million of net sale proceeds to pay down debt and further de-lever our balance sheet. We also completed the exit of our remaining U.S. Outlet Store. Business By exiting these lower margin businesses, we have fundamentally strengthened the company, creating a more focused, simplified business, one with more consistent top-line growth, higher margins, strong cash generation, a wide competitive mode, and multiple levers to unlock shareholder value over the next several years.

Scott Lewis: So if some of the other commodities fall flat, we think we're going to have some cost tailwinds as we go forward based on cotton. So we're feeling pretty good about our position right now.

Ike Boruchow: No.

Ike Boruchow: Great. Thank you.

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

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

Speaker Change: Great, thank you. Thank you.

Scott Lewis: Our next question will come from the line of Paul LeJouer with Citi.

Paul Lejuez: Hey everyone, Mr. Brandon Cheatham, One group. Paul, let's hope that you know, could you size the opportunity that you have available on the SG&A line item, give us some direction there, you know, as we think about where you all end up by the end of this year? Like how far along are you in the progression of cutting costs there, as you think about 20, 25 and beyond. Yeah, when you think about SGNA, Brandon, there certainly is opportunity, and it comes in different fronts. One, there's just, we can continue to get better in SGNA. There's no doubt about that.

Paul Lejuez: Hey, everyone. This is Brandon Cheatham on for Paul.

Scott Lewis: Hey everyone, this is Brandon Sheetam on Proof of All.

Speaker Change: I was hoping, you know, could you size the opportunity that you have available on the SG&A line item or give us some direction there, you know, as we think about where you all end up by the end of this year, like how far along are you in the progression of cutting costs there as we think about 2025 and beyond?

Brandon Cheatham: I was hoping, you know, could you size the opportunity that you have available on the SG&A line item or give us some direction there? You know, as we think about where you all end up by the end of this year, like how far along are you in the progression of cutting costs there as we think about 2025 and beyond?

Scott Lewis: When you think about SG&A, Brandon, there certainly is opportunity, and it comes on different fronts. One, there's just one thing we can continue to get better at SG&A. There's no doubt about that.

Steve Bratspies: Yeah, when you think about SG&A, Brandon, there certainly is opportunity, and it comes on different fronts. One, there's just, we can continue to get better at SG&A. There's no doubt about that.

Scott Lewis: Yeah, when you think about SG&A, Brandon, there certainly is opportunity and it comes in different fronts. One, there's just we can continue to get better in SG&A. There's no doubt about that, but it's also tied to

Scott Lewis: But it's also tied to the transaction and how we look at the business in total. There's costs that on a company, our size, they're kind of in between different businesses. And we are tackling those business costs right now. And there's a cost that is going to be coming out, a large chunk of costs in the back half of 24. But it's also going to continue in by the first half of '25. That's going to be a tailwind for us in the margin all the way through 2026. So we've got very clear actions. We're starting those actions.

Scott Lewis: But it's also tied to the transaction and how we look at the business in total. There are costs that, for a company our size, are kind of in between different businesses. And we are tackling those costs right now. And there's cost that is going to be coming out, a large chunk of cost in the back half of 24, but it's also gonna continue in probably the first half of 25. That's gonna be a tailwind for us.

Steve Bratspies: But it's also tied to the transaction and how we look at the business in total. There are costs that, for a company our size, are kind of in between different businesses. And we are tackling those costs right now. And there's cost that is going to be coming out, a large chunk of cost, in the back half of 24. But it's also gonna continue in probably the first half of 25. That's gonna be a tailwind for us.

Scott Lewis: The transaction and how we look at the business in total. There's costs that on a company our size They're kind of in between different businesses

Scott Lewis: and we are tackling those costs right now. And there is cost that is going to be coming out, a large chunk of cost, in the back half.

Scott Lewis: of twenty-four but it's also going to continue by the first half of twenty-five

Scott Lewis: That's going to be a tailwind for us in the margin all the way through 2026. So we've got very clear actions. We're starting those actions. We've got very good focus on where the cost is, and that's on a global basis.

Scott Lewis: We've got very good focus on where the cost is. And that's on a global basis. And just one point to add to that, you know, we've clearly talked about cost savings, right. We're really laser focused on that. But one thing to consider, as you look at our SGNA this year, we are already investing in brands, right? So when you think about our SGNA, we're going to make sure we're taking costs out, that we have an incremental layer of investments from brands. We're already at 5% of sales this year for a brand investment. So we've already got that in the PNL this year.

Steve Braskees: Now let me turn the discussion to our business on a Go Forward basis, and what HanesBrands looks like post divestiture. HanesBrands is a powerhouse in basics and interwear with a global footprint. We're relatively evenly split between men's and women's, and we operate in a category that is core and essential for consumers. While the pandemic and the current macroeconomic environment have created a period of volatility, long-term, we're confident this remains an attractive and stable category.

Scott Lewis: And just one point to add to that, you know, we clearly talked about cost savings, right? We're really laser focused on that. But one thing to consider as you look at our SG&A this year is that we are already investing in

Steve Bratspies: And just one point to add to that, you know, we clearly talked about cost savings, right? We're really laser focused on that. But one thing to consider as you look at our SG&A this year is that we are already investing in

Scott Lewis: And just one point to add to that, you know, we clearly talked about the cost savings, right? We're really laser focused on that.

Scott Lewis: but one thing to considers you look at our s this year

Scott Lewis: we are already investing and brand ry so when you think about our a structure overre taking cost outle that we are have an incremental later of investments from brands ' already at five percent of sales this year through our brand investments so

Steve Braskees: We own a portfolio of iconic brands that hold the number one or number two market share position in their categories, including Hanes, bonds, valley, and main form. Our brands are synonymous with comfort, and have been trusted by consumers for generations. We have a proven global consumer-centric innovation process that is driving market share gains, new retail space, and is making our brands increasingly the choice of younger consumers. In the US alone, innovation product has contributed over a half a billion dollars of sales in the last 18 months, and our innovation pipeline is full, giving us visibility to new product launches and brand programming into 2026.

Scott Lewis: And then, as you think about going forward, as Steve mentioned, cost savings is going to be able to drive SG&A down further. So whether it's headcount, whether it's reducing tech applications, consolidating other vendor headcount, we're attacking every aspect of it. And again, you'll start to see that in the back after this year, and it'll flow through the next year.

Steve Bratspies: You know, we've already got that in the P&L this year. And then as you think about going forward, as Steve mentioned, cost savings is going to be able to drive SG&A down further.

Steve Bratspies: So whether it's headcount, whether it's reducing tech applications, or solidifying other vendor headcount, we're attacking every aspect of it. And again, you'll start to see that in the back half of this year, and it'll flow through into next year.

Scott Lewis: So whether it's headcount or reducing tech applications.

Scott Lewis: So whether it's headcount, whether it's reducing tech applications, consolidating other vendor headcount, we're attacking every aspect of it. And again, you'll start to see that in the back half of this year and it'll flow through into next year.

Paul Lejuez: Got it. If I could follow up, I was just wondering about inventory levels later. Retail partner, I was PLS trending. You know, so I'd like you guys to continue to take share. Are you gaining shelf space with your retail partners? Anything that you can share there? Sure. The short answer is yes. We are continuing to gain shelf space, both on a permanent basis and on a promotional basis. So when you think about the promotions for back to school holiday, share of displays on the floor. We've done very well from a share perspective at back to school. Proud of the team and how the selling actions happen there.

Steve Bratspies: Got it. If I could follow up, I was just wondering about inventory levels at your retail partners, how POS is trending? It sounds like you guys are continuing to take share. Are you gaining shelf space with your retail partners? Anything that you can share there? Sure.

Speaker Change: Got it. If I could follow up, I was just wondering about inventory levels at your retail partners, how is POS trending? It sounds like you guys are continuing to take share. Are you gaining shelf space with your retail partners? Anything that you can share there?

Scott Lewis: Sure. The short answer is yes, we are continuing to gain shelf space, both on a permanent basis and on a promotional basis. So, when you think about promotions for back-to-school holiday share of displays on the floor, we've done very well from a share perspective at back-to-school. We know retailers are being cautious on inventory; there's no doubt about that, as is everybody.

Steve Bratspies: Sure. The short answer is yes, we are continuing to gain shelf space, both on a permanent basis and on a promotional basis. So, when you think about promotions for back-to-school holiday share of displays on the floor, we've done very well from a share perspective at back-to-school. You know, retailers are being cautious with inventory. There's no doubt about that, as is everybody.

Steve Braskees: We have global go-to-market capabilities and distribution scale that is unmatched, allowing us to capture demand wherever the consumer wants to shop. Our products are available in every channel, including leading retailers that are winning with consumers, and through our own direct-to-consumer offerings. And we have advanced world-class leaf factoring and sourcing operations. This is a powerful asset-based and capability that we are already leveraging to further widen our competitive mode, to extend our market share lead and to generate consistent top-line growth over time.

Scott Lewis: Sure The short answer is yes. We are continuing to gain shelf space both on a permanent basis and on a promotional basis. So When you think about promotions for back-to-school holiday

Scott Lewis: share of displays on

Scott Lewis: on the floor.

Scott Lewis: we've done very well from a share perspective

Scott Lewis: Retailers are being cautious on inventory. There's no doubt about that, as is everybody. So we think that we're in good shape. POS is tracking relatively along with shipments, or say shipments are tracking along with POS. But the important thing is we continue to take share, and we continue to outperform the market across all our brands, across all the categories and segments that we operate in. And we see that continuing as we go.

Scott Lewis: Back to School, I'm proud of the team and how the selling actions happened there. You know, retailers are being cautious on inventory. There's no doubt about that, as is everybody. So we think that we're in good shape. POS is tracking relatively along with with shipments, or I say shipments are tracking along with POS.

Steve Bratspies: So, we think that we're in good shape. POS is tracking relatively along with shipments, or I should say shipments are tracking along with POS. But the important thing is that we continue to take share and we continue to outperform the market across all our brands, across all the categories and segments that we operate, and we see that continuing as we go.

Scott Lewis: So, we think that we're in good shape. POS is tracking relatively along with shipments, or I should say shipments are tracking along with POS. But the important thing is that we continue to take share and we continue to outperform the market across all our brands, across all the categories and segments that we operate, and we see that continuing as we go.

Steve Braskees: In addition, we're well-positioned and highly confident in further margin improvement. We have the natural recovery of our gross margin, and the benefits from our existing cost savings programs, which are driving margin expansion this year. Beyond that, the divestiture of champion and the exit of our US outlet stores has created the opportunity to deliver a step-function change in our overall cost structure and improve our operational costs. Efficiency.

Scott Lewis: But the important thing is we continue to take share, and we continue to outperform the market across all our brands, across all the categories and segments that we operate in, and we see that continuing as we go forward.

Brandon Cheatham: I appreciate it. Thank you. Good luck, guys.

Paul Lejuez: Thank you.

Paul Lejuez: Thanks, Brandon.

David Swartz: Our next question will come from the line of David Swartz with Morningstar. Thanks for taking my question. Following up on that last answer, can you maybe talk about why it seems like your basics business has been depressed for a while? Well, when you think sales might bounce back a little bit and turn to growth, and when in the past when Hanes has faced a market with kind of depressed demand for innerwear, what it is looked like when the demand has returned. Sure, clearly the category has been challenged for a while. It's interesting when you look at the category over time.

Operator: Our next question will come from the line of David Swartz with Morningstar.

Speaker Change: usually plainking to look at thankfr

David Swartz: Yes, thanks for taking my question. Following up on that last answer, can you maybe talk about why it seems like your basics business has been depressed for a while, and when you think the sales might bounce back a little bit and return to growth, and when, in the past, Hanes has faced a market with kind of depressed demand for innerwear, what it has looked like when the demand has returned? Thanks.

David Swartz: Yes, thanks for taking my question. Following up on that last answer, can you maybe talk about why it seems like your basics business has been depressed for a while and, you know, when you think the sales might bounce back a little bit and return to growth, and when, in the past, Hanes faced a market with kind of depressed demand for innerwear, you know, what it looked like when the demand returned? Thanks.

Steve Braskees: We've identified three key areas and have specific plans in place to further reduce costs. First, we're resuming our migration to a consistent modern technology platform across the global organization that will enable better business analytic and planning, improve forecasting and drive greater automation. Second, we're further optimizing our supply chain with the divestiture as well as the benefits from automation and our skew management initiatives. We're able to exit several manufacturing distribution facilities while maintaining capacity for growth. These actions are expected to further simplify operations, reduce overhead, drive greater utilization, and improve customer service and end stocks.

Speaker Change: our next question 'will comees in the line of david sports with morning star

David Swartz: Yes, thanks for taking my question. Following up on that last answer, can you maybe talk about why it seems like your basics business has been depressed for a while and you know

David Swartz: What when you think the

Speaker Change: Sales might bounce back a little bit and return to growth and and when in the past when Hanes has Has faced a market with kind of depressed demand for for inner wear, you know What it is look like when the demand has returned. Thanks

Steve Bratspies: Sure. Clearly, the category has been challenged for a while. It's interesting when you look at the category over time. Historically, this has been a roughly 1% growth category. And if you look at the business over the last three years, while it has certainly been highly volatile, it's still averaged around 1%. The issue is that 2021 was so high.

Steve Bratspies: Sure, clearly, the category has been challenged for a while. It's interesting when you look at the category over time; historically, this has been a roughly 1% growth category. And if you look at the business over the last three years, while it has certainly been highly volatile, it's still averaged around 1%. The issue is that 2021 was so high. So that's extended the purchase cycle a bit, but we anticipate that in the long term.

Steve Bratspies: Sure, clearly the category has been challenged for a while.

David Swartz: Historically, this has been a roughly 1% growth category. And if you look at the business over the last three years, well, it has certainly been highly volatile. It's still average around 1%. The issues that 2021 was so high. So that's extended the purchase cycle a bit. We anticipate in the long term that the category will return to that 1% roughly growth rate as we go forward. When exactly that's going to happen, I'm not sure. I can give you a great answer on that. But the good is we are seeing POS slowly getting better, which is encouraging.

Steve Bratspies: It's interesting when you look at the category over time. Historically, this has been a roughly 1% growth category.

Steve Bratspies: So that's extended the purchase cycle a bit, but we anticipate that in the long term. The good news is we are seeing POS slowly getting better, which is encouraging. And we're also seeing that our consumers and retailers are still responding to newness. Like our innovation continues to work, you know, our media is working, we're continuing to gain space, and retailers are taking in incremental holiday events. So I think people still believe in this category, and, you know, we're leaning in as hard as we can to drive it.

Steve Braskees: And third, we're attacking SGNA overhead. This is all of the non-revenue generating spend within SGNA. We're creating the right cost structure for a simpler and more focused company. The supply chain optimization and SGNA reduction actions represent the vast majority of the savings, and we expect these two initiatives to be complete by the end of 2025. We're also strengthening our balance sheet through debt paydown and a focus on driving faster inventory turns.

Steve Bratspies: And if you look at the business over the last three years, while it has certainly been highly volatile, it's still averaged around 1%. The issue is that 2021 was so high. So that's extended the purchase cycle a bit. We anticipate in the long term...

Speaker Change: that the category will return to that one percent roughly growth rase we go forward when exactly that's going to happen i'm not sure i think give you a great answer on that but the good news is we are seeing poss slowly getting better which is encouraging

Steve Braskees: With higher margins, lower interest expense, and working capital productivity, we're confident we are positioned to generate strong double digit EPS growth for the next several years. We believe Haines Brands will generate consistent top line growth, a gross margin in the low 40% range, an operating margin of more than 15% and more than $400 million a year of cash flow from operations.

Steve Braskees: And we're also seeing our consumers and retails are still responding to newness. Our innovation continues to work. Our media is working with continue to gain space. Retails are taking an incremental holiday event. So I think people still believe in this category, and we're leaning in as hard as we can to drive it. But I think it's going to take some time before it rebounds, just like the rest of, you know, apparel. Things are challenging. So I think it'll take a couple of quarters for this category to normalize. But in the meantime, we are very confident.

Speaker Change: and we're also seeing our consumers and retails are still responding to newwness our innovation continues to work

Speaker Change: our media is working with continue to againstain bace retailers are taking an incremental holiday events

Steve Bratspies: So, I think people still believe in this category and we're leaning in as hard as we can to drive it, but I think it's going to take some time before it rebounds.

Steve Braskees: So in closing, we delivered solid second quarter results in a challenging consumer and a peril market. Through the actions we've taken to exit lower margin businesses, we fundamentally strengthen the company, creating a more focused, simplified business. We are now even better positioned to accelerate the flywheel of increased earnings growth and faster D leverage of the balance sheet, which provides us with multiple levers to unlock shareholder value over the next several years.

Steve Bratspies: But I think it's going to take some time before it rebounds, just like the rest of, you know, apparel. Things are challenging. So I think it'll take a couple quarters for this category to normalize. But in the meantime, we are very confident we're going to continue to take share, we're going to continue to lean in, and we're going to continue to act like the category brand leaders that we are.

Steve Bratspies: Just like the rest of apparel, things are challenging, so I think it'll take a couple quarters.

Steve Braskees: We're going to continue to take share. We're going to continue to lean in. And we're going to continue to act like the category grand leaders that we are.

Steve Bratspies: for this category to normalize, but...

Steve Bratspies: In the meantime, we are very confident that we're going to continue to take share, we're going to continue to lean in.

David Swartz: Thank you. And even as the closure of the outlet stores, historically, have that channel been used to clear access inventory.

Steve Bratspies: And you've announced the closure of the outlet stores. Historically, has that channel been used to clear access inventory? And why is it no longer a part of the business? Sure.

Steve Bratspies: And we're going to...

Steve Bratspies: It's key to act like the category brand leaders that we are.

Speaker Change: Thank you. And you've announced the closure of the outlet stores. Historically, has that channel been used to clear excess inventory, and why is it no longer a part of the business? Sure.

Steve Braskees: And why is it no longer a part of the business? Sure. It has not really been used to clear access inventory. There's a little bit that goes through there. But the taking those out of our portfolio is not going to create a how do we clear inventory problem for us going forward. So I'm not worried about that at all.

Scott Lewis: And with that, I'll turn the call over to Scott. Thanks Steve, want to echo your confidence on what the future holds for Haines Brands with a simplified and strengthen business model. I believe we're well positioned to generate strong shareholder returns over the next several years, with a combination of double digit earnings growth, paying down debt and in the long return, returning capital as shareholders.

Steve Bratspies: Sure. Um. It has not really been used to clear excess inventory; there's a little bit that goes through there, but taking those out of our portfolio is not going to create a how do we clear inventory problem for us going forward, so I'm not worried about that at all. In terms of the overall, we've been looking at this for some time, and quite frankly, we've been reducing the number of stores for the last couple of years. We've taken, you know, probably 20%, 10-20% of our stores out over the last couple years. Anyway, but the way I look at it, domestically, we're predominantly a wholesaler. That's what we do really, really well.

Steve Bratspies: Sure. It has not really been used to clear excess inventory. There's a little bit that goes through there. But taking those out of our portfolio is not going to create a how do we clear inventory problem for us going forward. So I'm not worried about that at all.

Steve Bratspies: It has not really been used to clear excess inventory, there's a little bit that goes through there, but taking those out of our portfolio is not going to create a how do we clear inventory problem for us going forward, so I'm not worried about that at all.

Steve Braskees: In terms of overall, we've been looking at this for some time. And quite frankly, this we've been reducing the number of stores the last couple of years. So we've taken, you know, probably 20% 10, 20% of our stores out over the last couple of years. Anyway, but the way I look at it domestically, we're predominantly a wholesaler. That's what we do really, really well. These stores do not have a lot of volume. They're not profitable. And as you go forward without Champion as part of our portfolio, that takes an additional part of the higher AUR product and profitability out of the network.

Steve Bratspies: In terms of the overall, we've been looking at this for some time, and quite frankly, we've been reducing the number of stores the last couple of years. We've taken, you know, probably 20%, 10, 20% of our stores out over the last couple of years, part of the HireAUR product and profitability out of the network, and that kind of becomes a tipping point. They were already very profit challenged, and they've become significantly profit challenged with our champions, so we thought it was the right time to make this move and to focus on the parts of the business where we're really strong.

Scott Lewis: As a result of the strategic actions we have implemented, our global champion and our U.S, allies for businesses have been reclassified to discontinued operations and we are real on our segment reporting. For recast historical financials, please see the supplemental financial pocket that's posted on our investor relations website. For today's call, I'll focus on continuing operations for additional details on the quarter's results and our guidance. I'll point you to our news release, second quarter earnings handout and FAQ document.

Steve Bratspies: In terms of the overall, we've been looking at this for some time and quite frankly, we've been reducing the number of stores the last couple of years.

Steve Bratspies: we've taken probably twenty percent ten twenty percent of our stores out over the last couple of years

Steve Bratspies: These stores do not have a lot of volume, and they're not profitable. And as you go forward without Champions as part of our portfolio, that takes an additional part of the HireAUR product and profitability out of the network, and that kind of becomes a tipping point. They were already very profit-challenged, and they've become significantly profit-challenged without Champions, so we thought it was the right time to make this move and to focus on the parts of the business where we're really strong.

Steve Bratspies: Anyway, but the way I look at it, domestically, we're predominantly a wholesaler. That's what we do really, really well. These stores do not have a lot of volume. They're not profitable. And as you...

Steve Bratspies: go forward without champion as part of our portfolio, that takes an additional...

Scott Lewis: Overall, we delivered strong second quarter results. We saw sequential improvement in top line trends, operating profit increased 46% over prior year, as we returned a double digit operating market, and interest expense decreased due to lower level of the debt. All of Lister are at 650% increase in earnings per share. For the quarter, net sales were $995 million. This represents a decrease of 4% versus prior year, with 150 basis points coming from FX head now, and 130 basis points from last year's U.S.

Steve Braskees: And that kind of becomes a tipping point. They were already very profit challenge. And they become significantly profit challenge without champion. So we thought it was the right time to make this move and to focus on the parts of the business where we're really strong.

Steve Bratspies: part of the higher AUR product and profitability out of the network. And that kind of becomes a tipping point. They were already very profit challenged, and they become significantly profit challenged without Champion. So we thought it was the right time to make this move and to focus on the parts of the business where we're really strong.

Paul Lejuez: Paul.

Tom Nikic: Our next question will come from the line of Tom Nikic with Wedbush. Hey, good morning, guys. Thanks for taking my question. I want to follow up on the questions earlier about the top line growth. So, do we think that the low single digits that you're looking to generate, do we think of that as being driven by shell space gains, or are there also ASP opportunities as you innovate and interest in products? Sure. I think you should think of this driven by a number of things. Do I think we can continue to just take shell space and out operate the competition from a service perspective?

Operator: Our next question will come from the line of Tom Nikic with Wedbush.

Tom Nikic: Hey, good morning guys. Thanks for taking my question. I want to follow up on the questions earlier about top-line growth. Should we think of that, you know, the low single digits that you're looking to generate as being driven by shelf space gains, or are there also opportunities for ASP growth as you innovate and introduce new products? Sure.

Tom Nikic: Hey, good morning, guys. Thanks for taking my question. I want to follow up on the questions earlier about top-line growth. Should we think of that, you know, the low single digits that you're looking to generate? Should we think of that as being driven by shelf space gains? Or are there also opportunities for ASP growth as you, you know, innovate and introduce new products? Sure.

Tom Nikic: Hey, good morning guys. Thanks for taking my question. I want to follow up on the questions earlier about top line growth.

Scott Lewis: Hozary Investiture. Now organic cost of currency basis net sales decreased 1% in a quarter. Looking at our segments, in the U.S., were approximately 90% of the businesses in our way. Fills decreased 1% compared to last year, which exceed our expectations. I'll be continuing to face the challenging environment with consumer spending headwind and high inventory management of select retailers, we're seeing that our strategy is working, and we're continuing to win the marketplace.

Tom Nikic: Should we think of that as being driven by shelf space gains or are there also ASP opportunities as you innovate and introduce new products?

Steve Bratspies: Sure, I think you should think of it as driven by a number of things. But do I think we can continue to just take shelf space and out-operate the competition from a service perspective? Yes, we expect to continue to do that. We are going to continue to innovate. I've been really proud of the team and the innovation that we've delivered over the last couple of years. We have a new innovation process that operates globally, and products like Hanes Originals and SuperSoft, Made in Form M, have all come from this, and they're working really well. We're doing it globally.

Steve Bratspies: Sure, I think you should think of it as driven by a number of things. But do I think we can continue to just take shelf space and out-operate the competition from a service perspective? Yes, we expect to continue to do that. We're going to continue to innovate. I've been really proud of the team and the innovation that we've delivered over the last couple of years. We have a new innovation process that operates globally, and products like Hanes Originals and SuperSoft, Made in Form M, have all come from this, and they're working really well. We're doing it globally.

Steve Bratspies: Sure. I think you should think of it as driven by a number of things.

Steve Bratspies: Do I think we can continue to just take shelf space and out-operate the competition from a service perspective? Yes, we expect to continue to do that.

Steve Braskees: Yes. We expect to continue to do that. We are going to continue to innovate. I've been really proud of the team and the innovation that we've delivered over the last couple of years. We have a new innovation process that operates globally, and products like Haynes, Originals, and Supersoft, Made in Form M have all come from this, and they're working really well. And we're doing it globally. We're moving product back and forth between the US and Australia, and it's making a difference in our business here. And you're going to see a very robust pipeline of innovation coming from us, going forward.

Scott Lewis: In the quarter, we gained another 40 basis points of market share in an aware, as increased marketing investment and product innovation on driving point of sell trends that continued to outperform the market. With respect to innovation, we saw strong growth in our hands, originals, and made-and-form end product models. And we lost Valley Brief, which is our biggest innovation behind the brand in over a decade. In our international business, Fills increased 2% every prior year on a cost of currency basis.

Steve Bratspies: We are going to continue to innovate. I've been really proud of the team and the innovation that we've delivered over the last couple of years.

Steve Bratspies: We have a new innovation process that operates globally.

Steve Bratspies: and products like Hanes Originals and SuperSoft, Made in Form M have all come from this and they're working really well and we're doing it globally. We're moving product back and forth between the U.S. and Australia and it's making a difference in our business here.

Steve Bratspies: We're moving product back and forth between the U.S. and Australia, and it's making a difference in our business here. You're going to see a very, very robust pipeline of innovation coming from us going forward. We have visibility after 2026 right now on our big launches.

Steve Bratspies: We're moving product back and forth between the U.S. and Australia, and it's making a difference to our business here. You're going to see a very, very robust pipeline of innovation coming from us going forward. We have visibility after 2026 right now for our big launches. The other thing you're going to see is us expanding our portfolio. We have great brands. So where can we take these brands? What adjacent categories can we play in that we're not in today? You know, one small example of that is what we're doing with medical scrubs right now. We have an early but nice building business of Hanes in the medical scrubs business.

Scott Lewis: Australia business, which represents roughly two-thirds of the segment, decreased at a mid-single-digit rate as lingering high interest rates continued to weigh on consumer spending. But we're not standing still in Australia, despite the macroeconomic headwinds and the consumer's focus on value, we are continuing to find solutions to draw a brand relevant and consumer engagement. For example, we launched our bonds every day value product, which is an extension of one of our U.S, products. This addressed a gap in our soil net that aligns with the current fine behavior of the Australia consumer while maintaining a strong mortgage and fertile.

Steve Bratspies: And you're going to see a very robust pipeline of innovation coming from us going forward. We have visibility after 2026 right now of our big launches.

Steve Braskees: We have visibility after 2026 right now of our big launch. The other thing you're going to see is us expanding our portfolio. We have great brands. So where can we take these brands? What adjacent categories can we play in that we're not in today?

Steve Bratspies: The other thing you'll see is us expanding our portfolio. We have great brands. So where can we take these brands? What adjacent categories can we play in that we're not in today?

Steve Bratspies: The other thing you're going to see is us expanding our portfolio. We have great brands. So where can we take these brands? What adjacent categories can we play in that we're not in today? You know, one small example of that is

Steve Braskees: One small example of that is what we're doing in medical scrubs right now. We have a early but nice building business of Haynes and the medical scrubs business. The Haynes brand can play in a lot of different places, and we're going to be smart about adjacent categories that we can go into that are going to be highly incremental. There's also growth globally. We have, I think we're in great markets, but some of them maybe are more underdeveloped than they should be. So we're going to, we're going to tap growth from multiple vectors, and we think there's a lot of different areas that can help us get there.

Steve Bratspies: You know, one small example of that is what we're doing in medical scrubs right now. We have an early but nice building business of Hanes in the medical scrubs business. The Hanes Brand can play in a lot of different places, and we're going to be smart about adjacent categories that we can go into that are going to be highly incremental. There's also growth globally. We have, I think we're in great markets, but some of them maybe are more underdeveloped than they should be. So we're gonna, we're gonna tap growth from multiple vectors. And we think there are a lot of different areas that can help.

Steve Bratspies: What we're doing in medical scrubs right now. We have a early but nice building business of Hanes in the medical scrubs business

Steve Bratspies: The Hanes brand can play in a lot of different places, and we're going to be smart about adjacent categories that we can go into that are going to be highly incremental.

Steve Bratspies: There's also growth globally. We have, I think we're in great markets, but some of them maybe are more underdeveloped than they should be. So we're gonna, we're gonna tap growth from multiple vectors, and we think there's a lot of different areas that can help us get there.

Tom Nikic: Great, and if I could follow up with one more, just should we think about, you know, there being any meaningful difference between the growth rate going forward domestically and internationally? Thanks.

Scott Lewis: For the quarter, first margin increased by 125 basis points to 39.8%, the operating margin increased 430 basis points to 12.7%. The margin improvement was driven by lower input cost as we had loophast the impact from peak inflation, as well as the benefits from our existing cost savings initiatives. This allowed us to increase brand marketing investments to support growth-related initiatives, which is contributing to our market share gains. A good example of the underscores was the success of our financial strategy as the return on our marketing step.

Tom Nikic: Great, and if I could follow up on one more, should we think about, you know, there being any meaningful difference between the growth rate go forward domestically and internationally.

Speaker Change: And if I could follow up on one more, should we think about there being any meaningful difference between the growth rate go forward domestically and international? Thanks.

Tom Nikic: Thanks.

Steve Braskees: Um, you know, I'm not going to get into what 2025 guide looks like by segment and do that. I would tell you, I'm confident there's growth around the globe for us. The consumers certainly challenge, you know, our Australian business, which is an important business for us. That economy is really struggling right now. Do I think that's going to rebound and continue to be a good growth business for us? Yes, I do. So I think it's going to be balanced around the globe. Some years will probably be higher in one market than others, but we're thinking about the portfolio we have right now, the footprint we have right now, as able to drive growth pretty consistently in each location.

Steve Bratspies: Um, you know, I'm not going to get into what the 2025 guide looks like by segment and do that. But I would tell you I'm confident there is growth around the globe. The consumer certainly challenges our Australia business, which is an important business for us. That economy is really struggling right now. Do I think that it's going to rebound and continue to be a good growth business for us? Yes, I do. So I think it's going to be balanced around the world.

Steve Bratspies: I'm not going to get into what 2025 guide looks like by segment and do that. I would tell you I'm confident there's growth around the globe for us.

Scott Lewis: I was pleased to see the investments we made behind our Haynes brand at one of our largest customers through nearly 400 basis points of share gains with other consumers, and our existing cost savings programs. We're confident that we can continue to expand our gross and operating margins in the second half of the year. And, with the incremental cost savings initiative as Steve highlighted, we see a long runway for significant margin expansion in 2025 and beyond.

Paul Kerney: Our next question will come from the line of Paul Kerney with Barclays. Hey, good morning. Thanks for taking my question.

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

Steve Bratspies: Some years will probably be higher in one market than others, but we're thinking about the portfolio we have right now, the footprint we have right now, as able to drive growth pretty consistently in each location. Our next question will come from the line of Paul Kearney with Barclays. Hey, good morning. Thanks for taking my question.

Paul Kearney: Hey, good morning. Thanks for taking my question I was wondering if you can comment on what youre seeing in the promotional environment out there and whether youre seeing.

Paul Kerney: I was wondering if you can comment on what you're seeing in the promotional environment out there and whether you're seeing pricing pressures. And then, as we think about going forward, should we think of that return to the 1% growth as price and volume mix, or how should we think about the mix of growth going forward in your different regions? Thanks. Sure, clearly the consumers are under pressure right now, and what we're seeing is consumers are buying around events. So they are looking for promotional pricing right now. Nothing, though, that's outside of the scope of our guide and outside of the scope of our plan.

Speaker Change: Pricing pressures and then as we think about going forward.

Speaker Change: We think that returns a 1% growth is.

Paul Kearney: Price and volume mix or how should we think about the mix of growth going forward in your different regions. Thanks.

Scott Lewis: In respect to EPS, our focus on paying down debt yielded more than $8 million of lower interest expense in the quarter as compared to last year. The lower interest expense coupled with higher profit margins for EPS are 15 cents up, 650 percent of two cents last year.

Paul Kearney: Sure. Clearly, the consumer is under pressure right now, and what we're seeing is consumers are buying around events. So they are looking for promotional pricing right now.

Speaker Change: Clearly the consumers under pressure right now and we're seeing is consumers are buying around events.

Speaker Change: So they are looking for promotional pricing right now.

Steve Bratspies: Nothing, though, that's outside of the scope of our guide, outside of the scope of our http://TheBusinessProfessor.com In terms of growth... As I was talking about a couple of minutes ago, I think there's growth across the board in this business. We can continue to take share and take space. We're going to out-innovate the competition. We've got a great global footprint in brands. We're going to expand into new adjacent categories and make our brands work harder for us.

Speaker Change: Nothing though that's outside of the scope of our guys outside of the scope of our plans.

Steve Braskees: But we are being smart about how we go to market for key events like back to school, what we're going to do at holiday to make sure that we're meeting the needs of consumers. But it's not an overly pressure-packed promotional environment right now. It's more everyone's been smart about how we can drive by and how we can be consumer needs to go forward.

Steve Bratspies: Nothing, though, that's outside of the scope of our guide outside of the scope of our http://TheBusinessProfessor.com In terms of growth... As I was talking about a couple of minutes ago, I think there's growth across the board in this business. We can continue to take share and take space. We're going to out-innovate the competition. We've got a great global footprint in brands. We're going to expand into new adjacent categories and make our brands work harder for us.

Speaker Change: But we are being smart about how we go to market for key events like back to school, what we're going to do at holiday to make sure that we're meeting the needs.

Steve Bratspies: Consumers, but it is not a overly pressure packed promotional environment right now it's more everyone's be smart about how we can drive volume how we can meet consumer needs as we go forward.

Scott Lewis: Outlook store businesses to discontinued operations, our current guidance is not comparable to our prior Goddard's, get it on May 9th. That said, in comparing our current full year outlook on an apples-to-apples basis, our sell-out look is unchanged. However, the increase our operating profit and EPS outlook as we continue to outperform on delivering cost savings. Looking at sales, we continue to expect some financial improvement in a year-of-a-year sales trends. On our organic cost and currency basis, we expect net sales to decrease 2 percent for the full year and 1 percent for the third quarter.

Steve Braskees: In terms of growth, as I was talking about a couple of minutes ago, I think there's growth across the board in this business. We can continue to take share and take space. We're going to innovate the competition. We've got a great global footprint and brands. We're going to expand into new adjacent categories and make our brands work harder for us. So we think there's a broad growth opportunity for us. And the key for us is the measure that we're going to hold ourselves to, certainly in the short term and probably in the long term, is we're going to grow twice the rate of the category.

Steve Bratspies: In terms of growth.

Steve Bratspies: As I was talking about a couple of minutes ago.

Steve Bratspies: I think theres growth across the board in this business, we can continue to take share and take space, we're going to out innovate. The competition, we've got great global footprint and brand, we're going to expand into new adjacent categories and make our brands work harder for us. So we think there is a broad growth opportunity for us and it keeps.

Steve Bratspies: So we think there's a broad growth opportunity for us, and the key for us is the measure that we're going to hold ourselves to, certainly in the short term and probably in the long term, is that we're going to grow twice the rate of the category. So that's what a category leader should do. That's how we're going to take share. So when the category gets back to that historical 1% growth, you should see us growing at twice the rate of the category.

Steve Bratspies: For US is the measure that we're going to hold ourselves to certainly in the short term, but probably in the long term, we're going to grow twice the rate of the category. So that's what a category leader should do that's how we're going to take share. So in the category gets back to that historical 1% growth you should see us growing at twice the rate of the category.

Scott Lewis: Turning to operating profit as we've highlighted all year, we have strong visibility to input cost and cost savings on our balance sheet to the rest of the year and into early next year. For the full year, we expect operating profit to increase 36 percent and operating margin to expand 330 basis points to 11.2 percent. For the third quarter, we expect operating profit to increase 34 percent and operating margin to expand 330 basis points to 12 percent.

Steve Braskees: So that's what a category leader should do. That's how we're going to take share. So in the category, it gets back to that historical 1% growth. You should see us growing at twice the rate of the category.

Operator: Our last question today will come from the line of William Reuter with Bank of America.

Steve Bratspies: Our last question today will come from the line of William Reuter with Bank of America.

William Reuter: Good morning. I have two.

William Reuter: Good morning, I have two so the first.

William Reuter: You gave the guidance of about $400 million of operating profit you clearly have a lot of productivity initiatives. Some of which are technology related how should we think about your capex going forward and I guess as you.

William Reuter: So the first, you gave guidance about 400 million in operating profits. You clearly have a lot of productivity initiatives, some of which are technology related. How should we think about your CapEx going forward? And, I guess as you, will it be elevated over the next year or two based upon some of these, it sounds like potentially cost savings projects that are kind of special and opportunistic.

Scott Lewis: So the first, you gave guidance about 400 million in operating profits. You clearly have a lot of productivity initiatives, some of which are technology related. How should we think about your CapEx going forward? And, I guess as you, will it be elevated over the next year or two based upon some of these, it sounds like potentially cost savings projects that are kind of special and opportunistic.

Scott Lewis: For our input cost visibility and the new cost savings programs we just put in place, we are well-positioned for continued expansion of both our gross and operating margins next year. Looking at EPS, for the full year, we expect EPS to increase 670 percent to 34 cents. For the third quarter, we expect EPS to increase 650 percent to 11 cents. With our commitment to pay down debt and our outlook for continued margin improvement, we believe we are well-positioned for strong double-digit EPS growth next year.

Scott Lewis: How should we think about your cat-ex going forward? And I guess as you will be elevated over the next year or two, based on some of these, it sounds like potentially cost savings projects that are kind of special and opportunistic. Yeah, good morning. Thanks for your question. Let me kind of take that from a couple of different angles. So cash, while you mentioned the 400 million, let me just kind of stick about cash flow in general. As you think about 2024, our God is just 200 million. You got some removing cards here. You have around $100 million of cash charges for the transaction costs as well as we're structuring.

Speaker Change: Will it be elevated over the next year or two based upon some of these it sounds like potentially cost savings projects that are kind of special and opportunistic.

Scott Lewis: Yeah, good morning. Thanks for your question. Let me kind of take that from a couple different angles. So cash flow, you mentioned $400 million, and let me just kind of speak about cash flow in general. As you think about 2024, our guide is $200 million, and you've got some moving parts here. You have around $100 million of cash charges for transaction costs as well as restructuring. So as you look forward, I think a good baseline to think about our operating cash flow going forward is around $300 million. And like we talked about before, you've got to think about that as a good baseline. Then you layer in the margin expansion from the cost savings. You've got lower interest from debt pay down.

Speaker Change: Yes. Good morning. Thanks for your question, let me, let me kind of take that from a couple of different angles. So cash flow you mentioned that the 400 million and let me just kind of speak about cash flow in general as.

Scott Lewis: As you think about 2024, our guide is $200 million and you've got some moving parts here you have around $100 million of cash charges for the transaction costs as well as restructuring. So as you look forward I think a good baseline to think about our operating cash flow going forward is around 300 million and I'll just talk about.

Scott Lewis: And we respect the leverage for the proceeds from the announced champions sale and internal cash generation. We expect to pay down an incremental $1 billion of debt in the second half of this year. We expect our year-end leverage ratio to decline of approximately 1.5 turns a year over year and end 2025 at approximately three times on a net debt to adjusted EBITDA basis.

Scott Lewis: So, as you look forward, I think a good baseline to think about our operating cash flow is going forward is around 300 million. And I always talk about before; you ought to think about that because a good baseline. Then you layer in the margin expansion from the cost savings. You got lower interest from debt pay down. It's going to grow from there. You're going to see, and we expect to be in the mid 300 operating cash flow range of forward next year. And we're going to bet a growth from there. You saw a recent, we are a good degree of confidence, high degree of confidence around 400 million plus of operating cash flows forward.

Scott Lewis: Before.

Scott Lewis: To think about that as a good baseline then you layer in the margin expansion from the cost savings you got lower interest from debt Paydown is going to grow from there youre going to youre going to see we expect to be in the mid 300 operating cash flow range for next year, and we're getting better growth from there you saw a reset.

Scott Lewis: It's going to grow from there. You're going to see, and we expect to be in the mid $300 operating cash flow range for next year, and we're going to be able to grow from there. You saw what we said. We have a good degree of confidence, a high degree of confidence, that we're going to have $400 million plus of operating cash flow going forward. As you think about CapEx, it's going to be up a little bit.

Scott Lewis: So, in closing, we delivered solid second quarter results with sequential improvement in our year every year sales trends, strong growth in profit and earnings per share, and lower debt. These results underscore our strategic direction and operational strength.

Scott Lewis: It's going to grow from there. You're going to see, and we expect to be in the mid $300 million operating cash flow range for next year, and we're going to be able to grow from there. You saw what we said. We have a good degree of confidence, a high degree of confidence, that we're going to have $400 million plus of operating cash flow going forward. As you think about CapEx, it's going to be up a little bit.

Scott Lewis: Great.

Scott Lewis: Good degree of confidence high degree of confidence around 4 million plus of operating cash flow going forward.

Scott Lewis: Looking forward, HanesBrands is taking a new direction. For a simplified strength and business model, we are confident in our ability to generate strong shareholders returns the next several years to a combination of double digit earnings credit and continued debt reduction.

Scott Lewis: You're going to have the technology that we talked about earlier. We feel really good about being able to, like we talked about, invest in the business, and we can easily, with that cash flow, support the CapEx levels we need going forward.

Scott Lewis: As you think about catbacks, as it's going to be up a little bit, you're going to have the technology that we talked about earlier. But you can't rate. We feel really good about being able to, like we talked about, we're going to invest in the business. And we can easily, or that cash was support the catbacks levels we need going forward.

Scott Lewis: As you think about Capex.

Scott Lewis: It's going to be up a little bit you're going to have the technology that we talked about earlier.

Scott Lewis: You're going to have the technology that we talked about earlier. But again, we feel really good about being able to, as we talked about, invest in the business, and we can easily, with that cash flow, support the CapEx levels we need going forward.

Scott Lewis: We feel really good about being able to like we talked about we're going to invest in the business and.

T.C. Robillard: With that, I'll turn the call over to TC. Thanks, Scott.

Scott Lewis: And we can easily without cash flow support the capex levels, we need going forward.

T.C. Robillard: That concludes our prepared remarks. We'll now begin taking your questions and we'll continue as time allows.

Steve Braskees: All right, that's helpful. And then there are many categories where we're seeing some lower price products that are coming from Asia, often unbranded, and they're going direct to consumer on e-commerce platforms. Are you seeing any of that increased competition? And is it impacting your categories at all? Yeah, we don't think it's impacting us. We are seeing it. We're watching closely. I know exactly what you're talking about. Our brands remaining really strong and continue to gain share in all the channels that we're participating in. So, we compete broadly with those products, and consumers continue to choose our brand.

William Reuter: All right, that's helpful. And then there are many categories where we're seeing some lower-priced products that are coming from Asia, often unbranded, and they're going direct to consumer on e-commerce platforms. Are you seeing any of that increased competition and is it impacting your categories at all? Yeah, we don't...

Speaker Change: Alright, that's helpful and then.

Operator: I'll turn the call back over to the operator to begin the question and answer session. Operator? As a reminder, if you'd like to ask a question at this time, 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. Please stand by when we compile the Q&A roster.

Speaker Change: There are many categories, where we're seeing some lower priced products that are coming from Asia, often unbranded and they're going direct to consumer E. Commerce platform are you seeing any of that increased competition is it impacting your categories at all.

Steve Bratspies: We don't think it's impacting us, but we are seeing it. We watch it closely, and I know exactly what you're talking about. Our brand's remaining really strong and continues to gain share in all the channels that we're participating in. So we compete broadly with those products, and consumers continue to choose our brand, and I think that's the media that is working, the innovation that we're bringing to market is working. So we're competing in our game, and how we compete, and that model is working for us.

Steve Bratspies: We don't think it's impacting us. We are seeing it. We watch it closely. I know exactly what you're talking about.

Steve Bratspies: We don't think it's impacting US we are seeing it we watch it closely I know exactly what youre talking about.

Steve Bratspies: Our brand is remaining really strong and continues to gain share in all the channels that we're participating in. So we compete broadly with those products, and consumers continue to choose our brand. And I think that the media that is working, the innovation that we're bringing to market is working. So we're competing in our game and how we compete, and that model is working for us.

Steve Bratspies: Our brands remaining really strong and continued to gain share in all the channels that we're participating in so weak.

Jay Sole: Our first question will come from the line of J-Sold with UBS. Super, thank you so much. I have a few questions.

Speaker Change: We compete broadly with those products and consumers continue to choose our brands and I think thats. The media networks is working the innovation that we're bringing to market is working so we're competing in Oregon, and how we compete and that model is working for us right now.

Steve Braskees: And I think that's the media that is working; the innovation that we're bringing to market is working. So we're competing in our game, and how we compete. And that model is working.

Steve Braskees: My first question is about how you feel about the portfolio today after the sale of champion business. Are there any parts of the business that maybe you're considering doing something with or do you feel like the portfolio today is to go forward, portfolio expect to have over the next few years? Scott, you mentioned that the EPS guidance on apples-to-apples basis might give us a little bit, give us an idea of how much it would have went up and what the drivers were. Lastly, do you have a new target debt to EBITDAO ratio where you want the business to be over the next couple of years? Thank you so much.

Operator: That concludes today's question-and-answer session.

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

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

T.C. Robillard: I'd like to call back to TC Robillard for closing your marks. We'd like to thank everyone for attending our call today, and we look forward to speaking with you soon. Have a great day.

T.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.

T.C. Robillard: We'd like to thank everyone for attending our call today, when we look forward to speaking with you soon have a great day.

Operator: This concludes today's conference call. Thank you for participating.

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.

Scott Lewis: Good morning, Jay. Thanks for the questions. In terms of the portfolio, the shorter answer is yes, I really like the portfolio that we have today on a go-forward basis. When you look at the brands that we have, the markets that we're in, I think we're in the right places, there's opportunity to grow in those markets and the power brands that we have with their tains, bonds, valley made and formed. They're all top tier brands in their segments, number one, number two, position.

Operator: Okay.

Operator: [music].

Operator: Okay.

Operator: [music].

Scott Lewis: And I think they all represent growth opportunities, both in their course segments and opportunities to expand beyond. So we have nothing planned beyond what we've just done. We like the portfolio, we like the growth opportunities, and importantly, the margin opportunities to come along with it.

Scott Lewis: Yeah, good morning, Jay. Thanks for your questions.

Scott Lewis: On the full-year guide, it's a great question. And I mean, first day, we're really pleased with Q2 results, why we delivered strong results in a tough environment. And we feel good about the second half.

Scott Lewis: If you consider our midpoint of our guide for sales was $5.41 billion. We had about $1.8 billion of sales between champion in the US store, so when you pack that out, you pretty much arrive right at the midpoint of our current guide of $3.61 billion.

Scott Lewis: For operating profit and ETS, we've actually raised our full year outlook. Our previous guide, the midpoint, was $510 million, and it included around $120 million of operating profit for champion in the US stores. So with the midpoint, you factor that in, you arrive about $390 million back and out that profit. Our updated guide for our profit is $4.5 million, and so we're essentially pulling through the Q2 date, and factoring the momentum incremental upside in the second half.

Scott Lewis: So then, and you also asked about leverage, and we also feel really good about that. Continue focus on debt reduction, we talked about in the early remarks. In the back half, we're going to pay down a billion dollars of debt, and when you look at that by the end of the year, we're going to be down a turn to half year by the end of this year, and then looking forward. Now, we're not guiding for 25, but as you think about next year, the margin expansion that we're expecting to continue debt pay down, we expect to end next year around three times on a leverage basis.

Scott Lewis: And, Jay, just one more thing, kind of beyond 2025. We said previously that our range guide is two to three times, and we've gotten asked the questions previously, is that too high? And what I would say is we're going to get back to the two to three times, and then we'll step back and evaluate, is that the right measure going forward? I think to probably anticipate we'll be towards the lower end of two to three times, if not lower going forward, but we'll get back into that range, and then we will, we'll evaluate and then talk about where we're going to be.

Jay Sole: Fantastic. Very helpful. Thank you so much. Thank you.

Ike Boruchow: Our next question will come from the line of Ike Boruchau with Wells Fargo. Thank you, everyone.

Scott Lewis: Good morning. I guess just two questions for me. We have the guidance for the gross margins, but I don't think you guys have momentum on the cost side into next year. So, the gross margin that you guys end this year at, I guess slightly above 40, I think is your guide. Where do you kind of see this new, with the new portfolio, or the adjusted portfolio, where is the gross margin structure likely to head?

Scott Lewis: And then just from a growth rate, for lack of better word, the algorithm of this business, how do you see growth? How should we be planning this portfolio to grow relative to the one that you had just recently? Sure.

Scott Lewis: Good morning, Ike. Thanks for the questions. In terms of gross margin, I think, again, we're not officially guiding for next year, but as you said, we think this business over time will operate in a low 40% range. So there's continued growth to be had there. And that'll come from some really strong cost actions that we have been taking and will continue to take. Obviously, there's still some natural recovery of our gross margin based on impact costs that we will continue to benefit from.

Scott Lewis: We've also been very focused on cost savings initiatives that continue to overperform for us. And with the inflection point of the divestiture, it creates an opportunity to go for it, and for us to look at the business difference, and we have some new savings programs that we're putting in. Some of whom are powered by the technology platforms that we're going to be putting in and we slow down that process, we're re-energizing that.

Scott Lewis: We have opportunities to get better on our analytics, our forecasting, more automation in our business that are going to continue to help us drive costs. Our supply chain, we're going to take some actions, and that's some from the changing the portfolio, but it's also all the hard work we're doing. We've been doing on inventory management, our skew program enables us to move capacity around and take some facilities offline, but still have room to grow. So we're attacking costs on all fronts that are going to continue to help us grow our gross margin and our out margin over time as we go forward.

Scott Lewis: In terms of growth, I think the way you should think about this business is more stable and more consistent growth business as we go through. And obviously today as we sit here, huge headwinds out there, it's a tough business to operate in, but we see this business growing in the low single digits as we go forward. I think we have lots of different growth opportunities that we can go after including just our core business and getting better at that business.

Scott Lewis: And ultimately when we have that level of growth, we're still going to have our operating profit growing faster than our sales within our profit growth double digit and an EPS will grow faster than our profit at double digit. So there's a flywheel here that we continue to generate. The P&L is going to continue to generate cash. We're going to continue to be investing in the business. We're going to continue to be able to pay down that. So our interest costs go down. So we'd like to shape the P&L as we go forward and what that looks like.

Scott Lewis: What I would tell you and I think it's really important with all the challenges in the economy right now with the consumer, just the broader markets. The margin improvement that we're forecasting is going to happen whether the consumer turns around or not. And I think it's really important for us now. We've been talking the last couple quarters around margin improvement and you're going to continue to see margin improvement from. You've seen that the last couple quarters, you're going to see that in the quarters going forward. So when we start to talk about gross margin improvement, profit improvement, you're getting that this is not a hockey stick idea. This is quarter over quarter. You're going to see improvement.

Ike Boruchow: That's helpful, Steve.

Scott Lewis: And then if I can ask one more is on the cotton specifically the AUC that you guys have on that. You know, there's been a few companies that have been giving a little bit more detail on cotton costs in the flow through I think one company yesterday actually said they expect a sizable benefit that they kind of they kind of explained it is. Half of that benefit flows through this year and half of the benefit coming next year.

Scott Lewis: Can you kind of comment on on that? Is that kind of mirror what you're expecting in terms of how we should expect the benefit from those costs from that specific. Call further to flow through yeah sure happy to talk about it when you think about cotton and you think about how it flows through for us we're looking to next year. We're called roughly 60% fixed on cotton going into next year so you know cotton is relatively low right now so we're estimating that would definitely be a tailwind for us as we go into next year. So if you know some of the other commodities say outside we think we're going to have some cost tailwind as we go forward based on cotton so we're feeling pretty good about our position right now.

Scott Lewis: No. Great.

Brandon Cheatham: Thank you.

Paul Lejuez: Our next question will come from the line of Paul Lejuez with City. Hey everyone, Mr. Brandon Cheatham, one group.

Brandon Cheatham: Paul, let's hope that you know, could you size the opportunity that you have available on the SGNA line item, give us some direction there, you know, as we think about where you all end up by the end of this year, like how far along are you the progression of cutting costs there, as you think about 20, 25 and beyond. Yeah, when you think about SGNA, Brandon, there certainly is opportunity and it comes in different fronts.

Brandon Cheatham: One, there's just, we can continue to get better in SGNA. There's no doubt about that. But it's also tied to the transaction and how we look at the business in total. There's costs that on a company, our size, they're kind of in between different businesses. And we are tackling those business costs right now. And there's cost that is going to be coming out, a large chunk of costs in the back half of 24.

Brandon Cheatham: But it's also going to continue in by the first half of 25. That's going to be a tailwind for us in the margin all the way through 20, 20, 26. So we've got very clear actions. We're starting those actions. We've got very good focus on where the cost is. And that's on a global basis. And just one point to add to that, you know, we've clearly talked about cost savings, right. We're really laser focused on that.

Brandon Cheatham: But one thing to consider, as you look at our SGNA this year, we are already investing in brands, right? So when you think about our SGNA, we're going to make sure we're taking costs out that we have an incremental layer of investments from brands. We're already at 5% of sales this year for a brand investment. So we've already got that in the PNL this year. And then as you think about going forward, as Steve mentioned, cost savings is going to be able to drive SGNA down further.

Brandon Cheatham: So whether it's headcount, whether it's reducing tech applications, consolidating other vendor headcount, we're attacking every aspect of it. And again, you'll start to see that in the back after this year and it'll flow through the next year. Got it.

Brandon Cheatham: If I could follow up, I was just wondering about inventory levels later. Retail partner, I was PLS trending, you know, so I'd like you guys to continue to take share. Are you gaining shelf space with your retail partners? Anything that you can share there? Sure. The short answer is yes. We are continuing to gain shelf space, both on a permanent basis and on a promotional basis. So when you think about the promotions for back to school holiday, share of displays on the floor.

Brandon Cheatham: We've done very well from a share perspective at back to school proud of the team and how the selling actions happen there. Retailers are being cautious on inventory. There's no doubt about that, as is everybody. So we think that we're in good shape. POS is tracking relatively along with shipments or say shipments are tracking along with POS. But the important thing is we continue to take share and we continue to outperform the market across all our brands across all the categories and segments that we operate it. And we see that continuing as we go.

Brandon Cheatham: Thank you. Thanks, Brandon.

David Swartz: Our next question will come from the line of David Swartz with Morningstar. Thanks for taking my question.

David Swartz: Following up on that last answer, can you maybe talk about why it seems like your basics business has been depressed for a while? Well, when you think sales might bounce back a little bit and turn to growth, and when in the past when Hanes has faced a market with kind of depressed demand for innerwear, what it is looked like when the demand has returned. Sure, clearly the category has been challenged for a while.

David Swartz: It's interesting when you look at the category over time. Historically, this has been a roughly 1% growth category. And if you look at the business over the last three years, well, it has certainly highly volatile. It's still average around 1%. The issues that 2021 was so high. So that's extended the purchase cycle a bit. We anticipate in the long term that the category will return to that 1% roughly growth rate as we go forward.

David Swartz: When exactly that's going to happen, I'm not sure. I can give you a great answer on that. But the good is we are seeing POS slowly getting better, which is encouraging. And we're also seeing our consumers and retails are still responding to newness. Our innovation continues to work. Our media is working with continue to gain space. Retails are taking an incremental holiday event. So I think people still believe in this category and we're leaning in as hard as we can to drive it.

David Swartz: But I think it's going to take some time before it rebounds just like the rest of, you know, apparel things are challenging. So I think it'll take a couple quarters for this category to normalize. But in the meantime, we are very confident. We're going to continue to take share. We're going to continue to lean in. And we're going to continue to act like the category grand leaders that we are.

David Swartz: Thank you.

David Swartz: And even as the closure of the outlet stores historically have that channel been used to clear access inventory. And why is it no longer a part of the business? Sure. It has not really been used to clear access inventory. There's a little bit that goes through there. But the taking those out of our portfolio is not going to create a how do we clear inventory problem for us going forward. So I'm not worried about that at all.

David Swartz: In terms of overall, we've been looking at this for some time. And quite frankly, this we've been reducing the number of stores the last couple of years. So we've taken, you know, probably 20% 10, 20% of our stores out over the last couple of years. Anyway, but the way I look at it domestically, we're predominantly a wholesaler. That's what we do really, really well. These stores do not have a lot of volume.

David Swartz: They're not profitable. And as you go forward without champion as part of our portfolio, that takes an additional part of the higher AUR product and profitability out of the network. And that kind of becomes a tipping point. They were already very profit challenge. And they become significantly profit challenge without champion. So we thought it was the right time to make this move and to focus on the parts of the business where we're really strong. Paul.

Paul Lejuez: Our next question will come from the line of Tom Nikic with Wetbush. Hey, good morning guys. Thanks for taking my question. I want to follow up on the questions earlier about the top line growth. So, do we think that the low single digits that you're looking to generate, do we think of that as being driven by shell space gains, or are there also ASP opportunities as you innovate and interest in products?

Paul Lejuez: Sure. I think you should think of this driven by a number of things. Do I think we can continue to just take shell space and out operate the competition from a service perspective? Yes. We expect to continue to do that. We are going to continue to innovate. I've been really proud of the team and the innovation that we've delivered over the last couple of years. We have a new innovation process that operates globally, and products like Haynes, Originals, and Supersoft, Made in Form M have all come from this, and they're working really well.

Paul Lejuez: And we're doing it globally. We're moving product back and forth between the US and Australia, and it's making a difference in our business here. And you're going to see a very robust pipeline of innovation coming from us, going forward. We have visibility after 2026 right now of our big launch. The other thing you're going to see is us expanding our portfolio. We have great brands. So where can we take these brands?

Paul Lejuez: What adjacent categories can we play in that we're not in today? One small example of that is what we're doing in medical scrubs right now. We have a early but nice building business of Haynes and the medical scrubs business. The Haynes brand can play in a lot of different places, and we're going to be smart about adjacent categories that we can go into that are going to be highly incremental. There's also growth globally.

Paul Lejuez: We have, I think we're in great markets, but some of them maybe are more underdeveloped than they should be. So we're going to, we're going to tap growth from multiple vectors, and we think there's a lot of different areas that can help us get there. Great, and if I could follow up on one more, should we think about, you know, there being any meaningful difference between the growth rate go forward domestically and international.

Paul Lejuez: Thanks. Um, you know, I'm not going to get into what 2025 guide looks like by segment and do that. I would tell you, I'm confident there's growth around the globe for us. The consumers certainly challenge, you know, our Australian business, which is an important business for us. That economy is really struggling right now. Do I think that's going to rebound and continue to be a good growth business for us? Yes, I do.

Paul Lejuez: So I think it's going to be balanced around the globe. Some years will probably be higher in one market than others, but we're thinking about the portfolio we have right now, the footprint we have right now, as able to drive growth pretty consistently in each location.

Tom Nikic: Our next question will come from the line of Paul Kerney with Barclays. Hey, good morning, thanks for taking my question.

Tom Nikic: I was wondering if you can comment on what you're seeing in the promotional environment out there and whether you're seeing pricing pressures and then as we think about going forward, should we think of that return to the 1% growth as price and volume mix or how should we think about the mix of growth going forward in your different regions. Thanks. Sure, clearly the consumers under pressure right now and what we're seeing is consumers are buying around events.

Tom Nikic: So they are looking for promotional pricing right now. Nothing though that's outside of the scope of our guide and outside of the scope of our plan. But we are being smart about how we go to market for key events like back to school, what we're going to do at holiday to make sure that we're meeting the needs of consumers. But it's not a overly pressure pack promotional environment right now. It's more everyone's been smart about how we can drive by and how we can be consumer needs to go forward.

Tom Nikic: In terms of growth, as I was talking about a couple of minutes ago, I think there's growth across the board in this business. We can continue to take share and take space. We're going to innovate the competition. We've got great global footprint and brands. We're going to expand into new adjacent categories and make our brands work harder for us. So we think there's a broad growth opportunity for us. And the key for us is the measure that we're going to hold ourselves to certainly in the short term and probably in the long term is we're going to grow twice the rate of the category.

Tom Nikic: So that's what a category leader should do. That's how we're going to take share. So in the category, it gets back to that historical 1% growth. You should see us growing at twice the rate of the category.

William Reuter: Our last question today will come from the line of William Reuter with Bank of America. Good morning. I have two. So the first, you gave the guidance about 400 million of operating profit. You clearly have a lot of productivity initiatives, some of which are technology related. How should we think about your cat-ex going forward? And I guess as you will be elevated over the next year or two, based on some of these, it sounds like potentially cost savings projects that are kind of special and opportunistic.

William Reuter: Yeah, good morning. Thanks for your question. Let me kind of take that from a couple of different angles. So cash, while you mentioned the 400 million, let me just kind of stick about cash flow in general. As you think about 2024, our God is just 200 million. You got some removing cards here. You have around $100 million of cash charges for the transaction costs as well as we're structuring. So as you look forward, I think a good baseline to think about our operating cash flow is going forward is around 300 million.

William Reuter: And I always talk about before, you ought to think about that because a good baseline. Then you layer in the margin expansion from the cost savings. You got lower interest from debt pay down. It's going to grow from there. You're going to see, and we expect to be in the mid 300 operating cash flow range of forward next year. And we're going to bet a growth from there. You saw a recent, we are a good degree of confidence, high degree of confidence around 400 million plus of operating cash flows forward.

William Reuter: As you think about catbacks, as it's going to be up a little bit, you're going to have the technology that we talked about earlier. But you can't rate. We feel really good about being able to, like we talked about, we're going to invest in the business. And we can easily, or that cash was support the catbacks levels we need going forward.

William Reuter: All right, that's helpful. And then there are many categories where we're seeing some lower price products that are coming from Asia, often unbranded, and they're going direct consumer on e-commerce platforms. Are you seeing any of that increased competition? And is it impacting your categories at all? Yeah, we don't think it's impacting us. We are seeing it. We're watching closely. I know exactly what you're talking about. Our brands remaining really strong and continue to gain share in all the channels that we're participating in.

William Reuter: So, we compete broadly with those products and consumers continue to choose our brand. And I think that's the media that is working, the innovation that we're bringing to market is working. So we're competing in our game and how we compete. And that model is working.

T.C. Robillard: That concludes today's question and answer session.

T.C. Robillard: I'd like to call back to TC Robillard for closing your marks. We'd like to thank everyone for attending our call today and we look forward to speaking with you soon.

T.C. Robillard: Have a great day.

Operator: This concludes today's conference call. Thank you for participating.

You may now disconnect.

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