Q4 2024 Hanesbrands Inc Earnings Call
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Speaker Change: I'd now like to hand, the conference over to T. C Robillard, Vice President of Investor Relations. Please go ahead.
Speaker Change: Good day, everyone and welcome to the Hanesbrands quarterly Investor Conference call and webcast. We're pleased to be here today to provide an update on our progress after the fourth quarter of 2024.
Speaker Change: Hopefully everyone has had a chance to review the news release, we issued earlier today.
Speaker Change: As a quick housekeeping item beginning with fourth quarter results, we have reclassified the champion Japan business to discontinued operations.
Speaker Change: When we announced the sale of our global champion business. In June 2024, We said, we would be a licensee of the champions Japan business for a temporary period of time and that we would eventually move the business to discontinued operations.
Speaker Change: In the fourth quarter, we notified authentic brands of our plans to exit the license by the end of 2025.
Speaker Change: The JV in Japan business moving to discontinued operations was not contemplated in our initial fourth quarter guidance back on November seven.
Speaker Change: Therefore fourth quarter and full year results as well as our 2025 guidance from continuing operations are not directly comparable to our previous guidance for the current consensus estimates.
Speaker Change: In addition to our earnings release and <unk> document we've provided two additional documents today, one as a supplemental financial package with recast historical financials, reflecting champion Japan in discontinued operations. The other is an earnings handout that provides a bridge from fourth quarter and full year results to our prior guidance as well as an updated overview of the <unk>.
Speaker Change: Forward business, all documents as well as a replay of this call can be found in the investors section of our Hanes Dot com website.
Speaker Change: On the call today, we may make forward looking statements either in our prepared remarks or in 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.
Speaker Change: These risks, including 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.
Speaker Change: These risks also include those detailed in our various filings with the SEC, which may be found on our website as well as in our news releases. The company does not undertake to update or revise any forward looking statements, which speak only to the time at which they are made.
Speaker Change: Unless otherwise noted today's references to our consolidated financial results and guidance exclude all restructuring and other action related charges and speak to continuing operations additional information on the quarter's results and our guidance, including a reconciliation of these and other non-GAAP performance measures to GAAP can be found in today's news release.
Steve <unk>: With me on the call today are Steve <unk>, our Chief Executive Officer, and Scott Lewis, Our Chief Financial Officer.
Speaker Change: For today's call Stephens, Scott will provide some brief remarks, and then we'll open it up to your questions I will now turn the call over to Steve.
Speaker Change: Thank you <unk> good morning, everyone and welcome to our fourth quarter earnings call.
Speaker Change: Hanesbrands delivered strong results for the quarter and the full year across all of our key metrics, including our sales margins EPS and operating cash flow and debt reduction.
Speaker Change: Coming into 2024, we said that despite the muted consumer environment, our sales trends would improve throughout the year and that we had reached an inflection point in our margins and our leverage we.
Speaker Change: We delivered on this expectation and as a result, we are entering 2025 with a strong foundation clear direction and good momentum to create shareholder value.
Speaker Change: Some highlights for the year.
Speaker Change: Sales trends improved each quarter with the fourth quarter pivoting to year over year growth of 4%.
Speaker Change: Gross margin improved 580 basis points over prior year to 41, 4%, which is structurally higher than pre pandemic levels due to permanent cost savings initiatives and improved assortment management.
Operating margin expanded 390 basis points to 11, 8%, while supporting a 150 basis point increase in brand investment.
Speaker Change: Earnings per share increased 670% and.
Speaker Change: And we paid down over $1 billion of debt and reduce leverage by nearly two turns.
Speaker Change: These results reflect the successful execution of our strategy over the past four years, streamline and reposition hanesbrands, even while facing a challenging consumer environment and a number of additional unexpected headwinds.
Speaker Change: We shifted from a global holding company to a global operating company, where we've leveraged and share our brands innovation marketing talent and supply chain capabilities around the world.
Speaker Change: We substantially focused our portfolio and simplified our business.
Speaker Change: We're now a consumer centric company with both a reignited innerwear business that is gaining market share and an added focus on new revenue streams.
Speaker Change: We built core competencies and a disciplined operating model with consumer led innovation SKU lifecycle management and the application of advanced analytics and AI.
Speaker Change: We streamlined and strategically segmented our global supply chain and expanded our E comm capabilities.
Speaker Change: And we built our talent and associated proposition, all while implementing cost reduction initiatives to improve efficiencies lower our fixed costs and allow for higher levels of growth related investments.
Speaker Change: As I previously highlighted the benefits of the organization's collective efforts over the past four years began to show in our 2024 results.
Speaker Change: I want to thank all of our associates for delivering on a strong year and for their hard work to successfully reposition hanesbrands for the future.
Speaker Change: We enter 2025 as a new company.
A more simplified focused business with a powerful asset base significant competitive advantages and multiple levers to create shareholder value over the next several years.
Speaker Change: We're a global powerhouse in innerwear and basic apparel operating in a brand driven category that is core and essential to consumers.
Speaker Change: We own market, leading brands, including Haynes bonds, Maidenform and Bali.
Speaker Change: Our brands are synonymous with comfort and quality and have been trusted by consumers for generations.
Speaker Change: We have a proven and repeatable consumer centric innovation process that is driving market share gains retail space expansion and is attracting younger consumers to our brand franchises.
Speaker Change: We have global go to market capabilities, as well as distribution breadth and scale, enabling us to capture demand wherever the consumer wants to shop.
Speaker Change: And we have an advantaged supply chain with world class own manufacturing network and diversified global sourcing operation.
Speaker Change: Going forward, we expect to further leverage our competitive strengths and generate consistent top line growth expand margins to over 15% and generate more than $400 million a year of operating cash flow.
Speaker Change: Looking to 2025, we believe we're well positioned to make significant progress towards these goals, we will build on fourth quarter's momentum and expect to deliver positive organic constant currency sales growth for the year driven by new innovations distribution gains in key channels contributions from new revenue streams.
Speaker Change: And market share opportunities within the <unk> channel as we celebrate and leverage the 50th anniversary of the Hanes DCT.
Speaker Change: As we continue to improve our cost structure, particularly within SG&A. We expect further margin expansion this year, while maintaining high levels of growth related investments.
Speaker Change: This magnifies our growth rates as we move down the P&L driving operating profit growth of 10% EPS growth of more than 30% and operating cash flow of $350 million.
Speaker Change: And we will remain focused on using all of our free cash flow to pay down debt and further reduce balance sheet leverage.
Speaker Change: The combination of profit growth and debt Paydown is expected to bring our leverage down to around three times by the end of 2025.
Speaker Change: So in closing we're seeing the benefits of our transformation strategy as we delivered strong results for the quarter and the year.
Speaker Change: We come into 2025 is a new and better company.
Speaker Change: Well positioned to build upon our competitive advantages and drive increased shareholder returns through sales growth further margin expansion strong cash generation and continued debt paydown.
Speaker Change: Before I turn the call over I want to touch on our leadership succession plan, we announced this morning.
Speaker Change: We have reached a positive and important inflection point in executing our strategy.
Speaker Change: Looking ahead to the company's next growth phase as a board. We believe now is the right time to begin to search to identify the next leader who will build upon our transformation work and continue the company's momentum.
Speaker Change: We have a remarkable team at Hanesbrands and it's an honor to work alongside them over.
Speaker Change: Over the last five years the team has done an extraordinary job of streamlining and repositioning hanesbrands all while navigating a number of extremely challenging environments today.
Speaker Change: Today, we're a leaner healthier company with a much stronger foundation, we're more focused having successfully transformed our portfolio and how we operate around the world. We're more profitable, we're generating consistent cash flow and we strengthened our balance sheet.
Speaker Change: Proud of the actions we've taken with this organization has achieved together and how hanesbrands is positioned for the future.
Speaker Change: We're in a very fortunate position with a great window of opportunity for a smooth transition.
Speaker Change: I am fully engaged and focused on continuing to lead the team in delivering a strong 2025 and I look forward to working with the board as it conducts the search and with that I'll turn the call over to Scott.
Scott Stephens: Thanks, Steve on a personal note and behalf of Hanesbrands I want to express our appreciation for your leadership and all that we've accomplished over the past five years to transform the business and position the company for the future I look forward to continuing to work together to drive our strategy and to deliver a strong 2025.
Scott Stephens: Also let me add my thanks to the global Hanesbrands team.
Scott Stephens: Their continued dedication and commitment drove strong and improving operating and financial performance over the course of 2024.
Scott Stephens: With a simplified and strengthened business model, we believe we're well positioned to generate strong shareholder returns over the next several years through a combination of double digit earnings growth and debt reduction and in the longer term returning capital to shareholders.
Scott Stephens: Before I speak to the quarter's results a quick housekeeping item regarding champion Japan.
Scott Stephens: Recall, when we announced the champion sale, we still will be a license fee for the champion Japan business for a temporary period of time and eventually move the business to discontinued operations.
Scott Stephens: In the fourth quarter, we notified authentic brands of our plans to exit the champion Japan license by the end of 2025 ahead of schedule.
Scott Stephens: As a result, beginning with fourth quarters results. The champion Japan business has been reclassified to discontinued operations, which was not contemplated in our previous guidance, therefore fourth quarter and full year results as well as our 2025 guidance are not directly comparable to our prior guidance or the current consensus estimates.
Scott Stephens: We provided the earnings handout that bridges, our fourth quarter and full year results to our prior guidance.
Scott Stephens: We also provided a supplemental financial package that includes the recast historical financials. Both documents are posted on our Investor Relations website.
Scott Stephens: For today's call I will focus on continuing operations.
Scott Stephens: Overall, we delivered strong fourth quarter results that were above our outlook across all of our key metrics.
Scott Stephens: Net sales increased nearly 4% on organic constant currency basis.
Scott Stephens: Operating profit increased 33% over prior year.
Scott Stephens: <unk> increased 240% and leverage declined by nearly two turns on a net debt to adjusted EBITDA basis.
Scott Stephens: Turning to the details of the quarter net sales on a reported basis increased four 5% over prior year to $888 million.
Scott Stephens: The year over year growth reflects 175 basis point benefit from translation services revenue at 110 basis points headwind from foreign exchange rates.
Scott Stephens: Looking at our segments in the U S. Net sales increased 3% over last year ahead of our outlook.
Scott Stephens: The challenging environment, our strategy is working and we're winning in the marketplace innovation increased brand investments incremental holiday programming and performance in the online channel helped drive growth in the quarter, particularly within our socks women's and scrubbed businesses.
Scott Stephens: In our international segment net sales increased 6% over prior year on a constant currency basis with growth in each region.
Scott Stephens: With respect to our Australia business growth in the quarter was driven by better in stocks within our own retail effective assortment management and strong bonds innovation.
Scott Stephens: Touching briefly on our other segment the year over year increase in net sales was driven by short term transition service agreements related to the sale of our champion business.
Scott Stephens: We expect these agreements to wind down over the course of 2025 with.
Scott Stephens: We've excluded these sales from our organic constant currency growth calculation.
Scott Stephens: Turning to margins, we saw continued year over year expansion in both our gross and operating margins as cost savings initiatives are flowing through and we continue to see a year over year benefit from input costs as we anniversary the impact from the completion of <unk>.
Scott Stephens: Cost savings and assortment management initiatives, driving structurally higher and sustainable margins, while supporting increased brand investments.
Scott Stephens: For the quarter gross margin increased 400 basis points over prior year to 44, 1% and.
Scott Stephens: And our operating margin increased 300 basis points to 14, 2%.
Scott Stephens: With our visibility to input cost and our cost savings initiatives. We are confident we can deliver year over year expansion in both our gross and operating margins in 2025.
Scott Stephens: And with respect to earnings per share EPS increased 240% over last year to 17.
Scott Stephens: The growth was driven by the combination of higher profit margins and a $7 million reduction in interest expense as we continued to pay down debt.
Scott Stephens: Turning to cash flow and the balance sheet with better than expected profit performance lower cash interest and disciplined working capital management, we generated $264 million of cash flow from operations for the year, which exceeded our outlook.
Scott Stephens: We also further strengthened our balance sheet through the combination of the net proceeds from the champion sale and strong cash generation, we paid down over $1 billion of debt during the year.
Scott Stephens: Leverage at the end of 2024 was three four times on a net debt to adjusted EBITDA basis, which was nearly two turns lower than the end of 2023.
Scott Stephens: And now turning to guidance, while all of my comments will refer to adjusted results from continuing operations and will be based on the midpoint of our guidance ranges.
Scott Stephens: We believe we are well positioned to deliver positive sales growth on an organic constant currency basis, along with solid operating profit and EPS growth for the year. Despite a continued muted consumer environment.
Scott Stephens: We expect further improvement in both our gross and operating margins for the year given the input cost visibility, we have on the balance sheet and our cost savings initiatives.
Scott Stephens: Our outlook also assumes that we refinance all of our 2026 maturities in the first quarter of 2025.
Scott Stephens: With respect to the current situation regarding tariffs with China, and Mexico, and Canada, We do not expect a material impact on our cost.
Scott Stephens: Alex from China to the U S represents a low single digit percent of our U S cost of goods sold.
Scott Stephens: Therefore, the recent incremental tariff does not materially impact our input costs and is factored into our guidance.
Scott Stephens: With respect to Canada, and Mexico, we do not source our manufacturer any products for the U S from either of those countries.
Scott Stephens: Looking at our full year, we expect net sales of approximately $3 5 billion, which represents approximately 1% growth on an organic constant currency basis.
Scott Stephens: We expect operating profit to increase approximately 10% operating margin to expand approximately 125 basis points to 13, 1% and EPS to increase more than 30% over prior year.
Scott Stephens: And we expect to generate approximately $350 million of operating cash flow for the year.
Scott Stephens: Turning to the first quarter, our outlook assumes net sales increased 1% to approximately $750 million.
Scott Stephens: On an organic constant currency basis, we expect net sales to be consistent with prior year.
Scott Stephens: We expect operating profit to increase nearly 30% over prior year and operating margin to expand approximately 190 basis points.
Scott Stephens: And we expect EPS of approximately <unk> <unk> as compared to a loss of five set last year.
Speaker Change: So in closing I'd like to Echo Steve's comments, we delivered strong results for the quarter and the year as we are seeing the benefits of our transformation strategy.
Speaker Change: We come into 2025 is a new and better company well positioned to build upon our competitive advantages and drive increased shareholder returns through sales growth further margin expansion strong cash generation and continued commitment to pay down debt.
Speaker Change: And with that I'll turn the call over to T C.
T C: Thanks, Scott that concludes our prepared remarks, we will now begin taking your questions and we'll continue as time allows I'll turn the call back over to the operator to begin the question and answer session operator.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: Withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Paul Kearney with Barclays.
Paul Kearney: Good morning, Thanks for taking our question.
Paul Kearney: Can you talk about the degree of confidence in the company's ability to drive positive sales and 25 and what are some of the revenue opportunities behind US and also can you expand on the visibility and control until the drivers of future margin expansion. Both for this year and eventually to the 15% target. Thank you.
Paul Kearney: Sure. Thanks for the question.
Scott Stephens: I'll start with the revenue one Scott and then I'll, let you talk about the margin.
Scott Stephens: We're very confident in our ability to pivot to that 1% organic constant currency growth for the year.
Scott Stephens: That said, it's still challenging environment out there, but as I look at where we're positioned and the momentum we have coming out of Q4 at the innovation that we have brand investment that we have planned.
Scott Stephens: Space that we've already gained permanently with some of our key retail partners.
Scott Stephens: I think we have a lot of momentum.
Scott Stephens: I think the consumer is responding to our innovation.
Scott Stephens: And continues to choose the brand and you can see that through the market share gains that we've continued to get so.
Scott Stephens: We feel good about our core business. We're also starting to expand a little bit into what we're calling kind of new revenue streams, you've heard us talk about our scrubber business before I am encouraged about the work that's being done in our hanes apparel sector.
Scott Stephens: So thats, some fleece product sleepwear product <unk>.
Scott Stephens: <unk> business, we mentioned at 50 <unk> anniversary of the BCG Theres a lot of momentum behind this business with new innovation, that's coming and we feel good about the opportunities that to pivot to a full year of growth for this company.
Scott Stephens: Yes, good morning, Paul and thanks for your question. So margins. Let me first say, we're just really pleased with performance in 2024 on our overall operating margins. They were up 400 basis points in 'twenty. Four we finished the year with gross margin of over 44%. So the team did a fantastic job of delivering.
Scott Stephens: And it really shows the power of the business model that we're running through.
Scott Stephens: Look to 2025, we are looking for another step up in our operating margins our guidance at the midpoint has us up another 125 basis points in operating margins.
Scott Stephens: 20 to 30 basis points of that is coming from gross margins. So youre going to see incremental benefits from cost savings from SKU mix and we're now in that low 40% gross margin range that we talked about so we're really delivering well on gross margin.
As you look to the on the SG&A side was actually the bigger driver of the margin expansion for operating margin is going to be up about.
Scott Stephens: SG&A is going to be down about 100 basis points of delivering at a 100 basis points of margin uplift for the year.
Scott Stephens: There you're going to see the <unk>.
Scott Stephens: Annualized run rate effect of the prior year actions that we took and the incremental actions that we're taking in 2025.
Scott Stephens: These savings more than offset.
Scott Stephens: The incremental investments that we have with technology and all the people side and then just one 1.2 on for 2025 and we've talked about this before on the brand spend.
Scott Stephens: 24 already had us at a spend rate of 5% of sales. So we took that investment rate up in 2024, we felt like that 5% is a good run rate fully supports our brands the innovation pipeline to feel really good about that so we're not looking at an incremental.
Scott Stephens: Headwind from brand spend in 'twenty fives are going to see that truly hitting the operating margin and then to your last point.
Scott Stephens: But we saw in 2000 and for what we expect in 'twenty five we have a lot of confidence again, great visibility too to cost and the savings. We say 25 was another big step in our journey to 15% plus op margins.
Scott Stephens: We can get there over time, so we feel really good about that.
Scott Stephens: Great. Thank you.
Speaker Change: Our next question comes from <unk> Kulkarni with UBS.
Speaker Change: Great Hi, this vehicle Kearney on behalf of tasteful. Thanks for taking my question.
Speaker Change: So this is a question for you Steve.
Speaker Change: The announcement of your planned departure was a bit of a surprise to US could you just talk a little about your decision to step down and whether this was always part of your plan.
Speaker Change: And then I have a quick follow up.
Speaker Change: Sure. Thanks for the question.
Speaker Change: There's not a ton more to add versus what you said, but maybe I can give you a little more context.
Speaker Change: I think what's really important is that we feel that we're transparent about these plans and ensure stakeholders that were beginning this transition from a really strong position a position of strength.
Speaker Change: I'm coming up on my fifth year anniversary of joining this great company and as a board. We're looking out as we should be for what is the next five year phase of this business look like.
Speaker Change: We've reached a positive and important point in our strategy, we have a clear long range plan and this naturally brought up these discussions so as a board. We believe now is the right time to implement our succession plan.
Speaker Change: And we're in a fortunate position company as strong foundation more focused more profitable we're generating consistent cash flow again, we are well positioned for sustainable growth as I talked about a few minutes ago and we built a great leadership team. So it's really that simple there is no issues with the business strategy the board.
Speaker Change: And I are in lockstep over succession.
Speaker Change: And when you are looking at all these factors, we have a great window of opportunity for a smooth transition.
Speaker Change: I want everyone to know make no mistake I am fully engaged and will continue to help drive this team and the business to deliver strong growth and really great profitability in 2025, and obviously I'll work closely with the board and help identify my successor.
Speaker Change: Understood that's very clear thanks.
Speaker Change: And then just switching gears a little bit.
Speaker Change: Could you talk a little about where you guys are with eliminating the stranded costs associated with champion and how much runway you have left on that front.
Speaker Change: Thank you.
Speaker Change: Sorry, you broke up just at the very end we heard how.
Speaker Change: How far we are on eliminating stranded costs from champion, but the last part broke up if you could repeat it yes, just how much runway you have left.
Speaker Change: Yes, so on the stranded costs and one of the things I touched on this a little bit earlier.
Speaker Change: We are very focused on not just eliminating the champions stranded costs. We use we took the opportunity with the champion transaction are broadly to step back and really look at our overall cost structure and so we took a lot of cost out in 'twenty, four and we actually accelerated a lot of the actions into 2024. So you saw again that mark.
Speaker Change: <unk> increased last year is largely attributable to the actions that we took in the pace, we're working through that on as far as the stranded cost and other actions are going to essentially be complete with that this year and so youre going to see again, the big part of the margin expansion of 125 basis points is kind of getting those cost out and then as you go forward.
Speaker Change: <unk>, you're going to see the full run rate effect of that as you look beyond 2025, and Thats, how you get to that 15% plus margin overtime.
Speaker Change: Okay.
Paul Kearney: Our next question comes from Paul <unk> with Citi.
Paul Kearney: Hey, Thanks, guys.
Speaker Change: You could talk about the guidance for F 'twenty five and how it breaks down in terms of what you're looking for in the U S business versus international and.
Speaker Change: Within the U S. We can maybe talk about any changes in ordering patterns sell through patterns from some of your bigger mass accounts versus department stores, what channel, we expect to be the strongest to weakest in.
Speaker Change: In F 'twenty five.
Speaker Change: And then last just curious.
Speaker Change: On gross margin if you could talk about the cadence maybe on a quarterly basis throughout the year.
Speaker Change: We should think about it as consistent or is it going be stronger upfront weaker in the back or vice versa.
Speaker Change: Sure Let me start Scott I'll, let you handle the margin on a on a topline for guide.
Scott Stephens: As you said, we expect about 1% growth a year over year on a constant currency basis that works out.
Scott Stephens: Awfully in the U S segment to be essentially flat for the year International.
Scott Stephens: On a constant currency basis will be up low single digit and then in our other segment, we do have that for about $45 million, but thats not in that in that 1% growth.
Scott Stephens: Regarding.
Scott Stephens: The channels that you talked about no major shifts in ordering patterns that we've seen.
Scott Stephens: Going forward and don't necessarily anticipate them. Obviously, there is some disruption out there in some channels are doing better than others, right now and some customers doing better than others, but we're working really hard with all of them. They are all important to us and we expect to continue to drive growth.
Scott Stephens: And where were strong I think we're well positioned with the winners.
Scott Stephens: That will play out over time, but where you would expect to see strong growth over the years, we're well positioned there and continue to see that growth. There's also been a lot of change in leadership at many of our retail partners and we're working very closely with them as they build out new plans and look for new ways to improve their business.
Scott Stephens: Our retail relationships today are probably as good if not better than they've ever been so we're very close and continue to adapt to the needs out there for different retailers.
Scott Stephens: Question on the margin so for the full year like I mentioned earlier gross margin will be up around 20 to 30 basis points in the first quarter, we're expecting gross margin to be around 41, 3%, which is up about 125 basis points year over year now we're not guiding.
Scott Stephens: On the <unk>.
Scott Stephens: Each quarter within the year, but just a little more color.
Scott Stephens: You think about put your model together I think in the first half you should expect a little more margin increase year over year, you're going to have a couple of things play out within gross margin. The first part is input cost we are seeing.
Scott Stephens: Input costs are stabilizing.
Scott Stephens: Overall, but we're going to see some some tailwind benefit in the first half not so much in the back half of input cost and then also from a cost saving standpoint, like I mentioned earlier, we accelerated a lot of actions so you're seeing that benefit earlier.
Scott Stephens: See the year over year benefit slow down a little bit mostly in the back half but.
Scott Stephens: Those two factors as you think about the margin cadence.
Scott Stephens: Should think about from a gross margin standpoint.
Scott Stephens: I would say operating margin you should expect.
Our year over year margin.
Scott Stephens: Uplift to year over year increase in each quarter for operating margin again, a big driver that is going to be the SG&A cost reductions.
Scott Stephens: Got it thank you and good luck okay. Thank you.
Speaker Change: Our next question comes from Ike <unk> with Wells Fargo.
Ike: Hey, good morning, everybody.
Ike: I have two questions one ill piggyback off of policies on the gross margin.
Scott Stephens: I guess Scott is that just so up 20 up 125 in.
Scott Stephens: In Q1 of 20 to 30 for the year, So youre breaking it down in the back half is there.
Scott Stephens: Conservatism or is there something on the cost side that kind of flips the headwind that we should be thinking about just trying to dig into that a bit more.
Yes, good question so.
Scott Stephens: As you think about gross margins, probably a little bit of conservatism in our gross margin outlook. We've talked about this before we have really good visibility to our cost. So we kind of what to expect from input cost to cost savings during the year. So there's a little bit of conservatism, but I would say as you look out again all the actions.
We're taking really accelerated a lot of that margin improvement year over year, you saw a lot of that in 'twenty four more than we initially anticipated.
Scott Stephens: Then in this year in the first half, we're seeing that play out and it's going to stabilize a little bit more year over year as far as you look about the comparison of year over year margin profile.
Scott Stephens: And the other thing I would just I would just add is Q4 is a big comp with that $44. One which is we're really proud of that number I'm really glad we hit it but that's a big comps that kind of adjust your numbers as you go through the year.
Speaker Change: Got it fair enough, Okay, and then just a follow up.
Scott Stephens: I want to make sure I understand the cash flow build for the year. So I.
Scott Stephens: I guess my question is so when I look at it youre guiding $350 million in operating cash flow.
Scott Stephens: My rough math, if I just add.
Scott Stephens: Net income in the DNA im getting something closer to $2 50.
Scott Stephens: I kind of have to assume there's some working capital benefits happening happening. There can you just maybe Scott talk about what those might be and.
Speaker Change: Follow up to that is can comment in that number or are you baking in further benefits from the securitization of receivables that you were doing last year into this year and could you quantify that I'm just trying to make sure I understand.
Scott Stephens: Line items and moving pieces within cash flow for the year.
Speaker Change: Definitely a great question on the cash flow.
Speaker Change: Again, just like the margin until very good and very pleased with our results in 2024 coming in at $264 million and maybe the best way.
Speaker Change: To talk about this as a bridge you from what we saw in 'twenty four gruesome some puts and takes in there and bridge you're there to help frame it up better for you. So starting with the $2 64, which you're going to see is on the increases you're going to see profit growth. We are going to have operating profit growth I mentioned 125 basis points.
Speaker Change: Well over $40 million of profit year over year growth.
Speaker Change: Also factoring in is the lower cash interest.
Speaker Change: We have lower cash interest and 25 versus <unk> 24 around $60 million. So there is another piece to consider as you look at year over year.
Speaker Change: And then also in 2024, there was about net about $75 million of nonrecurring transactional deal cost like what the champion transaction allow these restructuring actions that were cash those are nonrecurring to that level and so those are not we'll be repeating at that level. So you factor all of that.
Speaker Change: And.
Speaker Change: You really get a lot more upside than what you are looking for.
Speaker Change: And the calculation that you did the other couple of things to think about and consider is we saw a lot of working capital benefit in 2020 for a lot of that was tied to the champion transaction as we were harvesting.
Speaker Change: Cash and working capital to drive.
Speaker Change: The benefit they are getting cash out of those transactions.
Speaker Change: We had about $150 million in total working capital benefit last year, a lot of that was attributable to the champion of harvesting of cash you'll see that level youre going to see a benefit in working capital inventory AR AP is all going to be contributing to a working capital benefit. This year just not to the same level that you saw in 2010.
Speaker Change: For any of other puts and takes in there to get you to the to the $3 50, but.
Speaker Change: Good good shape all of that from a receivables financing standpoint, you did take and do some incremental actions in the last couple of years, not really anticipating any incremental benefits from receivable financing. This year on top of what we saw in 2024.
Speaker Change: Got it very helpful. Thanks.
Speaker Change: Our next question comes from Jim Duffy with Stifel.
Speaker Change: Hi, This is Peter Mcgoldrick on for Jim. Thanks for taking my question I was curious as you build to the low single digit international revenue outlook.
Speaker Change: On constant currency basis can you talk to your expectations for volume pricing.
Speaker Change: And if you can classify the inventory positions. It sounds like there was some channel fill in Australia in the quarter.
Speaker Change: Does that all fit into your topline growth outlook.
Speaker Change: Sure.
Speaker Change: So let me talk about Australia for switches, obviously, the biggest part of that international segment.
Speaker Change: No no inventory fill in the channel so.
Speaker Change: It's all volume driving consumer pulp that has improved that part of the business.
Speaker Change: Australia is still challenging situation inflation sticky.
Speaker Change: And the GDP is still a little bit low there but.
Speaker Change: Really like the way that this be run and where it's headed.
Speaker Change: Our online business is doing extremely well there and has continued to perform the innovation that we've launched has been really good and one of the things I'm really proud of that team is they are not standing still they are finding solutions to operate in a really challenging environment driving again, new innovation consumer engagement and really making sure.
Speaker Change: Our assortment is aligned with consumer behavior. So an example of that was we found some gaps in the portfolio of.
Speaker Change: Lower end that we've launch date will be called bonds everyday value product, which is actually a lift in land from the U S. So back to that we're a global company moving innovation around the world that really address the price gap, we have in the market and that's doing extremely well so feel good about Australia, obviously, we saw growth in the <unk>.
Speaker Change: Quarter in Australia is about 4%, which we have not seen growth in a while there. So I'm encouraged about where that business can go.
Speaker Change: R R.
The rest of the Americas business.
Speaker Change: Is doing fairly well and we think we have opportunity to continue to grow that business, particularly our business in Mexico, so around the globe.
Speaker Change: International is we feel pretty good its normal business, it's grinding out business, but there is no. There is no inventory fill or anything like that that's driving that business going forward.
Speaker Change: Very helpful. And then I was curious about the opportunity youre seeing in the <unk> business with a new streamlined operating structure can you size print, where what it means to hanesbrands.
Speaker Change: Gus your current competitive position and how that fits into your 2025 growth outlook.
Speaker Change: Yes.
Speaker Change: We don't share the exact breakdown of that business, it's not a tremendously large part of our business, but I think it can be highly incremental part of our business and it's a business that we honestly haven't focused on it that much.
Speaker Change: <unk> recently, but we are pivoting hard we've got a new leadership team in place.
Speaker Change: And they are working extremely hard with our partners and our business Hanesbrands bvt, 15th anniversary as being extremely well received in the market.
Speaker Change: One of our many growth opportunities that we have for next year, we've got a lot of growth drivers and that's one of them and I think we'll talk more about it as we go forward.
William Reuter: Our next question comes from William Reuter with Bank of America.
William Reuter: Hi, I have just one in terms of your sales into Mexico as well as Canada in the event that there were a retaliatory.
William Reuter: Tariffs put in place what would be the impact potentially there.
William Reuter: Yes.
William Reuter: The short answer is zero.
William Reuter: Because we don't move product that way.
William Reuter: So obviously there is speculate on.
William Reuter: Other scenarios, but there is no impact on product on tariffs between.
William Reuter: Our countries, Mexico and Canada.
Speaker Change: Okay. So just to be clear you don't sell products into the mix.
William Reuter: And their customers retail customers.
William Reuter: I guess they would be your wholesale sales.
William Reuter: And to Canada and Mexico.
William Reuter: Not from the U S.
William Reuter: Got it Okay alright, that's all from me. Thank you. Thank you.
Carla Casella: Our next question comes from Carla Casella with JP Morgan.
Hi.
Carla Casella: Given you guys have such a great touch with retail wholesale channels can you talk about what are you seeing a consumer kind of shifts between channels or different consumer.
Carla Casella: Trends within the markets.
Speaker Change: Sure. Thanks Carla.
Speaker Change: It is really good we have our great relationships with whole bunch of different customers across the different channels and.
Speaker Change: <unk> seen which channels seem to be over performing at a macro level right now.
Speaker Change: Our business performed relatively consistently with those channels. So I don't want to get into specifics of our performance channel by channel, but you should expect that our business follows the macro channel trends.
Speaker Change: Relatively closely.
Speaker Change: Okay.
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.
Speaker Change: I'd like to thank everyone for attending our call today, and we look forward to speaking with you soon have a great day.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.