Hanesbrands Inc. (HBI)
Q4 2008 Earnings Call
January 27, 2009 4:30 pm ET
Richard Noll – Chairman, CEO
Lee Wyatt – Chief Financial Officer
Omar Saad – Credit Suisse
Eric Tracy – BB&T Capital Markets
[Todd Hargreiter – Goldman Sachs]
Scott Krasik – C.L. King & Associates
Reed Kim – Bank of America
[Jody Kane – Sidoti & Co.]
[Kevin Thebes – Poly]
Previous Statements by HBI
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Good afternoon everyone and welcome to the Hanesbrands quarterly investor conference call and web cast. We are pleased to be here today to provide and update on our progress as of the fourth and final quarter of 2008. Hopefully everyone has had a chance to review the news release we issued earlier today. The news release and the audio replay of the webcast of this call can be found on the investor section of our Hanesbrands.com web site.
I want to remind everyone that we may make forward-looking statements on the call today either in our prepared remarks or in the associated question and answer session. These statements are based on current expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially. These risks are detailed in our various filings with the SEC such as the most recent Forms 10-K and 10-Q as well as our news releases and other communications. The company does not undertake to update or revise any forward-looking statements which speak only to the time at which they are made.
With me on the call today are Rich Noll, our Chairman and Chief Executive and Lee Wyatt, our Chief Financial Officer. Rich will give a summary of our business performance and trends for the fourth quarter and full year. Lee with then provide further detail on the various aspects of our financial performance.
Following our prepared remarks, we've allowed ample time to address any questions that you may have. Before I turn the call over to Rich, I want to take a moment to invite you to our Second Annual Investor Day on Tuesday, February 24 in New York. We will again have our extended management team update you on our achievements and opportunities as well as provide more information to help you model our business for 2009 and beyond.
As a reminder, registration is required for all attendees so make certain to our offices as soon as possible to ensure your participation. If you haven't received our invitation, please contact me and I will ensure that you do. Now, I will turn the call over to Rich.
Thank all of you for joining us today. Given the current consumer environment, and although sales declines were much more than anticipated in the quarter, I am pleased with many of our accomplishments this year. We made significant progress in our strategic initiatives.
In terms of our brands, we invested in media at the second highest level in the company's history. We gained share in our key inner wear segment. For the first year in a row, Hanes has been voted the number one brand in both Women's Wear Daily and Retailing Today.
In terms of our spend less strategy, in just 12 months our offshore textile capacity increased from roughly 50% to 75% and will be 100% offshore next month. We opened two sewing facilities in Viet Nam and one in Thailand and nearly tripled our number of Asian employees to 5,500.
We opened a brand new 1.3 million square foot west coast distribution to support our Asia strategy. And even with these openings, we reduced our supply chain footprint by 14 facilities. As a result of these accomplishments, we were able to generate over $75 million in cost savings and enabled us to mitigate the sudden spike in commodity costs.
For our generate cash strategy, we paid down $139 million of debt in 2008 and over $400 million since the spin off, and we have successfully managed our debt structure to minimize interest expense.
We accomplished much in a year in which we faced the worst economic crisis in decades and a broad based collapse in the consumer retail sales environment. Our organization has performed superbly which confronted with new macro challenges and our people continue to demonstrate tremendous professionalism and commitment. It is why we will come through these difficult and uncertain times as an even stronger competitor.
Turning to financial results, in the fourth quarter, we saw a massive shift in consumer spending behavior. This shift led to unprecedented declines in our categories and we are clearly not immune to the impact. Total sales declined 11% in the fourth quarter and 5% for the full year.
Our declines were in the same range as challenging retailer comp performance and soft traffic trends. Our sales trends progressively worsened through the quarter. Retail sell through went down from a few percent in October to down double digits in November and December. Broadly, all of our major retailer partners experienced negative comp store sales for total apparel including our categories.
Sales for the full year were particular soft in women's intimate apparel. Intimate apparel accounted for roughly half our total sales decline and two-thirds of our inner wear sales decline for the year. While intimate apparel market share has increased, the category weakness was simply too large to overcome.