HanesBrands Inc successfully increased its profitability in Q3, FY25 despite facing a slight drop in sales. While the company’s net sales declined by 1 per cent Y-o-Y to $892 million, it achieved a significant rise in its bottom line due to cost control. HanesBrands’ profit surged by 14 per cent to $108 million during the quater, which allowed the operating margin to expand by 160 basis points (bps) to reach 12.1 per cent.

The company’s adjusted operating profit grew by 3 per cent to $116 million, with the Adjusted Operating Margin improving by 45 bps to 13.0 per cent. The reported Earnings Per Share (EPS) showed a massive 986 per cent surge to $0.76, though this substantial growth was primarily aided by a discrete tax benefit. The more representative Adjusted EPS still saw a strong 25 per cent rise to $0.15.

The 14 per cent rise in operating profit and the expansion of the operating margin were largely driven by lower Selling, General, and Administrative (SG&A) expenses and the successful execution of cost-saving and productivity initiatives.

The 1 per cent decline in net sales was attributed to an ‘unanticipated late quarter shift in replenishment orders’ at one of its major US retail partners.

Despite the ordering issue, management noted that underlying business fundamentals were improving, with unit point-of-sale (POS) trends sequentially improving each month during the quarter.

The company’s net sales from the US dropped by 4.5 per cent, but the US segment's operating margin still improved by 20 basis points (bps) to 22.2 per cent, benefiting from cost-saving initiatives and market share gains for the Hanes brand during the back-to-school season.

The company’s international net sales fell by 8 per cent with sales improving in Japan but declining in the Americas and Australia. The international operating margin dropped 230 bps to 10.2 per cent.

The company continued to strengthen its balance sheet, with its leverage ratio decreasing to 3.3 times net debt-to-adjusted EBITDA, compared to 4.3 times a year ago.

The substantial 986 per cent rise in GAAP EPS was heavily influenced by a $0.64 per share discrete tax benefit related to a valuation allowance release. The more indicative Adjusted EPS rose 25 per cent due to the improved operational performance and lower interest expenses.

The company noted that it remains focused on the successful completion of the previously announced merger transaction with Gildan Activewear.