An activist investor wants sweeping changes at Hanesbrands, outlining a list of demands just two days before the North Carolina Champion owner is scheduled to report second-quarter earnings.
In a letter to Hanesbrands chairman Ronald Nelson, Barington Capital suggested that Stephen Bratspies, the basics maker’s CEO since 2020, is unfit to lead the apparel giant through what it describes as a significant overhaul, citing the “company’s largely ineffective response to recent market challenges, poor operating performance, and excessive debt burden.”
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“Barington believes the Company may need to retain a new Chief Executive Officer and add directors with the relevant skills and industry experience required to implement its plan to create long-term shareholder value,” it wrote of Bratspies, who previously spent five years as Walmart’s chief merchandising officer.
Hanesbrands recently named Scott Lewis as its new CFO after the chief accounting officer, who will also continue in that role, served in an interim capacity.
Barington also wants HanesBrands to cut the $1.97 billion in inventory it held at the end of the end of the first quarter in May, which was 8 percent higher than 2022’s comparable quarter. The company should end the year with 170 days of stock and get down to 150 days within 18 months, “by closely monitoring stock levels, production, and purchases,” it added.
Barington chairman James Mitarotonda, in a statement, issued the usual activist investor salvos at Hanesbrands, alleging that “poor execution” has “destroyed shareholder value.”
“We invested in Hanesbrands because we believe in its recognized portfolio of value brands, strong distribution capabilities, and unique vertically integrated operating model,” he said, adding that lackluster management has put the clothing giant in a “precarious position.”
The value of the New York hedge fund’s Hanesbrands holdings couldn’t immediately be determined.
Though Hanesbrands’ first-quarter SG&A expenses fell 5 percent year-on-year to $397 million, Barington wants a full-year- reduction of $300 million, “in line with more reasonable, market-based expectations for growth.” It wants the company to use those savings to pay down the roughly $3.6 billion in debt it reported at the end of the first quarter.
Hanesbrands responded with a statement saying company leadership is committed to driving “sustainable value creation for shareholders” and noted recent engagement with Barington prior to the investor’s public attack on Tuesday. “We are also, however, open-minded with regard to additional paths to improve performance and create value,” it said.
The company said it believes the Full Potential plan it announced two years ago “will unlock significant opportunities.”
It countered Barington’s call for executive and board changes by pointing to the three independent directors named in the past four years, saying it prioritizes the “right mix of expertise and diversity.” Hanesbrands also reiterated management’s experience in apparel production, supply chain execution, physical and digital retail and branding.
“We will continue to act in the best interests of the Company and all HanesBrands shareholders,” it said.
Barington’s campaign comes just days after Hanesbrands announced the planned September closure of its lone remaining cut-and-sew facility in the United States. An estimated 230 employees stand to lose their jobs when the Clarksville plant in Arkansas shuts down by the end of next month as part of Hanesbrands’ decision to sell of its domestic sheer hosiery business.
Hanesbrands shares were trading around $5.33 by mid-day Tuesday. They’ve reached as high as $11.77 in the past 52 weeks. A UBS Evidence Lab research note dated July 24 reiterated a $5 per-share value target for Hanesbrands, citing a 38 percent falloff in “struggling” Champion’s digital traffic.
