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Good day, and thank you for standing by. Welcome to the Hanesbrands' First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] 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.

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 first quarter of 2025. Hopefully, everyone has had a chance to review the news release we issued earlier today. The new release, updated FAQ document, and a 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 deleverage on the anticipated timeframe, and the inflationary environment. These risks also include those detailed in our various filings with the SEC, which may be found on our website. These forward-looking statements should be considered in conjunction with the cautionary statements in our news release, and in our filings with the SEC. 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. 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. 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. Good morning, everyone, and welcome to our first quarter earnings call. Today I would like to focus on two key two points related to the transformational work we've completed, and the long-term growth strategy we are executing. The first is that our strategy is working, and continues to drive strong results. And second, we believe our strategy enables us to successfully manage through the current tariffs environment, which presents challenges, but also creates real opportunities. From a margin standpoint, we believe we will fully mitigate the tariff headwinds as we have many levers to pull, including further cost reductions and pricing actions. Our mitigation initiatives are consistent with that, and build upon to work we are already doing within our growth strategy. And from an opportunity standpoint, we are already seeing tariff-related disruptions creating incremental revenue opportunities in the market. With our Western Hemisphere supply chain speed and capability matched with our strong retailer relationships, we believe we're in an advantaged position to capture new revenue and gain additional market share. Beginning with my first point, and thanks to the hard work of the global HBI team, our growth strategy is working. We're seeing it in our results as we delivered another strong quarter, including better-than-expected sales, gross margin, operating profit, and earnings per share. Over the past few earnings calls, we've spoken about the successful transformation work we've done to simplify and reposition Hanesbrands. We strengthen our brands, we streamline our supply chain assets, while remaining diversified and balanced across the globe with capacity for growth. We built disciplined operating capabilities, including category-best consumer-led innovation, assortment management, and advanced analytics to drive growth. We removed fixed costs, and we strengthened our balance sheet by paying down over $1 billion of debt last year, and refinancing our 2026 maturities in March. Today, we're a new company. We're healthier, leaner, and more profitable. We're operating on a stronger foundation, and we're leveraging our competitive advantages to drive revenue growth, margin expansion, and strong cash flow. The benefits from our transformation plan and the reduction of debt are evident in our first quarter results. We drove accelerating growth rates down the P&L, as sales increased 2%, operating profit increased 61%, and EPS increased 240% over prior years. On an organic constant currency basis, international sales increased 4%, which was ahead of our outlook, driven by growth in Australia and Asia. In the U.S., sales decreased 1%, which was in line with our expectation. Ongoing consumer headwinds continue to pressure the U.S. innerwear market, in particular, the intimate apparel category, which typically experiences the greatest pressure in tough macroeconomic environments. While our intimates business was down mid-teen, as compared to last year, we generated solid growth in our other businesses, including low single-digit growth in basics, mid-single-digit growth in active, and 60% growth in new businesses, which includes our scrubs and loungewear products, among others. We also delivered strong profit growth. Our assortment management initiatives and cost restructuring actions helped drive 390 basis points of operating margin expansion over prior years. Approximately 60% of the margin improvement came from lower SG&A expenses, and 40% from further expansion of our gross margin. Of particular note, SG&A levered 225 basis points over prior years, even with the incremental 50 basis points of brand investment in the quarter, as our cost reduction actions have scaled to the point where they're more than offsetting our investments. And with over $1 billion of debt reduction last year, we had lower interest expense in the quarter, which further accelerated our profit growth and helped drive a 240% decrease in EPS. As I pivot to my second point on how our strategy enables us to successfully manage through the current tariff environment, I'd like to take a moment to help ground everyone on the mix of our business and our supply chain network. The U.S. accounts for roughly 75% of our sales and cost of goods. The remaining roughly 25% are in international markets. Therefore, 25% of our P&L is not directly impacted by the U.S. tariffs. With respect to sales in the U.S., roughly two-thirds are basic products, namely underwear and socks. Looking closer at our U.S. cost of goods, approximately 85% is from our own manufacturing facilities, which gives us greater speed and ability to shift units within our supply chain. Of this, we are essentially split evenly between our Western Hemisphere network, which includes the Dominican Republic, El Salvador, and Honduras, and our Eastern Hemisphere network, which includes Vietnam and Thailand. The remaining 15% of our U.S. cost of goods is sourced from a number of different countries across various regions. With respect to China, we no longer source any U.S. products from there. China historically was a low single-digit percent of U.S. cost of goods. Today, it is zero. As I mentioned, the current tariff environment creates both challenges and real opportunities. Over the past several years, you've seen us be proactive and have a number of levers we can pull. We're confident in our ability to successfully manage through this environment. Our confidence comes from two factors. First, we have a proven track record of managing through market disruptions and coming out the other side a stronger company. And second, the initiatives we're taking to mitigate costs and capture incremental revenue are aligned with and build upon the work we're already doing within our growth strategy. And as we've seen over the past several quarters, our growth strategy is delivering results, including our strong start to the year. Looking at the cost impact of tariffs, we believe we can fully mitigate these headwinds, both in the short and long-term. For starters, announced tariffs are not expected to impact us until Q4. And we have U.S. yarn and U.S. cotton content in our products, which are not subject to reciprocal tariffs. In other words, we have natural tariff offset embedded in our products as the U.S. content within our imported products is exempt from reciprocal tariffs. We have a number of levers we can pull to mitigate the cost impact, and we expect to use a combination of initiatives. Our current cost reduction actions are delivering savings faster than expected, and will continue to accelerate these actions. We're further tightening our spending, as well as taking actions to preserve cash flow. We're taking strategic and searchable pricing actions supported by the strength of our brands and market-leading innovation. We're driving additional cost savings through vendor consolidation and price negotiations. And with our diversified supply chain, we also have the ability to shift production and further optimize the network. Turning to the revenue opportunity, we believe we are well-positioned to navigate the current demand environment. We have visibility to incremental revenue opportunities that have been created from tariff-related disruptions in the market. With our Western Hemisphere supply chain speed and capability, matched with our strong retailer relationships, we believe we're in an advantaged position to capture this revenue and gain additional market share. In fact, we've already received a number of inbound inquiries from retailers across multiple channels that range from innerwear to activewear programs to replace products sourced from China. We're also advantaged to drive additional revenue growth through our transformation work, which has simplified the business and positioned us in more stable basis products, as well as our growth strategy. It's working, and we're leaning in. Brand investment and innovation have been contributing to growth and will continue to make these investments. We're driving new businesses, which increased 60% over prior year in the first quarter. And we expect growth to continue this year, driven by new product launches, meeting incremental consumer needs, and space expansions. And we're leveraging our assortment management capabilities and advanced analytics, which make us more nimble and able to quickly pivot to capture demand, whether it shifts channels, products, or pack sizes. We're closely monitoring all of our retail programming, staying close to the consumer, and making sure our portfolio matches the demand in line. So, in closing, we are confident that our transformation work and our growth strategy positions us for success, both in the near and long-term. We're delivering strong financial results, as evidenced by our most recent quarter. We have a strong asset base, meaningful competitive advantages, and the speed and flexibility to manage through the current market environment. And finally, we have multiple avenues to drive increased shareholder returns over the next several years, through consistent sales growth, further margin expansion, and continued debt reduction. And with that, I'll turn the call over to Scott.

Thanks, Steve. We delivered another strong quarter, including better than expected sales, gross margin, operating profit, and earnings per share. It's great to see the benefits of our growth strategy, as well as our transformation work reflected in our results. Our strong performance is a testament to all the hard work from the team over the last several years. While this year is bringing a new set of challenges, I believe we are a stronger, more resilient company today, and we are very well-positioned to succeed in any operating environment. For today's call, I'll touch on the highlights from the quarter, and then I'll provide some thoughts on our outlook. For additional details, I'll point you to our news release and FAQ document. Turning to the details of the quarter, sales on a reported basis increased 2% over prior year to $760 million. Adjusting for the impact from foreign exchange rates and transit and services revenue, sales on an organic cost of currency basis were consistent with prior year. We saw continued year-over-year expansion in both our gross and operating margins, as our cost savings and assortment management initiatives are driving structurally higher and sustainable margins, while funding increased brand investment. For the quarter, gross margin increased 165 basis points over prior year to 41.6%. SG&A expenses decreased 5% compared to prior year, or 225 basis points as a percent of sales. Combination of these drove a 390 basis points expansion of our operating margin to 10.7% for the quarter. In respect to earnings per share, EPS increased 240% over the last year to $0.07, driven primarily by higher margins, as well as lower interest expense, as we benefited from our meaningful debt reduction efforts over the past year. With respect to cash flow and the balance sheet, we reported a use of $108 million of cash flow from operations in the quarter, as we saw the normal seasonal inventory bill ahead of our planned back-to-school programs with key retailers. Leverage at the end of the first quarter was 3.6 times on the net debt to adjusted EBITDA basis, which was 1.4 times lower than prior year. In March, we refinanced all of our 2026 maturities, resulting in a greater mix of prepayable debt. This increased flexibility in our debt structure allows us to continue to meaningfully deleverage our balance sheet going forward. Now turning to guidance, outlook for the second quarter includes a continued margin expansion and operating profit growth, and even faster EPS growth. For the second quarter, we expect sales of approximately $970 million, operating profit of approximately $136 million, and EPS of approximately $0.18. We also reiterated our four-year outlook, which now reflects the impact of tariffs as of what we know today. Putting some context on the assumptions within our four-year outlook, from a sales standpoint, we recall what we initially set our outlook in February. We took a more conservative view of the consumer environment relative to the market's consensus view at the time. Post-transformation, the mix of our business has its better position in the current environment. 25% of our sales are from international markets, which continue to perform well and are outside of the U.S. tariff challenges. And within the U.S., roughly two-thirds of our sales are from basic innerwear products, which historically outperform other apparel categories during tough macroeconomic periods. And as Steve mentioned, we are pursuing and evaluating incremental revenue opportunities from a number of our retail partners who are looking to address expected supply gaps as well as reduce exposure to high tariff countries. From a profit perspective, we continue to have good visibility to input cost and cost savings, essentially through the remainder of the year. Our outlook now reflects what we know about tariffs today and our expectations for the impact on our business, including an adjustment to the U.S. content within our products that is exempt from reciprocal tariffs. And with roughly two-quarters of inventory on hand, the cost headwind from tariffs will not impact us until the fourth quarter this year, which is expected to give us plenty of time to enact our mitigation initiative as well as monitor the progress of negotiation. Factoring in everything we know today, which certainly could change, we believe we are well-positioned to manage through the current tariff environment. We're confident we can fully mitigate the cost and cash flow headwind, both in the short and long-term. And with our transformed business, the momentum in our growth strategy, and the incremental revenue opportunities due to our Western Hemisphere capabilities, we believe we have the tools and the agility to successfully navigate the current demand environment. So, in closing, we feel really good about our competitive position and believe we are very well-positioned to succeed in any operating environment. We're a healthier, leaner, and more profitable company. We're operating on a stronger foundation, and we're leveraging our competitive advantages to drive revenue growth, margin expansion, strong cash flow over the next several years. With that, I'll turn the call over to T.C.

Thanks, Scott. 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?

[Operator Instructions] Our first question comes from Jay Soul with UBS.

Great. Thank you so much. Steve, two questions for you, and then, Scott, one for you. First, just on tariffs and your ability to mitigate the impact, you gave a lot of great color, but just tell us a little bit more about what your effective tariff rate is, given that some of the product does come from the U.S. It's not impacted by the reciprocal tariffs. If you can talk about that, that would be helpful. And also, these revenue opportunities you mentioned, can you just maybe give us a little bit more color on where they're coming from? Are we talking about making private label for companies, or are we talking about more opportunity for the Hanesbrands and other brands in the portfolio? And then, Scott, just because the company earned $0.07 in Q1, and I think the guidance was for $0.02, can you just maybe elaborate on where the upside was in the quarter? What was better than you expected? Thanks so much.

Thanks, Jay. Good morning. Yes, let me start with we believe that we can fully mitigate the tariff headwinds, both in the short and the long-term, and we think that'll start from day one. Some context on it, for starters, and you mentioned this tariffs aren't expected to hit us until Q4. So, we've got two quarters of inventory on hand that allows us to kind of manage through in the short-term. And we do have meaningful U.S. content in our products. And this is exempt from reciprocal tariffs. We're primarily a basics company and there's a lot of cotton in that product. So, we have some natural nets to the overall tariff impact. Our mitigation plans also assume a higher tariff rate. So, as we have planned and done our internal work, we are planning for a higher number than is out there right now to give us some cushion, if the numbers stay where they are, which gives me a lot of confidence in our ability to offset. We also have a great balance of East-West manufacturing in our supply chain and zero exposure to China now. So, that gives us a lot of capability to maneuver in this difficult environment. So, we're being very proactive. There's a lot of different levers we can pull, including both cost and pricing actions. And some of those cost actions are things we've already been doing that we're accelerating. Some of them are new. We are tightening spending to think about preserving cash. And we've got additional cost savings initiatives through further vendor consolidation and price negotiations. And on top of that, we are thinking about strategic and surgical pricing actions. And we know with the strength of our brands, the market share leadership that we have, we're confident in our ability to take that action over time. And I would tell you, this will be a fluid situation. We have the ability to shift production and optimize our network further. So, we have a plan. It'll be fluid and we'll stay kind of on our front foot as we go through this. Underlying a lot of this, or along with this, is the tariff, we'll call it revenue opportunities that we've been talking about. And we feel that we're really well positioned to capture them. If you remember, we started the year with a relatively conservative position on the top line, and these are additive to that. And they are driven by our Western Hemisphere supply chain, the speed and the capability that we have. So, we've got a lot of inbound already from a number of our retail partners that we have great relationships with, and they're looking to replace products that they are concerned about. It's not private label, to answer your question directly. So, we're looking at expanding our brands and the ability to do that. You put all this together and that with this revenue opportunities, the cost position, our position on tariffs, we are able to, with confidence, confirm our guide for the full-year.

Hey, good morning, Jay, and thanks for your question. We're very pleased with our first quarter performance. And it really, the upside came in several areas. One is sales came in better than expected. The teams did a really good job of delivering, delivering on the core sales standpoint across the board, U.S. and international. And then, if you move down to cost of sale and gross profit, we're seeing cost savings bill. We're seeing the assortment management mix really coming through. And it's really interesting as you see the combination of those two as they build and build. We are looking to overall for the full-year, our gross margin is going to be up. And as you move forward, SG&A is going to be a bigger part of our operating margin increase. SG&A, cost savings are flowing through. We're at a pace now where our investments are at a good level. And now you're seeing those cost savings flow through the P&L. We're leveraging SG&A as you move on. So, across the board, across all those areas.

Got it. Thank you so much.

Our next question comes from Paul Kearney with Barclays.

Hey, good morning. Nice results. Thanks for taking my question. Can you talk a bit more about what you're seeing in the market and the conversations with retailers and how they're managing their inventory? Additionally, what are you seeing competitors do in terms of pricing today? And then just a clarifying question on the last one, where retailer partners are looking to backfill inventory that maybe was coming from China, they're looking to backfill potentially private label with Hainesbrands. Is that the correct interpretation? Thank you.

Yes. So, let me take the last one first. No, we're not in private label discussions with retailers. We're a branded company and we're going to continue to build that. Sometimes, they're looking to backfill other brands, they're looking to fill any short-term or long-term gaps than they expect. But to be clear, we're not getting into the private label business and that is not a focus of what we're doing. Clearly, there'll be some space moves around and we expect to gain some incremental space while this goes on. We've got a great back half plan on space to begin with just in our core business, but we think this will be some incremental growth in space for us as we go forward. In terms of discussions with retailers, they're very positive right now. We've got very deep long-term relationships with all the major retailers and they know based on past disruptions in the market that they can come to us and we can deliver very quickly opportunities for them. And that's kind of what's happening right now. There's a discussion with a number of retailers, some we do business with today and some we're not doing business with today that are approaching us to see what we can do for them in the near-term to drive business and fill gaps that they're anticipating. Everyone's managing inventory relatively tightly as you can imagine. We don't see any disruptions in inventory in the market. The business is progressing pretty well in those as far as inventory is concerned. I think the third question was around pricing and what are we seeing in the market right now. We monitor the market incredibly closely, watch exactly what's going on and know what everyone's doing. I don't think you're going to see or we haven't seen a lot of significant price moves yet in the market, but we're watching it very closely. More importantly, we are building our plan for what we're going to do. We have some strategic pricing. It's a very surgical pricing. It may differ by brand. It may differ by category. It may differ by geography, but we're very confident in our ability to take price as necessary as a part of our broader plan to offset the tariff situation and that should put us in position to have a real strong year building on the first quarter.

Our next question comes from David Swartz with Morningstar. Hi.

Hi, thanks for taking my question. So, you mentioned some weakness in the women's business in the quarter. I was wondering if you expect that to persist and whether you think that's due to market conditions solely or is it also market share loss a factor? And also, in the past, when you've had weakness in that category due to economic issues, how quickly you've seen it bounce back? Thanks.

Sure. Good morning, David. First of all, I'd say we talked about weakness in the intimate apparel business, not necessarily women's business. Our women's business across Haines is doing quite well and we're confident and feel good about that business. But in intimate, so I'd tell you is, it is the most challenged category in the Innerwear business, which is typical in difficult economic environment. It tends to be the category that suffers the most and tends to be the one that moves first. It's also the most exposed to the mid-tier department store channel, which is the most challenged channel right now. On top of that, though, I would tell you is I'm not happy with where we are in intimates right now. We have work to do to continue to improve that business, and it's different parts of our business. So, for example, our Bali and Playtex businesses are actually doing quite well and we're seeing growth in those businesses. I like how they're positioned in the mass channel and Amazon. Those parts of the business are doing quite well. We continue to expect those to outperform over time with the innovation that we're bringing the investments that we're putting behind the brand. The biggest challenge we have right now is our Maidenform business. We have an opportunity to improve and broaden our approach there. We launched M last year and it worked well in terms of gaining share with younger consumers and improving brand perception. But it really wasn't focused on a large enough portion of the category. So, we're pivoting this year. You're going to see us focus on T-shirt bras in the Maidenform business, which is the biggest part of the category and continue to focus that in mass and online. And I think we'll be able to see that business turnaround. But all of that said, I think the intimates business will have the longest headwind in the current economy than the more basics business, which has been growing quite well for us and we had a good first quarter across basics up low single digits and the active business up mid single-digits and the active business up mid single digits. So, we’re working to offset the weakness in intimates.

That’s helpful. Thanks a lot. Our next question comes from Ike Boruchow with Wells Fargo.

Hey, good morning, everyone. Two questions for me. Sorry, Steve, I jumped on a little late. I understand on the tariff side, you’re in pretty -- you’re in pretty good shape based on the nuances of your business. Is it to the extent where you would say the unmitigated tariff impact on your business is zero? Is it a little bit above that? I’m curious how granular you’d be comfortable getting on that. And then, based on anything that you’ve kind of encountered the last couple of months, obviously pretty volatile environment, any change to the low 40s kind of gross margin outlook you have for the business go forward? Any near-term volatility to that? Just curious how you’d frame that. Thank you.

Sure. Good morning, Ike. In terms of the impact, I mean, we will mitigate all of it. So, that’ll be zero. If you think about the tariff rates that are out there right now as they exist, we know we can mitigate that. And, we are planning for more than that to be able to offset it to build -- we always plan for a rainy day and build cushion into how we’re approaching it. So, we feel good about our ability to mitigate that and have lots of levers to pull. Regarding the gross margin in low-40s, the short answer is no, no change in our outlook for that. We have -- continued to have offsets. I’ve been very pleased with our performance in the gross margin, and our -- way we built back both past the inflation and now going beyond that. And we continue to see really strong performance quarter over quarter. And, we will see that for the full-year. So, no issues there at all.

Cool. Thank you.

Our next question comes from Paul Lejuez with Citi.

Hey, everyone. This is Brandon Cheatham for Paul. I was hoping we could double click into the potential benefit from these incremental programs that you’re receiving inbounds on. What is your capacity currently? And, I was hoping that you could break that out versus your Eastern capacity and your Western capacity, just if we could try and like size the potential opportunity there. And the inbounds you’ve received, are they mostly interested in your Western manufacturing capacity? Or, is it kind of your whole network?

Sure. Good morning, Brandon. So, let me see if I can try to break some of this out for you. In terms of the interest that’s coming in, they’re interested in ability to supply product in an effective, cost-efficient way. And then, rely on us to figure out where to make that, how to make that for them, depending upon timeline. So, certainly the Western hemisphere creates a lot of interest. And, often I would probably argue calls come first because of that. But we have the capability to move it around the globe to - we’ll make it where it’s best to make it and where that is the most efficient from a cost perspective and from a time perspective. So, flexibility there. In terms of capacity, we’ve done a lot of work on our supply chain over the last couple of years in terms to streamline it, to make it more effective, more efficient. Obviously, the sale of Champion was a big lever in that. We closed some facilities, closed some distribution centers to make us optimize from a cost perspective. That said we have capacity for growth. And as we went through all of that supply chain work, that was one of our priorities is to make sure that we have both short-term and long-term growth ability. So, we have surge capacity in our network today. And then, we have long-term capability at the same time. So, I’m not worried about running out of capacity as we go after these new revenue opportunities.

That concludes today’s question-and answer-session. I’d like to turn the call back to T.C. Robillard for closing remarks.

We’d like to thank everyone for attending our call today. And, we look forward to speaking with you soon. Have a great day.