Good day, and thank you for standing by. Welcome to the Second Quarter 2022 Hanesbrands Earnings Conference Call. At this time, all participants are in 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 your speaker today, TC. Robillard, VP of Investor Relations. Please go ahead..

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 second quarter of 2022. Hopefully, everyone has had a chance to review the news release we issued earlier today.

The news release, updated FAQ document and the replay of this call can be found in the Investors 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 the impact of the COVID-19 pandemic and measures taken by governmental or regulatory authorities to combat the pandemic as well as current macroeconomic conditions, consumer demand, the inflationary environment and cybersecurity, including risks regarding the ransomware attack announced May 31.

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.

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, 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 Michael Dastugue, our Chief Financial Officer. For today's call, Steve and Michael 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, TC. Good morning, everyone, and welcome. Despite Q2 being a disappointing quarter, I want to thank our committed Hanesbrands associates around the world for everything they're achieving in this difficult operating environment. We continue to work toward and make progress against transforming Hanesbrands to a consumer-centric growth company.

For today's call, I'd like to touch briefly on the quarter, including the unexpected cyber event and external factors that negatively impacted our performance. Next, I'll discuss our outlook for the rest of the year before providing an update on our full potential growth strategy. Then I'll turn the call over to Michael, to provide greater detail.

As you've heard through this earnings season, the global operating environment deteriorated in the second quarter. Inflation continued to impact product costs and increasingly weighed on consumer demand. COVID remains a headwind in parts of Asia.

And inventory has built up in pockets at retail, all of which drove softer-than-expected point-of-sale trends in the quarter. Adding to these macro headwinds was the unexpected impact from the previously disclosed cyber event, which disrupted our global operations in late May. As a result, our second quarter performance was below our expectations.

While profit margins were in line with our forecast, sales and profits were below our guidance. And we ended the quarter with more inventory than planned, which is creating a near-term drag on cash flow.

That said, our team did a great job recovering from the cyber event, which temporarily shut down parts of our global supply chain network and limited our ability to fulfill customer orders for nearly three weeks. And despite the disruption, we shipped all of our Innerwear back-to-school commitments on time and in full.

Absent the cyber event, we estimate second quarter sales would have still been below our guidance. However, operating profit and earnings per share would have been at the high end of our guidance range. To be clear, we're not satisfied with our performance in the quarter. That said, as an organization, we're not standing still. We remain nimble.

We're continuing to execute our long-term growth strategy and we're staying focused on controlling the things that we can control. Today we have plans in place to bring our inventory levels down.

We're confident in the quality of our inventory, given the vast majority replenishment Innerwear products and we expect to end the year with inventory units below prior year. We continue to invest in our brands globally, as well as our technology and our talent.

We have a solid track record of managing SG&A and we'll remain disciplined in managing expenses without sacrificing investments in our full potential plan, and we'll continue to search for additional cost savings opportunities.

Looking at the back half of the year, we reduced our sales and profit outlook to reflect the changes in FX rates, the short-term costs associated with our inventory reduction actions, as well as an assumption that slow consumer demand continues and the retail environment remains challenging.

While our estimated reduction may prove to be conservative, we felt it was prudent, given the softer-than-expected point of sales trends in the second quarter and the overall macro environment. That said, we're convinced we have the right long-term strategy.

We're hearing it from our consumers, our suppliers and our retail partners and we remain steadfast in executing our full potential plan. We're acting more like a global operating company. We're beginning to move with speed, and we're seeing evidence of this around the globe in our Innerwear, Champion and supply chain initiatives.

Touching on each of these, I like how we've consolidated design globally in Innerwear. We're starting to see results with new Innerwear products and innovation, and we're driving retail space gains. I'm very pleased with how our Total Support Pouch with X-Temp is performing, both in the US and Australia.

This is the first time we've launched innovation globally and supported it with a global marketing campaign. Our Retro Rib product from Australia was launched in the United States under the Hanes brand and is exceeding our expectations. Our top customers are very pleased with the consumer response and we expect to gain additional retail space.

We're also building innovation platforms around absorbency. We believe this is a meaningful opportunity under our Hanes and Bonds brand, with lots of different usage occasions, ranging from adult and child absorbency to post pregnancy needs for women. And this is just the start. Our product and innovation pipeline is full.

We have a lot of big ideas across our basics and intimates brands that we expect to drive continued retail space gains. I look forward to sharing more of our innovation pipeline toward the end of this year and into 2023. Turning to our Champion business. We continue to invest in the brand globally.

As we highlighted at our Investor Day last year, Champion is a big part of our full potential plan. We see significant growth opportunities through the expansion of our women's and kids businesses. The expansion in new markets such as China, as well as into adjacent product categories, including footwear.

Specifically, footwear in North America represents an expanded opportunity. We purchased the Champion trademark for footwear in North America in the quarter. This purchase adds to the control we have over the Champion brand and product globally.

It will give us greater speed to market and the ability to have a more integrated and collaborative approach with our apparel offerings. I saw this opportunity firsthand in May as I traveled and spent time with the Champion Europe team. They have amazing head-to-toe product that comes to life in a great retail shopping experience.

I came away from the trip excited about our European operations, and I saw significant opportunities to leverage our global capabilities for the Champion brand. We can build our footwear success in Europe and Asia to address the US market. And more broadly, we have a big opportunity to coordinate design, product development and merchandising globally.

During the quarter, we also continued to invest in our Champion distribution network as we consolidate down to two wholesale Champion DCs. This will simplify our distribution model, create efficiencies, lower costs and improve retail service as well as support the future growth of Champion in the US.

And lastly, we're in the early stages of executing our full potential supply chain strategies to build on our advantaged position as well as balance speed, cost and flexibility to enable faster top line growth and higher margins over time.

These efforts involve segmenting our supply chain and the previously mentioned DC consolidation work we're doing in Champion. In addition, we also began direct shipping Innerwear product from our Central American manufacturing facilities to certain wholesale customers in the US.

This initiative leverages our scale, saves time and reduces costs for both us and our retail partners. We're also on track to go live this month with our new West Coast DC to support our direct-to-consumer business. Plus, we began adding additional automation to several DCs.

This includes the addition of robots and sortation systems, which will help improve picking and sorting speeds, while also lowering costs. So in closing, the macro environment remains extremely challenging and is weighing on near-term results. But our team is focused, and we're not standing still.

We're executing our full potential growth strategy of consumer centricity, simplification, increased speed and building digital capabilities. We're controlling the things we can control, and we're delivering innovation. We have the biggest and most robust pipeline of new products and innovation in decades.

These products are rolling out, they're testing well with consumers and retailers, they're driving retail space gains, and there's a lot more coming as we head into next year. As we look forward, we're convinced our strategy positions us to deliver revenue and profit growth with consistent cash flow over the next several years.

And with that, I'll turn the call over to Michael..

Thanks, Steve. As previously mentioned, we faced an unexpected cyber event and external factors that impacted our second quarter performance.

And while we're not at all satisfied with our results, the near-term headwinds we're facing do not change our long-term strategy or the work we are doing to transform Hanesbrands into a consumer centric growth company. I'm encouraged by the progress we've made in implementing our full potential plan.

In the quarter, we continue to increase investments behind our brands globally. We're rolling out new product innovation across men's and women's with a robust pipeline that extends beyond 2023. We're effectively managing SG&A costs and finding cost savings opportunities.

We're continuing to find ways to leverage our global capabilities, which improve speed to market and lowers cost. The macro related factors impacting near-term performance should settle out over time. That said, our focus remains on controlling the things we can control and executing our long-term strategy.

By leaning in to our growth related investments during challenging times, we believe we will be even better positioned to gain market share and deliver sales and profit growth over the next several years. For today's call, I'll touch on the highlights from the quarter as well as provide some thoughts on our outlook for the remainder of the year.

For additional details on the quarter's results and our guidance, I'll point you to our news release and FAQ document. Overall, our second quarter results were below our expectations. This was driven by a combination of unexpected cyber event in late May and softer point-of-sales trends relative to our forecast.

In total, we estimate the cyber event negatively impacted the second quarter by approximately $100 million in sales, $35 million in operating profit and $0.08 in EPS. Absent the cyber event, we estimate sales for the quarter would still have been below our forecast.

However, adjusted operating profit and EPS would have both been at the high end of our guidance range. Looking at the specifics in the quarter. Net sales were $1.51 billion, a decrease of 14% as compared to last year. Adjusting for the 220-basis point headwind from foreign exchange rates constant currency sales decreased 11% from the prior year.

Although the macro headwinds are weighing on our near-term performance, sales were up 75% on a 2-year stack basis, excluding PPE. And year-to-date, sales are 8% higher than pre-pandemic levels with growth across all businesses.

For the domestic businesses in the first half of the quarter, sales were pressured by point of sales trends and product availability challenges. Unfortunately, this was magnified in late May due to the cyber event.

It impacted our ability to receive and ship product, while at the same time we saw consumer demand slow as the result of the highest inflation in decades. We saw these trends across both our Innerwear and Activewear businesses. Overall, our international business performed relatively better in the quarter, despite the cyber event.

Constant currency sales declined approximately 3% as compared to prior year, although performance varied by region. Sales in Australia and Europe declined in low single digits. In Latin America, sales were up as we overlap COVID-related headwinds in the year-ago quarter.

And in Asia, sales were essentially flat with prior year as the intermittent COVID headwinds in China were offset by growth in the rest of the region. And now turning to margins.

Adjusted gross margin declined 120 basis points over prior year to 37.8%, driven by lower sales volume, input cost inflation, the incremental costs associated with the cyber event and exchange rates. These headwinds more than offset the benefits from business mix, the first quarter price increase in Innerwear, cost savings and less air freight.

With respect to SG&A on a percent of sales basis, our adjusted SG&A expense increased 215 basis points over prior year to 27.7%. The increase was driven by the deleverage of lower sales volume, as well as planned increased investments in brand marketing and technology.

These more than offset cost controls and expense efficiencies from our full potential initiatives. This resulted in adjusted operating margin of 10.2% for the quarter.

Our operating margin was in-line with our forecast as the organization did a great job of managing expenses in response to the challenges we face while maintaining brand-related investments. Turning to cash flow and the balance sheet. We ended the quarter with nearly $1 billion of total liquidity, which included approximately $250 million of cash.

Cash flow from operations was a use of approximately $210 million in the quarter, driven primarily by working capital used for inventory. Inventory at the end of the second quarter was up 19% over prior year in units.

On a dollar basis, inventory was up 37% due predominantly to inflation, lower second quarter sales, and the early arrival of products for the third quarter commitments. Inflation alone represented roughly half of the year-over-year increase.

We're confident in the quality of the inventory as approximately 80% of the year-over-year increase is in replenishment Innerwear products. That said, we did end the quarter with more inventory on hand than planned.

We already have a number of initiatives underway to reduce our inventory and we expect by year end that our inventory units will be below last year's level. The reduction plans we have in place include temporarily reducing production shifts in our manufacturing facilities as well as strategic actions tied to our segment and supply chain initiative.

On top of those is our ongoing initiative to reduce SKUs. We have plans to further reduce SKUs by another 30% with some of the benefit coming this year. The impact from these actions is reflected in our updated financial guidance. And now turning to guidance.

Looking at the second half of the year, we reduced our sales and profit outlook to reflect the changes in FX rates, the short-term costs associated with our inventory reduction actions, as well as an assumption that slow consumer demand continues and the retail environment remains challenging.

With respect to sales, although we expect the second half to be down low to mid-single-digits as compared to prior year, sales are still expected to be well above pre-pandemic levels. We are continuing to invest in our brands, and we are seeing good consumer engagement, and we're launching new product innovation.

Touching on the quarters, we expect better year-over-year sales performance in the third quarter as compared to the fourth quarter. This outlook is driven by initial back-to-school commitments and the shipments of our initial Champion fall/winter product sets.

Turning to margins, at the midpoint, we expect gross margin in the second half to decline approximately 350 to 400 basis points over prior year, with a larger year-over-year impact in the third quarter as compared to the fourth. This is driven by three main factors.

First, the impact from inflation as higher input costs work their way off the balance sheet and onto our P&L. This is unchanged from our prior outlook. Second, the deleverage impact related to lower sales. And third, the incremental costs related to our actions to reduce inventory by year-end. Looking at our outlook for operating margins.

At the midpoint, we expect second half operating margins to be down slightly more than 400 basis points as compared to last year. The incremental pressure relative to our prior outlook is a function of the deleverage from lower gross profit dollars as we remain committed to investing in our brands and technology.

We expect greater year-over-year impact from the third quarter as compared to the fourth. And lastly, we expect to generate approximately $400 million in cash flow from operations in the second half, which is more than sufficient to support our full potential investments and our dividend.

For the full year, we expect cash flow from operations to be essentially breakeven. The change relative to our prior outlook is due to the lower profit outlook and a working capital impact from the higher-than-planned inventory dollars. So, in closing, I'll echo Steve's comments.

The global operating environment remains challenging and it's weighing on our near-term financial results, but the organization is not standing still. Our team is focused. We are executing our full potential growth strategy, we're controlling the things we can control, and we're delivering innovation with a robust pipeline that extends beyond 2023.

As we look forward, we're convinced our strategy positions us to deliver revenue and profit growth with consistent cash flow over the next several years. And with that, I'll turn the call over to T.C..

Thanks, Michael. That concludes our prepared remarks. We'll now begin taking your questions and will 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 the line of Michael Binetti with Credit Suisse. Your line is now open..

Hey guys. Thanks for all the detail here. I know it was a tough quarter to get through. I want to ask a little bit about Champion. You had a very specific comment in there that you delivered all of your Innerwear deliveries for back-to-school.

Does that imply -- can I assume that the cyber event hit Champion more than the Innerwear business? I guess, I'm specifically looking at the Champion sales numbers you gave here. This is the first time we've seen the revenue dollars move below 2019 levels. Obviously, you had a lot of things that were one-off going on in the quarter.

I'm trying to think about what happened? Was there an outsize impact on Champion? And maybe some thoughts and detail to help us get confidence in building back Champion to a growth brand here as we look ahead in the model..

Sure. Good morning, Michael. Thanks for the question, and thanks for joining us today. So let me parse that apart and Michael, if I miss anything kind of jump in. In terms of thinking about the cyber incident that we had impacting Innerwear more than Activewear, more than Champion, not really. I wouldn't parse it apart that way.

I think it was pretty much consistent across our business and how we manage it and how it flows. When you think about Champion, obviously, it's a commit business. So we brought in some of that inventory early into Q2, which is part of our current inventory issue from a quarter-over-quarter perspective right now.

But we feel good about shipping that product on time as it rolls out into Q3, so no more disruption on one side of the business than the other side of the business. When you think about Champion, yes, it was a tough quarter. You look back, we're overlapping a huge quarter, so 96% two-year stack, which gives us some good feeling.

But a couple of things impacted that business. Let me walk you through what we think impacted the business, and then I'll talk to you about what we're doing, where we're going and why we're very confident in the brand going forward.

At the beginning of the quarter, we continue to have some service challenges and still some product delay working through that. Then, we definitely had a consumer slowdown in the middle of the quarter, which caused some of the excess retail and from the retailer channels backing up a little bit. We had the cyber event that we talked about.

And we're still experiencing some COVID headwinds in Asia, particularly in China, which is still working against us. So I feel -- I'm very confident the business is much stronger today than it was pre-pandemic. That said, we have work to do.

And let me talk to you a little bit about what we're doing and where we're going to take the brand over time, because I think there's a lot of good things happening. And we're very committed to Champion being a big part and is a big part of our full potential plan as we go forward.

So first of all, we have a new leadership team, and I'm really pleased with the team and it's at the top level and it's down through the business that I think is incredibly committed and is going to take the brand to the next level on a global basis.

I'm very focused on very defined segmentation strategy for product and channel, and improving upon our execution against that going forward, which is an opportunity for us. The consumer continues to ask for the brand, and they continue to ask for more and broader assortment for us. We need to deliver that.

The pipeline is building of new product ideas, and I feel better today than I did in the past about what's to come as we go forward. And we're going to continue to expand into new business opportunities.

So we acquired the footwear trademark in the US for Champion this quarter, which is an accretive opportunity to us and continue to build on our capability. We already have a very robust footwear business in Europe and in Asia. So we know how to do this, and it's going to be part of the globalization strategy of the brand.

We're going to continue to expand new geographies. I've said this before, you've heard me say it, we're very early in China right now. There's headwinds there right now with COVID, which -- so we're not moving as fast as we initially had planned, but that's COVID-related. Nothing to do with the brand or operations behind it.

And we continue to have new or incremental consumer segments. We're underdeveloped in women and kids, and we're very focused on that. So I look at the business and all the things that we're working on haven't changed because we had a rough quarter, and we think there's still a lot of demand for the brand.

And I'm encouraged about what the opportunity is for us going forward, and it's going to be a big part of our overall execution strategy, and I think there's a ton of upside..

Okay. Thanks a lot, guys. Appreciate it..

Our next question comes from the line of Susan Anderson with B. Riley. Your line is now open..

Hi. Can you give us an idea on how much the POS slowed in the second quarter? And then also how it's trending in third quarter? I guess I'm curious if you've seen a pickup at all with back-to-school and then on-time deliveries.

And then also if you can maybe talk about product costs for the back half and into 2023 and if you're seeing some easing there at all as we head into 2023 and how we should think about cotton flowing through? Thanks..

Sure. Good morning, Susan. And thanks for joining us. Let me do the first one and I'll let Michael talk about product costs going forward. The consumer is certainly still feeling pressure. Inflation is impacting consumer sentiment overall and demand. And we're seeing that globally. In our US business, Australia, Europe.

And as I mentioned, we're still seeing some COVID pressures in Asia. And there's lots of talk about the shift of discretionary budgets between experience and things. So we definitely saw the pressure build in May and June, and it has carried into July. So you think about our second half, we're factoring in that continued slow consumer business.

That said, if you think about us longer term, I like our position. Apparel, obviously, is discretionary, but there's different levels of discretionary. And I think we play in a really good place there with our basics business. We've got a great brand portfolio, a good innovation pipeline going.

So I think we can operate in this environment very well, and I think we're positioned well to do it. When we talk about back-to-school for a minute. It's still early, but the consumer demand seems to be week-over-week, improving a little bit. And we're encouraged by that. And that's across the Innerwear business, across our D2C business.

Tax-free weekend in 11 of the 17 states with last week and we saw a strong response for our business. So we kind of know when consumers are buying and what the headwinds are, but we're very encouraged to see what's happened there.

We have a strong program for back-to-school this year with more display, more inventory than on the floor than we've had in the past. So we feel good about our execution behind back-to-school, and we're starting to see a little bit of improvement in the consumer on a week-over-week basis, but those headwinds definitely still remain..

Yes. I think with regard to cost, the inflation in the second half, one, you kind of see that in our inventory number, right, as we called out that over half of our inventory increase is related to inflation. So, in terms of – as we're looking at cost, it's in our guidance.

It's unchanged really from the guidance we gave you guys at the beginning of the second quarter. And so, in terms of – the costs are locked in for the most part for this year in some cases, into early next year. As we think about next year, as you can appreciate, we're not really giving guidance.

It's great to see cotton prices come back to a more normalized level. And I think that we'll be looking at that as we start thinking about next year's plans and pricing, etcetera. So – but right now at this point, I think we feel like we have our arms around cost..

Great. Thanks so much. .

Our next question comes from the line of Ike Boruchow with Wells Fargo..

Hey guys, it's Will Gaertner on for Ike. Can you guys just touch on Walmart and Target, obviously, have the big announcements.

Can you just maybe talk about how that impacted you in the quarter? And if you're going to see any impact from that into the back half?.

Good morning, Will. So, I'm not going to talk directly about Walmart, Target, any of our customers.

What I would tell you is, I think you're seeing a macro environment change in the second quarter and particularly towards the middle to end of the quarter with the inflation really hitting the consumer and you saw an inflection point in the consumer behavior.

And I think that's pretty consistent across retail channel, across different manufacturers and just consumers in general. So, I think it really depends on the consumer and where does the consumer go and how does the consumer respond to the challenging headwinds that they're facing right now..

Got you. And maybe just one more follow-up. You noted some softer-than-expected in Innerwear.

Does that mean you guys are losing share or shelf space and you're seeing a migration of consumers to trading down to more private label?.

Yes. So a couple of things. Let me unpack that a little bit. We're gaining shelf space. And I was very pleased with the quarter shelf space report that I got and sitting with the team and talking about the actions that they're taking in the marketplace. A lot of that's new product that we talked about in the prerecorded remarks.

Our new product is resonating extremely well. So we're gaining incremental product -- incremental shelf space and we expect that to continue going forward as the pipeline continues to build. When you look at share, a lot of ups and downs in the business. Our share in Q2 compared to pre-pandemic were up 60 basis points.

So, I try to look at share over time. It gets a little choppy quarter-to-quarter, but if you look at – draw that trendline over time, I like our share position. And the reality is, private label and Innerwear is not really gaining share. So that's not where share is flowing right now. So the consumer will net that out overtime.

But what we're doing is, we're leaning in and we're not going to let the challenging macro headwinds slow us down. So, we talked about the innovation pipeline, space gains that we just referred to.

We're going to be aggressive in this time, whether that's managing our inventory, whether that's leaning in -- building behind our brands, we're going to keep pushing and keep growing..

Great. Thanks. I'll pass it on..

Our next question comes from the line of Jim Duffy with Stifel. Your line is now open..

Thank you. Good morning. Stephen, I wanted to ask about the incremental, I believe, 30% reduction in SKUs.

To be clear, is this incremental to actions already underway? Where do you see the opportunity? Can you speak to a working capital benefit? And how does that dovetail with the innovation agenda?.

Hey good morning Jim. So, the -- we're talking about that reduction in inventory. So, we did 35% last year, and inventory. So we did 35% last year, and I set the target for the team this year for another 30%. And I think, to be honest with you, I think we may continue beyond that. We'll see how that nets out.

I believe SKU reduction is obviously important for our working capital management. It helps our innovation pipeline. We've talked about a lot of the new things that are coming. Fundamentally, we have to create space for that, both at the retail shelf and inside our pipeline and how we operate going forward.

We have not historically been as disciplined as we need to be on SKU management. And we have a long tail that I think can be cleaned up and will help us significantly in terms of our operations and continues to build that lifeline for innovation, and it also improves our service levels.

We talked a little bit about the beginning of the quarter, our service level is not as good as we want them to be. They're improving already in the third quarter, and I'm encouraged by that. But service levels is a really important metric for us.

And SKU management, SKU rationalization is a big enabler for us to continue to improve service levels for us to grow..

Understood. And then I had a question on margins. Susan asked the question on commodity costs, but I'm curious, as it relates to the back half of the year, is there a utilization deleverage in manufacturing that we should consider as a comparison? And I'm hoping you can itemize the -- of inventory clearance on the margin outlook..

Hey Jim, this is Michael. Good question. Yes, as you think about the back half guidance, we did -- we took sales down and we also took profit down. Some of the profit relates clearly to just bringing down the sales. Some of it is to the point you made, which is in our manufacturing, we will be underutilizing some of our fixed costs.

And so we're taking that to the bottom-line in the back half. And so that is a meaningful number. I can't give you that number specifically. But it is something that will impact the back half profitability, but we think it's the right thing to do.

So, in other words, as you think about the margin coming down in the back half, it's really not about additional markdowns. It's really about just not producing more inventory. And as we talked about, we're planning to have less units at the end of the year than what we currently have and what we had at the end of last year.

But total actions, they're probably in the neighborhood of $30 million, $35 million. And so as we think about next year, right, we'll be -- you'll be asking us about guidance next year, those are things that would not be repeatable..

Understood. Very helpful. Thank you..

Our next question comes from the line of Jay Sole with UBS. Your line is now open..

Great. Thank you so much.

I'm just wondering if you can maybe walk us through some of the details within the Innerwear business, how the women's apparel business performed versus sort of the men's business?.

Yes. Good morning, Jay. So when you look at Innerwear business, overall, on a kind of a -- we had a tough quarter. Definitely, inflation impacting it, cyber event, all the things that we've talked about. When you break out the business, not a dramatic difference between men's and women's. They're performing pretty consistently.

The innovation we're balancing is pretty consistent across the business. The space gains that I referenced earlier, pretty consistent across the business. So not a dramatic change. When you think back to challenging times in the past and how this business has performed, men's business tends to hold up better than women's business.

There's a lot of underlying purchasing behavior that goes into that. But to-date, we have not seen an inflection point between men's and women's..

Got it. Okay. Thank you so much..

Our next question comes from the line of Paul Kearney with Barclays. Your line is now open..

Hi, everyone. Thanks for taking my question.

I was wondering if you can comment on wholesale inventory levels and where you think retailers are in rebalancing their inventory to right-size for consumer demand? And then my second question is, can you talk about your planned price increases kind of in light of those inventory levels? And are they going through as expected and what has been the consumer response? Thanks..

Sure. In terms of retail inventory, there's pockets of inventory out there that, obviously, retailers have talked about their position. But I think what is important for us is, a lot of our business is replenishment business for them. So a lot of what they’re calling out is more -- has been more seasonal business.

We have put that -- a slowdown into our second half, and that's part of our view, because of retail headwinds. So if you think about why we put the second half guidance we put out there. We talked about the consumer and what are the things we talked about was the retail environment that's out there. So we factor that into our guide.

That said, if times continue to be difficult, I like our channel position. I like our channel mix, about where we are and where we're going to go. And you asked a second question, I'm sorry, I don't remember what it is..

Just on your planned price increases, can you just comment on how those -- are those still going according to plan with your channel partners and what has been the consumer response? Thanks..

Sure. Thank you. Yes. So, pricing, we talked about, we put Innerwear into effect mid first quarter. That's pretty much played out the way we expected it to. In the back half of this year, and -- but that's globally -- around the globe, not just the US, and that's pretty much held true to form.

And then the back half is when Champion starts to hit the market in our fall/winter assortment. Managed this through pretty well. Team did a nice job, partnering with the retailers. Consumer response has basically been in the range that we would have expected it to be.

And we're continuing to manage the business and think about the consumer, think about competition, think about price gaps, think about share, think about space gains that we have, all of that goes into how we think about pricing going forward, and we're starting that step thinking about what's next and how do we think about next year in our planning process..

Thank you. Our final question will come from Tom Nikic with Wedbush. Tom, your line is now open..

Hey. Good morning guys. Thanks for taking my question.

Just from a modeling perspective, how do we think about the various -- the different segments in the back half? Like how do we think about Innerwear versus Activewear versus International?.

So for Q3, we've got Innerwear down high single digits. We have Activewear basically improving in the -- give us one second. Let me make sure we get the right number for you..

No problem..

The Q3 is up high single digits. And that's partially because we're just rebounding up in terms of the shipments and the issues that Steve talked about. And international is up low double digits on a constant currency basis. But as we called out, we have a lot of currency challenges. So we'll probably be flat on a reported basis..

Got it. Thank you..

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

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

This concludes today's conference call. Thank you for participating. You may now disconnect..