HanesBrands Announces Strong Fourth-Quarter and Full-Year 2021 Results Driven by Full Potential Growth Plan; Raises 2024 Full Potential Financial Targets; Announces $600 Million Share Repurchase Authorization

• Net sales from continuing operations of $1.75 billion, up 4% over fourth-quarter 2020; up 9% on a constant currency basis excluding PPE and 53^rd week sales in 2020
• Net sales from continuing operations up 15% over fourth-quarter 2019
• GAAP EPS from continuing operations of $0.19; adjusted EPS from continuing operations of $0.44, inclusive of $0.02 per share impact from higher-than-expected tax rate
• Global Champion brand sales increase 10% over prior year and 25% over fourth- quarter 2019
• U.S. Innerwear sales increase 3% over prior year, excluding PPE, and 19% over fourth-quarter 2019
• Provides first-quarter and full-year 2022 guidance. Expects full-year sales from continuing operations of $7.0 billion to $7.15 billion; GAAP EPS from continuing operations of $1.50 to $1.67; adjusted EPS from continuing operations of $1.64 to $1.81
• Raises 2024 Full Potential financial targets to approximately $8 billion of revenue, an adjusted operating margin of approximately 14.4%, and cumulative three-year free cash flow of approximately $1.6 billion
• Board of Directors authorizes a three-year $600 million share repurchase plan; Company to begin repurchasing shares in first-quarter 2022
• Declares regular quarterly cash dividend of $0.15 per share
• For reconciliations of select GAAP and Non-GAAP measures, see Table 6 of this release
• Unless otherwise noted, all 2019 comparisons are rebased, see Table 6 of this release

WINSTON-SALEM, N.C.–(BUSINESS WIRE)–HanesBrands Inc. (NYSE: HBI), a global leader in iconic apparel brands, today announced results for the fourth quarter and full-year of 2021, with increased sales and better-than-expected profitability driven by continued growth in consumer demand and market share gains in its innerwear and activewear businesses.

“We are rapidly creating a new HanesBrands, focused on growth and serving our consumers and customers like never before,” said Steve Bratspies, chief executive officer. “We significantly outperformed our expectations in 2021, driving increased financial projections in our three-year Full Potential growth plan. As we enter 2022, our performance, operational execution and financial foundation are far stronger than they were before the pandemic. We are implementing a three-year $600 million stock repurchase program, based on our confidence in future growth. Most importantly, I want to thank our outstanding global associates as they continue to meet every challenge to serve our consumers.”

Highlights include:

• Exited 2021 with a stronger business and financial foundation as well as a more attractive long-term growth profile relative to its pre-pandemic position. The Company delivered meaningful growth above pre-pandemic levels with full-year 2021 net sales 13% above 2019, adjusted operating profit 14% higher than 2019 and adjusted earnings per share 26% above 2019. The balance sheet also strengthened with leverage declining to 2.7 times on a net debt-to-adjusted EBITDA basis.

• Raised its 2024 Full Potential financial targets driven by increased consumer demand for its brands globally, the traction of its Full Potential growth strategy and the proven ability of the global team to execute and consistently deliver results, particularly in one of the most challenging macro environments in decades. The Company increased its 2024 revenue target to approximately $8 billion, which includes an increase in global Champion brand sales to approximately $3.2 billion; adjusted operating margin increased to approximately 14.4%; and cumulative three-year free cash flow increased to approximately $1.6 billion. See Full Potential Update below for a comparison to prior targets.

• Increased capital returns to shareholders. In addition to its regular quarterly cash dividend, the Company announced that its Board of Directors authorized a three-year $600 million share repurchase plan. Based on its Full Potential plan targets, the Company expects to repurchase shares quarterly while maintaining flexibility to be opportunistic dependent upon market conditions. Share repurchases are expected to begin in the first quarter 2022.

• Consumer demand for the Company’s brands remains strong and continues to exceed supply due to ongoing disruptions in the global transportation environment. Fourth-quarter revenue was in-line and adjusted operating margin exceeded the Company’s guidance range as it continued to execute its Full Potential plan, generate returns on its growth-related investments and effectively manage the items that are within its control.

• Global Champion brand sales increased 25% and 20% compared to fourth-quarter and full-year 2019, respectively. The continued growth above pre-pandemic levels is driven by strong consumer demand across channels in the U.S., continued growth in Europe, the Americas and Australia as well as the ramp-up of partners in China.

• U.S. Innerwear sales increased 19% and 21% compared to the fourth-quarter and full-year 2019, respectively. For the full-year 2021, Innerwear’s market share increased approximately 150 basis points over 2019 with increased share positions in Men’s, Women’s, Kids and Socks.

• Continued execution of the Company’s Full Potential growth plan, including investment in its iconic brands and the simplification of its business portfolio. As compared to 2019, global media and marketing investment increased nearly $30 million for the quarter and $70 million for the full-year, helping drive higher point-of-sale trends and increased market share. The Company made the decision to sell its U.S. Sheer Hosiery business, another milestone in its initiative to focus its portfolio on areas with the greatest potential for growth and returns.

Fourth-Quarter 2021 Results

Net sales from continuing operations for the fourth quarter ended January 1, 2022 totaled $1.75 billion, an increase of $63 million, or 4%, including 10% growth in Champion brand sales globally. Excluding $28 million in sales of personal protective equipment (“PPE”) and $45 million of sales from a 53^rd week in the prior period, and a $9 million headwind from exchange rates in the current period, net sales increased $146 million, or 9%, over prior year.

The year-over-year growth in net sales was driven by strong consumer demand and point-of-sale trends in the U.S., Europe, Americas and certain Asia markets, including China, which more than offset lingering COVID-related headwinds in Australia and Japan. Total constant currency fourth-quarter net sales increased 4%.

Due to the significant impact of the pandemic on prior year results, this release includes certain comparisons to the comparable 2019 periods for additional context. All 2019 results are rebased to reflect the European Innerwear business as discontinued operations as well as the exit of the C9 Champion mass program and the DKNY intimate apparel license.

Compared to fourth-quarter 2019, net sales from continuing operations increased $230 million, or 15%, including 25% growth in Champion brand sales globally. Total constant currency net sales increased 14%. Growth in the global innerwear and activewear businesses was driven by strong consumer demand, higher point-of-sale performance and market share gains.

For the fourth-quarter 2021, GAAP gross margin of 38.1% increased 3,220 basis points compared to prior year and decreased 120 basis points compared to fourth-quarter 2019.

Adjusted gross margin of 38.4% decreased 195 basis points compared to last year and approximately 235 basis points compared to fourth-quarter 2019. The margin decline was driven primarily by increased expedite costs. The Company gained significant new retail space and made the strategic decision to expedite additional product to ensure arrival in time for space sets at retail partners. Efficiency improvements in manufacturing, cost savings from initiatives such as its SKU reduction program and the benefits of business mix offset the vast majority of the inflation and transportation cost headwinds in the fourth quarter.

Fourth-quarter GAAP operating profit was $156 million compared to an operating loss of $397 million in the prior year and operating profit of $230 million in the fourth-quarter 2019. GAAP operating margin of 8.9% improved from the (23.5%) loss in the prior year and declined from 14.3% in the fourth-quarter 2019.

Adjusted operating profit of $220 million decreased $9 million, or 4%, compared to prior year and $8 million, or 3% compared to 2019. Adjusted operating margin of 12.6% was ahead of the Company’s expectation. Adjusted operating margin declined approximately 100 basis points compared to last year and 240 basis points compared to fourth-quarter 2019. The decline was driven by the gross margin performance as disciplined SG&A expense management essentially offset the impact from increased brand marketing investments and higher labor costs in its distribution centers.

The GAAP and adjusted effective tax rates for the fourth quarter were 6.8% and 15.0%, respectively. For the fourth-quarter of 2020, GAAP and adjusted effective tax rates were 34.4% and 17.6%, respectively. For the fourth-quarter of 2019, GAAP and adjusted effective tax rates were 12.9% and 21.3%, respectively.

On a GAAP basis, fourth-quarter income from continuing operations totaled $68 million, or $0.19 per diluted share. This compares to a loss from continuing operations of $292 million, or ($0.83) per diluted share in the prior year period, and income from continuing operations of $159 million, or $0.43 per diluted share in fourth-quarter 2019.

Adjusted income from continuing operations totaled $156 million, or $0.44 per diluted share and includes a $0.02 per share impact from a higher-than-expected tax rate. This compares to adjusted income from continuing operations of $148 million, or $0.42 per diluted share, in the prior year period and adjusted income from continuing operations of $142 million, or $0.39 per diluted share, in fourth-quarter 2019.

(See the Note on Adjusted Measures and Reconciliation to GAAP Measures later in this news release for additional discussion and details of actions, which include pandemic-related and Full Potential plan charges.)

Fourth-Quarter 2021 Business Segment Summaries

Innerwear: Sales increased 3% over last year, excluding PPE, driven by point-of-sale growth across channels. Prior year sales included significant post-COVID inventory restocking by retailers and $22 million of PPE sales.

As compared to fourth-quarter 2019, sales increased $108 million, or 19%, with double-digit growth in the Kids, Socks, Women’s and Men’s businesses. Relative to 2019, the Company’s U.S. innerwear market share increased approximately 150 basis points with increased share positions in Men’s, Women’s, Kids and Socks.

Operating margin of 16.9% decreased more than 700 basis points compared to prior year and fourth-quarter 2019. The decline was due to the expected impact from higher inflation and costs associated with the strategic decision to expedite additional product to service new retail space gains as well as increased investments in brand marketing, all of which impacted the business ahead of Innerwear’s first-quarter 2022 price increase.

Activewear: Sales grew $46 million, or 11% over prior year driven by strong point-of-sale trends across its activewear brands. Sales increased $73 million, or 19%, compared to fourth-quarter 2019. By brand, Champion sales increased 21% and sales of its other active brands increased high teens as compared to 2019. The Company experienced strong point-of-sale trends across the online, wholesale and distributor channels in the quarter. Sales in the college bookstore channel returned to pre-pandemic levels and were consistent with the fourth-quarter 2019.

Segment operating margin of 13.0 % increased 420 basis points over prior period driven by benefits from business mix, price increases in printwear and disciplined SG&A expense management. These benefits more than offset higher levels of inflation and increased investments in brand marketing. Operating margin decreased 100 basis points compared to fourth-quarter 2019 as higher levels of inflation and increased brand marketing investments more than offset leverage from higher sales volume and benefits from business mix.

International: Sales increased $19 million, or 4%, compared to prior year. Excluding $6 million of PPE sales in the prior year quarter, fourth-quarter sales increased 5% on a reported basis and 7% on a constant currency basis. Constant currency sales grew in the Americas, Europe and China driven by strong consumer demand for the Company’s brands. Constant currency sales declined in Japan and Australia as both regions continued to be impacted by store closures and tentative consumer behavior resulting from the ongoing COVID pandemic.

As compared to fourth-quarter 2019, International segment revenue increased $49 million, or 10%. On a constant currency basis, sales increased 7% with strong growth in Europe, the Americas, Australia and China more than offsetting the impact from COVID-related headwinds in Japan.

For the quarter, the International segment’s operating margin of 19.1% increased 140 basis points over prior year. Operating margin increased 190 basis points compared to fourth-quarter 2019 driven by fixed-cost leverage from higher sales, benefits from business mix and disciplined SG&A expense management.

Cash Flow, Balance Sheet and Shareholder Capital Returns

As of the end of fiscal year 2021, the Company had a total liquidity position of $1.75 billion, consisting of $536 million of cash and equivalents and approximately $1.2 billion of available capacity under its credit facilities.

Leverage at the end of fiscal year 2021 declined to 2.7 times on a net debt-to-adjusted EBITDA basis as compared to 3.5 times at the end of fiscal year 2020 and 2.9 times at the end of fiscal year 2019.

Inventory at the end of fiscal year 2021 was $1.6 billion, an increase of 16% over prior year due to the combination of higher levels of in-transits and the strategic decision to invest in inventory in the quarter to capture increased consumer demand. As compared to 2019, inventory from continuing operations declined 8%. In the fourth-quarter 2020, the Company announced a 20% SKU reduction initiative to focus on its highest-volume, fastest-growing and most profitable products. At the end of fiscal year 2021, the Company had reduced its SKUs by more than 30% as compared to prior year.

The Company generated $623 million of Cash From Operations in fiscal year 2021, which exceeded its guidance range. The stronger-than-expected cash generation, despite the strategic decision to increase investment in inventory to support higher levels of consumer demand, was driven by better-than-expected profitability and disciplined working capital management.

The Company’s Board of Directors declared a regular quarterly cash dividend of $0.15 per share payable on March 8, 2022, to shareholders of record at the close of business on February 15, 2022.

The Company’s Board of Directors approved a three-year share repurchase program. The program authorizes the repurchase of up to $600 million of the Company’s outstanding common stock through open market or privately negotiated transactions through December 28, 2024. The timing and amount of repurchases will be determined by the Company’s management based on its performance, evaluation of market conditions, legal requirements and other factors. The program may be suspended, modified or terminated at any time without prior notice. This share repurchase program replaces the previous program announced in February 2020.

Based on its Full Potential plan targets, the Company expects to repurchase shares quarterly while maintaining flexibility to be opportunistic dependent upon performance and market conditions. Share repurchases are expected to begin in the first quarter 2022.

Full Potential Update: 2024 Financial Targets Increased; Announces Plan to Sell U.S. Sheer Hosiery Business

“I am very encouraged by the fast start to our Full Potential growth plan, despite the extremely challenging operating environment,” Bratspies said. “Our strong early execution in growing global Champion, re-igniting innerwear growth, driving consumer centricity and focusing our portfolio gives me confidence in what we can achieve over the next three years.”

The Company exceeded its initial full-year 2021 outlook provided at its May 2021 Investor Day, despite greater-than-expected headwinds from inflation and global logistics challenges. Sales exceeded the midpoint of its prior range by approximately $550 million, adjusted operating profit was approximately $100 million higher, adjusted earnings per share were approximately $0.30 higher and operating cash flow was approximately $100 million higher.

The Company raised its 2024 Full Potential financial targets as a result of increased consumer demand for its brands globally, the traction of its Full Potential growth strategy and the proven ability of the global team to execute and consistently deliver results, particularly in one of the most challenging macro environments in decades.

2024 Financial Targets

• Approximately $8 billion of sales, an increase from the prior goal of approximately $7.4 billion
• Approximately $3.2 billion of global Champion brand sales, an increase from the prior goal of approximately $3.0 billion
• Approximately $1.15 billion of adjusted operating profit, an increase from the prior goal of approximately $1.05 billion
• Adjusted operating margin of approximately 14.4%, an increase from the prior goal of nearly 14.3%
• Approximately $1.6 billion of cumulative three-year free cash flow, an increase from the prior goal of approximately $1.5 billion

In addition, the Company announced it reached another milestone in its Full Potential initiative to focus its portfolio in areas with the greatest potential for growth and returns. As part of this initiative, the Company announced its intention to sell its U.S. Sheer Hosiery business. As a result, the Company recorded a non-cash impairment charge in the fourth quarter of approximately $38 million to reflect the net asset write down. The assets and liabilities of the U.S. Sheer Hosiery business are reflected in ‘held for sale’ on the balance sheet as of January 1, 2022. The Company expects the business to generate approximately $60 million of sales and essentially zero operating profit in 2022, which is reflected in the Company’s current 2022 guidance estimates.

First Quarter and Full-Year 2022 Financial Outlook

For first-quarter 2022, which ends on April 2, 2022, the Company currently expects:

• Net sales from continuing operations of approximately $1.51 billion to $1.57 billion, which includes a projected headwind of approximately $35 million from changes in foreign currency exchange rates. At the midpoint, this represents approximately 2% growth over prior year on a reported basis and 4% growth on a constant currency basis.

• GAAP operating profit from continuing operations to range from approximately $120 million to $150 million.

• Adjusted operating profit from continuing operations to range from approximately $135 million to $165 million and includes a projected headwind of approximately $5 million from changes in foreign currency exchange rates. The midpoint of adjusted operating profit represents an operating margin of 9.7%.

• Charges for actions related to Full Potential of approximately $15 million.

• Interest and other expenses of approximately $35 million.

• An effective tax rate of approximately 17% on both a GAAP and adjusted basis.

• GAAP earnings per share from continuing operations to range from approximately $0.20 to $0.27.

• Adjusted earnings per share from continuing operations to range from approximately $0.24 to $0.31.

• Fully diluted shares outstanding of approximately 353 million.

• Earnings per share and fully diluted share count guidance exclude any potential impact from share repurchases.

For fiscal-year 2022, which ends on December 31, 2022, the Company currently expects:

• Net sales from continuing operations of approximately $7.0 billion to $7.15 billion, which includes a projected headwind of approximately $100 million from changes in foreign currency exchange rates. At the midpoint, this represents approximately 4% growth over prior year on a reported basis and 5.5% growth on a constant currency basis.

• GAAP operating profit from continuing operations to range from approximately $780 million to $850 million.

• Adjusted operating profit from continuing operations to range from approximately $840 million to $910 million, which includes a projected headwind of approximately $14 million from changes in foreign currency exchange rates. The midpoint of adjusted operating profit guidance range represents an operating margin of 12.4%.

• Charges for actions related to Full Potential of approximately $60 million.

• Interest and other expenses of approximately $142 million.

• An effective tax rate of approximately 17% on both a GAAP and adjusted basis.

• GAAP earnings per share from continuing operations to range from approximately $1.50 to $1.67.

• Adjusted earnings per share from continuing operations to range from approximately $1.64 to $1.81.

• Cash flow from operations of approximately $500 million to $550 million.

• Capital expenditures of approximately $150 million to $175 million.

• Fully diluted shares outstanding of approximately 353 million.

• Earnings per share and fully diluted share count guidance exclude any potential impact from share repurchases.

HanesBrands has updated its quarterly frequently-asked-questions document, which is available at www.Hanes.com/FAQ.

Note on Adjusted Measures and Reconciliation to GAAP Measures

To supplement financial results prepared in accordance with generally accepted accounting principles, the Company provides quarterly and full-year results concerning certain non‐GAAP financial measures, including adjusted EPS from continuing operations, adjusted income from continuing operations, adjusted income tax expense, adjusted income from continuing operations before income tax expense, adjusted operating profit (and margin), adjusted SG&A, adjusted gross profit (and margin), adjusted other expenses, EBITDA and adjusted EBITDA.

Adjusted EPS from continuing operations is defined as diluted EPS from continuing operations excluding actions and the tax effect on actions. Adjusted income from continuing operations is defined as income from continuing operations excluding actions and the tax effect on actions. Adjusted income tax expense is defined as income tax expense excluding actions. Adjusted income from continuing operations before income tax is defined as income from continuing operations before income tax excluding actions. Adjusted operating profit is defined as operating profit excluding actions. Adjusted SG&A is defined as selling, general and administrative expenses excluding actions. Adjusted gross profit is defined as gross profit excluding actions. Adjusted other expenses is defined as other expenses excluding actions.

Charges for actions taken in 2021 include professional fees, operating model charges, loss on classification of assets held for sale, supply chain segmentation charges, technology charges and intangible asset impairment charges related to our Full Potential plan and early extinguishment and refinancing of debt.

Charges for actions taken in 2020 include suppl

Contacts

News Media contact: Kirk Saville (336) 979-7293

Analysts and Investors contact: T.C. Robillard (336) 519-2115

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