Hanesbrands Faces Activist Campaign

Hanesbrands, a prominent consumer goods company, is now the subject of an activist campaign led by investor Barington Capital. In a letter addressed to the company’s board, Barington Capital explicitly outlines its concerns and proposed changes. These include a shake-up of Hanesbrands’ board of directors and management team, cost reduction measures, inventory level optimization, and addressing the burden of debt. The letter by James Mitarotonda, Chairman of Barington, was made public on Tuesday, shedding light on the campaign’s aims.

According to Mitarotonda, Hanesbrands’ management has largely failed to effectively respond to recent market challenges, the consequences of which are reflected in the company’s declining results. He also emphasizes that the company’s accumulated debt further hampers its ability to generate value for shareholders. Hanesbrands’ stock has seen an 18% decrease this year, a stark contrast to the rise of the S&P 500. Over the past five years, the company’s shares have plummeted by 72%. However, on Tuesday, the stock showed signs of recovery as investors rallied behind the activist campaign, resulting in a 1.3% increase to $5.28 in early trading.

Barington Capital argues that the current management team lacks the necessary expertise to effectively run the company. It specifically calls into question CEO Stephen Bratspies’ ability to lead a global vertically integrated apparel business, citing his past experience at Walmart, Sam’s Club, and Frito-Lay. Barington suggests that Hanesbrands may need to search for a new chief executive with the required operational and merchandising skills, as well as industry experience to successfully guide the business.

Furthermore, Barington recommends that Hanesbrands diversify its board by adding directors with backgrounds in apparel, fashion, and manufacturing. This infusion of expertise could prove invaluable in navigating the challenges faced by the company in these industries.

Overall, the demands put forward by Barington Capital highlight the need for substantial changes within Hanesbrands. The investor firmly believes that such changes are crucial for the company’s future success and the maximization of shareholder value. As the activist campaign gains momentum, it remains to be seen how Hanesbrands will respond and whether a new course will be charted for the company’s future.

Hanesbrands’ Commitment to Strategy and Portfolio Reflected in Board Refresh

In a recent press release, Hanesbrands highlighted the expertise of its board and management team in areas directly relevant to the company’s strategic objectives and portfolio. The company also emphasized its commitment to refreshing the board by adding three independent directors within the past four years.

As part of its ongoing efforts, Hanesbrands is implementing initiatives aligned with its Full Potential plan, which it expects will unlock significant opportunities. These initiatives will be further discussed in the forthcoming second quarter 2023 earnings report.

While maintaining a focused approach, the company remains open to exploring additional paths that can enhance performance and create value for stakeholders.

One of the requests made by Barington, an investment firm, is for Hanesbrands to reduce selling, general, and administrative expenses by a minimum of $300 million per year. Barington advises utilizing the resulting cash savings to reduce the company’s debt burden. As of April 1, Hanesbrands’ long-term debt stood at nearly $3.6 billion, according to its latest quarterly filing. The company’s current market capitalization is valued at $1.86 billion.

The size of Barington’s investment has not been disclosed. Founded in 2000, the firm has previously undertaken activist campaigns targeting retail and apparel companies. Notably, Barington played a role in urging the separation of Victoria’s Secret (VSCO) and Bath & Body Works (BBWI) from L Brands.