HBI Q1 Earnings Call: Margin Expansion and Tariff Mitigation Take Center Stage

Clothing company Hanesbrands (NYSE:HBI) met Wall Street’s revenue expectations in Q1 CY2025 as sales rose 2.1% year on year to $760.1 million. Its non-GAAP profit of $0.07 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Hanesbrands’ first quarter results reflected the impact of its ongoing transformation program, with management pointing to cost reductions, supply chain streamlining, and brand investments as central to its performance. CEO Steve Bratspies credited assortment management and disciplined operating capabilities for margin expansion, noting that international markets like Australia and Asia outperformed, while U.S. sales were pressured by ongoing consumer headwinds—especially in the intimate apparel segment. Bratspies was candid about the company’s challenges in intimates, stating, "I'm not happy with where we are in intimates right now. We have work to do to continue to improve that business." CFO Scott Lewis highlighted that sales outpaced internal expectations, and that cost savings initiatives are now at a scale where they more than offset incremental brand investments, supporting both profitability and lower SG&A expenses.

Looking ahead, Hanesbrands’ guidance for the coming quarters is shaped by its ability to manage new U.S. tariffs, capture incremental revenue opportunities, and further execute its cost reduction strategy. Management believes the company is well-positioned to mitigate cost headwinds from tariffs through a mix of pricing actions, supply chain flexibility, and ongoing cost savings, with Bratspies stating, "We believe that we can fully mitigate the tariff headwinds, both in the short and the long-term." The company expects its Western Hemisphere manufacturing network and strong retailer relationships to create opportunities to gain market share as competitors face tariff-related disruptions. Management reiterated that growth in basics and active categories, as well as expansion into scrubs and loungewear, will help offset ongoing weakness in intimates. Lewis emphasized that the company’s transformed supply chain provides both near-term surge and long-term growth capacity, supporting confidence in Hanesbrands’ ability to navigate evolving market dynamics.

Key Insights from Management’s Remarks

Management attributed margin expansion and earnings growth to cost savings, supply chain optimization, and category mix, while noting that tariff-related disruptions are driving both challenges and new revenue opportunities.

• Transformation plan impact: The company’s margin improvement and profit growth were largely attributed to the benefits of its transformation program, which included the removal of fixed costs, debt reduction, and simplification of its business model. Management stated these efforts have made Hanesbrands “healthier, leaner, and more profitable.”
• International sales outperformance: International markets, particularly Australia and Asia, were cited as outperformers, with organic constant currency sales up 4%. These regions helped offset persistent softness in the U.S. market, especially in the intimate apparel category.
• Intimates under pressure: Management acknowledged ongoing weakness in the intimate apparel business, attributing the decline to macroeconomic headwinds and exposure to the challenged mid-tier department store channel. Bratspies noted that while brands like Bali and Playtex are performing well in select channels, Maidenform is undergoing a strategic pivot to focus on T-shirt bras to address broader category needs.
• Tariff mitigation strategies: Hanesbrands’ leadership emphasized its ability to manage the impact of new U.S. tariffs through a combination of cost reductions, pricing actions, and supply chain flexibility. The company no longer sources U.S. products from China and highlighted its balanced East-West manufacturing network as a key advantage.
• Incremental revenue opportunities: The current tariff environment is generating inbound interest from retailers seeking alternatives to China-sourced products. Hanesbrands is leveraging its Western Hemisphere supply chain and brand strength to pursue these opportunities, aiming to gain additional shelf space and market share, particularly in basics and activewear.

Drivers of Future Performance

Hanesbrands’ forward guidance is driven by its approach to tariffs, product mix, and ongoing cost initiatives, with management signaling a measured outlook amid macro uncertainty.

• Tariff navigation and mitigation: Management expects that announced tariffs will not impact costs until the fourth quarter, allowing time to implement mitigation actions. These include cost containment, targeted price increases, and optimizing the supply chain to minimize tariff exposure. The company’s significant U.S. content in products provides natural offsets to reciprocal tariffs.
• Growth in basics and new categories: Leadership anticipates continued growth in basics, activewear, and new businesses like scrubs and loungewear. These segments are expected to help balance ongoing softness in intimates, with management highlighting innovation and expanded shelf space as key contributors.
• Cost discipline and capacity for growth: The company will maintain its focus on cost reduction and SG&A leverage, supported by a streamlined supply chain with built-in surge capacity. Management believes this foundation will support both short-term performance and long-term expansion, even as consumer demand remains unpredictable.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will watch (1) the pace and effectiveness of tariff mitigation actions as the fourth quarter approaches, (2) evidence that Hanesbrands can capture incremental revenue through expanded retailer programs and shelf space, and (3) stabilization or recovery in the intimates category, particularly as new Maidenform initiatives are rolled out. Progress on cost reduction and SG&A leverage will also remain key indicators of execution.

Hanesbrands currently trades at a forward P/E ratio of 9.6×. Should you double down or take your chips? Find out in our full research report (it’s free).

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