Hanesbrands Earnings: Expectations Met Despite Ongoing Demand Challenges; Shares Very Undervalued

Narrow-moat Hanesbrands reported a loss amid slow sales of both innerwear and activewear in the first quarter but is on track to return to profitability in the second quarter and reach full-year expectations. We do not expect to make any material change to our $17.30 fair value estimate and view shares as very attractive for investors willing to wait for its operating performance to improve. Although it has gone through a long period of weak results, we still think it is on a path to return to operating margins above 12% from the recent mid-single-digit levels and pay down significant debt. Hanes has reduced debt by over $500 million over the past year and expects to retire about $300 million in debt in 2024. We forecast its net debt/adjusted EBITDA will fall to less than 4 times by the end of 2025 from about 5 times now.