Downsizing tapers off at Hanesbrands

In a time when most corporations are making cautious forecasts about sales - if they predict at all - Hanesbrands is taking a bullish approach about its short- and midterm future.

It's an approach that, if successful, could lead to a more stable employment base in Forsythe County following the stunning elimination of about half of the company's blue- and white-collar jobs since the spinoff from Sara Lee in September 2006.

The apparel company says it is primed for a sales and earnings surge.

"Hanesbrands is at an inflection point to begin realizing its significant growth potential," Richard Noll, the company's chairman and chief executive, said at a recent presentation to investors.

"We see very strong growth in 2010 and are targeting consistently strong growth for the longer term," Noll said.

The company has raised its sales-growth projection for 2010 from 5 percent to as high as 8 percent. It said diluted earnings per share could double over the next three to four years, assuming earnings growth between 25 percent and 35 percent and the achievement of long-term growth targets.

By contrast, Hanesbrands reported an 8.4 percent drop in sales in 2009 to nearly $3.9 billion, including declines in its five primary sales categories.

The company said in January that "locked-in shelf-space gains" would generate about $200 million of additional sales in 2010 for a 5 percent increase. Because consumer spending may rebound at a higher level than expected, the company says that additional sales could approach $300 million.

Hanesbrands' sales and earnings goals appear to be realistic and achievable, said Michael Lord, an associate professor of management at Wake Forest University.

"Despite the continuing tough economy, there has been some stabilization of consumer markets," Lord said. "Consumers are likely to remain cautious and conservative spenders in this economy, but a person can only wear a pair of underwear for so long, recession or not."

Foreign vs. Forsyth

For the long term, Hanesbrands is projecting sales growth between 2 percent and 4 percent and earnings growth between 10 percent and 20 percent - with an emphasis on the high end of each range. That could mean full-year earnings of up to $4 a share by 2013, compared with $1.66 in 2009.

The company said it has achieved most of its restructuring goals since the spinoff - shifting the bulk of its production and supply-chain operations to lower-cost sites and third-party vendors in the Caribbean, Central America and Southeast Asia.

In terms of jobs, that restructuring, has proved to be especially bruising on the Triad and North Carolina.

In September 2006, the company had 4,900 employees in Forsyth County - nearly 10 percent of its overall work force - and 8,600 in North Carolina.

Since the spinoff, Hanesbrands has closed 12 domestic plants. That includes 610 jobs at its fabrics plant in Winston-Salem, a hosiery cornerstone.

By the time Hanesbrands completes the closing of its historic Weeks plant by the end of 2010 and a distribution center in Winston-Salem in early April, it will have about 2,500 employees in Forsyth and 3,785 in the state.

That includes reducing its headquarters staffing by at least one-third. It also will have just one plant in North Carolina, a sock plant in Mount Airy.

By comparison, Hanesbrands has hired more than 7,000 employees in Asia alone since 2006.

Matt Hall, a company spokesman, said the company has reached a stable work-force size at its headquarters, "although economic conditions always have a say in that."

Goals for market share

Another reason why Hanesbrands is being so bold is a significant increase in shelf space with key retail customers such as Walmart, Target and Kohl's in the United States and Carrefour internationally. It has gained new or expanded product placement with other retailers that include Disney, Dollar General, J.C. Penney, Macy's and The Sports Authority.

Company officials think consumer demand is building globally, particularly in Brazil, China and India.

"Our goal is to not only be No. 1 in every category in which we compete, but to be No. 1 in every subcategory and at every account," said Bill Nictakis, the company's chief commercial officer.

The company said it holds the top U.S. market share by sales in T-shirts, fleece, socks, men's underwear, sheer hosiery and children's underwear. It is No. 2 in bras and panties.

Noll said that Hanesbrands is positioned to pay about $200 million for rivals in its core apparel and essential categories. Among the buying criteria: Any such company must fit within its supply-chain network and provide access to new products or international sales.

Hanesbrands is likely to make one or more purchases this year because "this is a good time to buy companies that fit into your business model," said Peter Tourtellot, the managing director of Anderson Bauman Tourtellot Vos & Co., a turnaround-management company in Greensboro.

"Strong companies take advantage to build market share by buying other business and gaining market share from weaker competitors," Tourtellot said. "I like the strategy because opportunities - poor economic times - like this do not come along very often, so Hanesbrands should take advantage of it now."