August has been a busy month for HanesBrands, as news about plant closures, cost-cutting, and job cuts swirl.
Key points:
- Clarksville, Arkansas, hosiery plant to close
- Barington Capital Group calls for change
- 250 corporate jobs cut
Clarksville Plant to Close, Ending U.S. Manufacturing
Earlier this month, news broke about HanesBrands’ Clarksville, Arkansas, plant shuttering — ending stateside manufacturing for the company by the end of September.
The closing of the hosiery production plant, which once employed 570 people, leaves roughly 330 people without work. However, Arkansas Business says an “outplacement support program” and separation pay will be available for full- and part-time workers.
In 2015, the company moved production from Honduras to Arkansas, adding 120 jobs to the area. The move was a $1.5 million investment, and Hanes received $900,000 in incentives and training assistance from the state and county. Despite the investments made, the company shared its plans to sell its U.S. Sheer Hosiery business in 2021.
“Decisions that affect our workforce are taken very seriously,” HanesBrands shared in a statement. “We thank our associates in Clarksville for their contributions to HanesBrands and are committed to working closely with them to provide support through the transition.”
Over the last four years, HanesBrands has said goodbye to other facilities. In 2019, it closed its sock manufacturing facility in Mount Airy, North Carolina. That closure eliminated 220 jobs. Earlier this year, it reduced its domestic production network with the sale of its fabric-manufacturing plant in Woolwine, Virginia, for $3.1 million.
On Aug. 7, activist investment firm Barington Capital Group penned a letter to HanesBrands asking the company to cut costs and debt and possibly appoint a new CEO.
“We believe that HanesBrands currently sits at a critical juncture and must immediately focus on cash generation and debt reduction in order to create long-term value for shareholders,” Barington CEO James Mitarotonda wrote to HanesBrands Chairman Ronald Nelson. “We believe that management’s largely ineffective response to recent market challenges is responsible for the company’s rapidly deteriorating results. Further, HanesBrands’ excessive debt burden appears to amplify the impact of poor operating performance on HanesBrands’ ability to create value for shareholders.”
According to CNBC, HanesBrands has seen a drop in its stock this year, dipping 17%. However, its shares closed 5% higher on Aug. 8.
As wholesale buyers have pulled back on ordering, HanesBrands has dealt with profits falling, says CNBC. As a result, Barington wants Hanes to reduce expenses by at least $300 million annually, using the savings to pay down debts. It also asks the company to improve inventory practices and believes new board members and even a new CEO could help push these efforts forward.
“We believe that the right board and management team and an immediate focus on cash generation and debt reduction can position HanesBrands to become a best-in-class, vertically integrated apparel company and achieve durable profitable growth,” Mitarotonda wrote.
In response to Barington making its letter public, HanesBrands released a statement, reading in part: “The Board and management team believe initiatives that are being executed as part of the company’s Full Potential plan will unlock significant opportunities, which we look forward to discussing later this week as part of our second quarter 2023 earnings report. We are also, however, open-minded with regard to additional paths to improve performance and create value.”
Corporate Job Cuts
On Aug. 10, HanesBrands confirmed it eliminated at least 250 U.S. corporate jobs. The Winston-Salem Journal (WSJ) says the work will go to international operations as part of the Full Potential initiative. The three-year program aims to drive about $1.2 billion in incremental revenue and expand operating margins to 14.3% by 2024.
Bratspies told analysts during Hanes’ second-quarter conference call that the company “reorganized and relocated approximately 250 corporate roles to leverage our talent pools outside the U.S., standardized processes, and reduced expenses by approximately $15 million.” He did not share what roles were affected by the restructuring.
This round of cuts is the second one announced in 2023. In January, the company cut an unspecified number of jobs in response to financial and sales challenges.
“We continue to make structural changes to our agile supply chain and organization, as well as take costs out of the business,” Bratspies told analysts.
According to WSJ, roughly 88% of Hanes’ workforce (45,000 jobs) was reported to be outside the U.S. as of Dec. 31. During the Q2 conference call, HanesBrands listed its overall workforce at 51,000.
“We’re taking a number of actions, including additional cost-saving initiatives, to improve performance, as well as actively looking across the business at additional options to enhance shareholder value,” Bratspies shared.
The news comes as layoffs sweep the U.S. workforce. Job cuts have touched several industries from apparel and finance to tech. H&M cut 1,500 jobs in late 2022, Gap cut more than 2,000 over the last year, and 3M’s cuts hit 8,500 in April. Business Insider says layoffs stem from slowed business growth and high labor costs.
