A customer shopping for Hanes underwear at a Target store in Chicago, Illinois. Tannen Maury | Bloomberg | Getty Images
Activist investment firm Barington Capital Group has publicly expressed its concerns and demands for clothing manufacturer Hanesbrands. Barington is pressuring Hanesbrands to reduce costs, increase cash flow, and potentially replace its CEO as the company’s market value continues to diminish.
In a letter addressed to Hanesbrands Chairman Ronald Nelson, Barington CEO James Mitarotonda highlighted the challenges faced by the company and called for a series of changes to be implemented. Mitarotonda emphasized the need for immediate focus on generating cash and reducing debt in order to create long-term value for shareholders. He also criticized management’s inadequate response to the company’s deteriorating financial performance and highlighted the negative impact of Hanesbrands’ high levels of debt.
Hanesbrands, known for its basic T-shirts, bras, and underwear, has experienced a significant 17% decline in its stock this year. The company has struggled with declining sales and profits as wholesalers decrease their orders.
Following Barington’s demands, Hanesbrands’ shares experienced a 5% increase on Tuesday.
Barington’s specific requests include a reduction in selling, general, and administrative expenses by at least $300 million per year, with the savings being used to repay debt. They also call for improvements in inventory management practices. Additionally, Barington believes that Hanesbrands would benefit from new board members who possess relevant skills and experience, and possibly a new CEO to turnaround the company’s performance.
In response, Hanesbrands, scheduled to report its earnings on Thursday, expressed its commitment to its current growth plans but acknowledged that it is open to considering additional strategies to improve performance and create value. However, the company appeared resistant to making changes to its board of directors, stating that the current board and management team possess the necessary expertise and experience relevant to the company’s strategy.
It remains unclear how large of a stake Barington holds in Hanesbrands and whether they will attempt to nominate new board members.
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