Trouble in Paradise: Hanesbrands Faces an Uphill Battle

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It comes as no surprise that an activist would set their sights on Hanesbrands, but breaking through to them may prove to be a daunting task.

Hanesbrands’ impressive portfolio, which includes renowned brands like Hanes, Maidenform, and Playtex, has long been the foundation of many people’s wardrobes. However, Wall Street has not been kind to their stock. As of now, shares have plummeted by a staggering 12% this year. According to a FactSet survey, out of the nine analysts covering the company, only one is bullish on the stock. Furthermore, the average price target stands at $4.57, approximately 18% lower than current trading levels.

Barington Capital, an influential activist fund, has now entered the fray. Barington made waves in the past with their successful campaign to separate L Brands into Victoria’s Secret (VSCO) and Bath & Body Works (BBWI). Their list of demands for Hanesbrands includes appointing a new CEO, implementing board changes, reducing inventory, and slashing costs by $300 million to alleviate the company’s debt burden.

Hanesbrands responded to Barington’s push by stating that it remains “open-minded” about exploring additional avenues to improve performance and create value. However, during an analyst call on Thursday, the company refrained from discussing Barington’s involvement in detail.

While some are receptive to Barington’s proposals, others remain skeptical. CEO Stephen Bratspies, who joined Hanesbrands in 2020, inherited the company’s debt burden and should not shoulder all the blame, according to Wedbush Securities analyst Tom Nikic. In his research report, Nikic reiterated his Neutral rating on Hanesbrands stock and set a price target of $5.50. He acknowledges that cutting costs is a sensible approach but cautions against going overboard, as there is a risk of compromising the company’s infrastructure.

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