Hanesbrands Draws Activist Investor Seeking to Shake Up Underwear Maker

Hanesbrands has drawn an activist investor who is pushing the underwear company to make changes to its board and other moves to reverse a slide in its stock.

Barington Capital has built an undetermined stake in Hanesbrands, known for its everyday basic underwear and T-shirts, and is asking the company to find new board members with apparel and manufacturing experience and possibly a new CEO, according to a letter made public Tuesday. The letter was first reported on by The Wall Street Journal.

It couldn’t be learned whether Barington will seek to nominate its own director candidates ahead of Hanesbrands’ coming shareholder meeting or just encourage the company to refresh its board. A nomination window runs from Oct. 17 through Nov. 16, according to proxy materials.

Hanesbrands said in a statement that its management team has held discussions with Barington over the past year. It said its board remains committed to “ongoing refreshment and having the right mix of expertise and diversity.” The company also said it is “open-minded with regard to additional paths to improve performance and create value.”

Barington, which has successfully pushed for changes at retailers and restaurant chains including L Brands (before it broke into Victoria’s Secret and Bath & Body Works), Avon Products and Olive Garden parent Darden Restaurants, is also asking for Hanesbrands to cut costs by at least $300 million annually and slash its inventory levels.

Winston-Salem, N.C.-based Hanesbrands is known for making clothing under its namesake brand, as well as Champion and Bonds. Its products are mostly sold through other retailers and online, but it has a handful of its own bricks-and-mortar shops. 

Shares of Hanesbrands have tumbled 18% so far this year. The S&P 500 Retail index, by comparison, is up about 10% in the same period.

The stock plummeted earlier in the year after Hanesbrands said it would eliminate its dividend to shore up its balance sheet. Consumers have been pulling back in the U.S. as well as overseas, and retailers are cutting their orders to reduce their own inventory positions. 

Hanesbrands’ total sales dropped 8% in 2022 and are expected to fall again this year, which led the company to push an $8 billion annual sales target back by two years to 2026. Hanesbrands managed to end last year with inventory levels 6% lower than in 2021. 

“We believe that Hanesbrands currently sits at a critical juncture and must immediately focus on cash generation and debt reduction,” Barington Founder James Mitarotonda said in the letter to Chairman Ronald Nelson dated Monday. “We believe that management’s largely ineffective response to recent market challenges is responsible for the company’s rapidly deteriorating results.” 

Hanesbrands current CEO, Stephen Bratspies, has been in the position since August 2020, when he joined from Walmart. In its letter, Barington argues that Bratspies’ experience “has not prepared him” for the role at Hanesbrands, which lost its chief financial officer earlier in the year. 

Barrington said it believes Hanesbrands has a recognized portfolio of brands with strong distribution online and through other retailers. However, it says management has failed to address industry challenges and allowed debt to swell to over $3.5 billion. The company’s market capitalization is roughly $1.8 billion. 

Barrington was founded in 2000 by Mitarotonda, who has sat on boards of companies including Pep Boys and Avon Products. The firm primarily invests in consumer and industrial companies.

Write to Lauren Thomas at [email protected]