Hanesbrands faces activist pressure from Barington Capital Group

A customer at a Goal store in Chicago, Illinois shops for Hanes underwear

Tannen Maury | Bloomberg | Getty Images

Activist investment firm Barington Capital Group is pressuring Hanesbrands to scale back its costs, generate money and maybe pick a latest CEO because the apparel maker’s market cap shrinks, the firm announced Tuesday.

In a Monday letter to Hanesbrands Chairman Ronald Nelson, Barington’s CEO, James Mitarotonda, outlined the problems facing the corporate and called for a series of changes.

“We imagine that Hanesbrands currently sits at a critical juncture and must immediately concentrate on money generation and debt reduction with the intention to create long-term value for shareholders,” he wrote. 

“We imagine that management’s largely ineffective response to recent market challenges is chargeable for the Company’s rapidly deteriorating results,” Mitarotonda added. “Further, Hanesbrands’ excessive debt burden appears to amplify the impact of poor operating performance on Hanesbrands’ ability to create value for shareholders.”

Hanesbrands, which is understood for its line of basic T-shirts, bras and underwear, has seen its stock plummet about 17% this 12 months. It has grappled with soft sales and plunging profits as wholesalers pull back on ordering.

The corporate’s shares rose nearly 5% on Tuesday.

Barington desires to see Hanesbrands reduce selling, general and administrative expenses by at the least $300 million per 12 months and use the savings to pay down debt. It also wants the corporate to enhance its inventory practices.

Further, Barington believes Hanesbrands needs latest board members with “more relevant skills and experience,” and maybe a latest CEO, to show its business around, the letter said. 

“We imagine that the correct board and management team and an instantaneous concentrate on money generation and debt reduction can position Hanesbrands to develop into a best-in-class, vertically integrated apparel company and achieve durable profitable growth,” Mitarotonda wrote. 

In response, Hanesbrands, which is as a result of report earnings on Thursday, said it stands by its current growth plans but is “open-minded with regard to additional paths to enhance performance and create value.” 

It also appeared immune to any changes to its board.

“HanesBrands’ Board actively oversees the event and execution of our strategy, operations and capital allocation decisions, in collaboration with the management team. The Board and management team are deeply experienced in areas relevant to our strategy and portfolio,” the corporate said in a press release. 

“Further, the Board is committed to ongoing refreshment and having the correct mix of experience and variety, as demonstrated by the addition of three independent directors to our Board during the last 4 years,” Hanesbrands said.

It isn’t clear how large Barington’s stake in Hanesbrands is, and whether it can attempt to nominate any board members.