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Exploring Hanesbrands’ Project Booster

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Project Booster

During 1Q17, Hanesbrands’ (HBI) management announced a new initiative called Project Booster. The focus of this multiyear initiative is to boost organic sales growth, reduce costs, and drive cash flows.

Hanesbrands has seen weakening organic sales over the past couple of quarters. As we discussed in the previous article, the company’s top line was mainly driven by acquisitions in 2016. Its management has even predicted a fall in 2017 organic sales.

As we can see in the graph above, the company’s expenses have also been on the rise.

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Financial implications

HBI’s management expects the Project Booster initiative to generate ~$150 million in annualized cost savings. Of these total savings, $50 million will be invested in targeted growth opportunities. The company also plans to invest in marketing and brand-building initiatives as well as in worldwide omnichannel and global growth.

Online expansion and international growth will be key areas of focus for HBI. The company plans to invest in its domestic distribution center network to better serve the demands of the online market.

HBI is likely to see cost savings from headcount reduction, supply chain optimization, and working capital improvements. The company plans to reduce its headcount by 220 employees. By 2020, these efforts are likely to generate ~$300 million in incremental annual cash from operations. However, for the current year, the project is expected to be neutral.

Investors looking for exposure to HBI can consider investing in the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests 0.33% of its portfolio in HBI.

Read on to learn about Hanesbrands’ profitability and margin expectations.

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