Hanesbrands Swings to Profit Amid Gildan Merger, Strategic Divestitures

TL;DR

**HBI is a buy on the Gildan merger news, as the company's financials are improving and the acquisition offers a clear, albeit modest, premium.**

AI Summary

Hanesbrands Inc. (HBI) reported a significant turnaround in its financial performance for the quarter ended September 27, 2025, with net income soaring to $270.7 million, a substantial increase from $29.9 million in the prior-year quarter. Diluted earnings per share also saw a dramatic rise to $0.76, up from $0.08. This improvement was largely driven by a positive income tax benefit of $219.5 million, contrasting sharply with an expense of $11.4 million in the same period last year. Operating profit increased to $107.5 million from $94.0 million, despite a slight dip in net sales to $891.7 million from $900.4 million. For the nine months ended September 27, 2025, net income reached $342.9 million, a stark reversal from a net loss of $307.6 million in the comparable 2024 period. The company's strategic decision to exit the global Champion business, U.S.-based outlet stores, and Champion Japan business, now classified as discontinued operations, is a key factor in these results. A definitive merger agreement with Gildan Activewear Inc. was announced on August 13, 2025, under which Gildan will acquire Hanesbrands for 0.102 common shares of Gildan and $0.80 in cash per HBI share, with the transaction expected to close in late 2025 or early 2026.

Why It Matters

This filing is critical for investors as it reveals Hanesbrands' significant financial recovery, largely due to a substantial tax benefit and the strategic divestiture of its Champion businesses. The impending acquisition by Gildan Activewear Inc. for 0.102 common shares and $0.80 cash per HBI share provides a clear exit strategy and valuation for current shareholders, impacting their future investment in the combined entity. For employees, the merger introduces uncertainty and potential restructuring, while customers may see changes in product offerings and brand focus under Gildan's ownership. In the broader apparel market, this consolidation could intensify competition, particularly for rivals like Fruit of the Loom, as Gildan strengthens its market position.

Risk Assessment

Risk Level: medium — The risk level is medium due to the pending merger with Gildan. While the merger offers a clear exit, there's a risk of termination, which could trigger a $67.5 million fee for Hanesbrands or an expense reimbursement of up to $17.5 million if stockholder approval fails. Additionally, the filing notes a 'meaningful decline in the fair value cushion above the carrying value' for the company's goodwill, indicating potential future impairment risks if market conditions deteriorate.

Analyst Insight

Investors should hold Hanesbrands shares to capitalize on the pending acquisition by Gildan, which offers a defined cash and stock consideration. Monitor the progress of regulatory approvals and stockholder votes, as any delays or unexpected hurdles could impact the transaction timeline or even its completion. Consider the implications of owning Gildan shares post-merger.

Financial Highlights

revenue

$891,683,000

operating Margin

12.06%

total Assets

$3,144,389,000

net Income

$270,736,000

eps

$0.76

gross Margin

40.76%

cash Position

$217,573,000

revenue Growth

-0.97%

Revenue Breakdown

Key Numbers

• $270.7M — Net Income (Q3 2025) (Significant increase from $29.9M in Q3 2024, driven by tax benefit.)
• $0.76 — Diluted EPS (Q3 2025) (Up from $0.08 in Q3 2024, reflecting improved profitability.)
• $891.7M — Net Sales (Q3 2025) (Slight decrease from $900.4M in Q3 2024.)
• $219.5M — Income Tax Benefit (Q3 2025) (Major contributor to net income, compared to $11.4M expense in Q3 2024.)
• $342.9M — Net Income (YTD 2025) (Reversal from a $307.6M net loss in YTD 2024.)
• 0.102 — Gildan Common Shares per HBI Share (Part of the consideration in the Gildan merger agreement.)
• $0.80 — Cash per HBI Share (Part of the consideration in the Gildan merger agreement.)
• $67.5M — Hanesbrands Termination Fee (Potential fee if the merger agreement is terminated under specified circumstances.)
• 353,802,157 — Common Stock Outstanding (As of October 31, 2025.)
• $446.4M — Total Stockholders' Equity (Increased from $34.0M at December 28, 2024.)

Key Players & Entities

• Hanesbrands Inc. (company) — registrant in the 10-Q filing
• Gildan Activewear Inc. (company) — acquiring company in the merger agreement
• Champion (company) — business being exited as discontinued operations
• $270,736 (dollar_amount) — net income for the quarter ended September 27, 2025
• $29,951 (dollar_amount) — net income for the quarter ended September 28, 2024
• $342,891 (dollar_amount) — net income for the nine months ended September 27, 2025
• $307,551 (dollar_amount) — net loss for the nine months ended September 28, 2024
• $0.76 (dollar_amount) — diluted earnings per share for the quarter ended September 27, 2025
• $0.08 (dollar_amount) — diluted earnings per share for the quarter ended September 28, 2024
• $67,500 (dollar_amount) — Hanesbrands Termination Fee if merger agreement is terminated

FAQ

Risk Factors

• Merger Agreement Termination [medium — legal]: Hanesbrands faces a potential $67.5 million termination fee if the merger agreement with Gildan Activewear Inc. is terminated under specific conditions outlined in the agreement. This risk is heightened by the announcement of the definitive agreement on August 13, 2025.
• Discontinued Operations Impact [medium — operational]: The company is undergoing significant strategic changes, including exiting the global Champion business, U.S.-based outlet stores, and Champion Japan. These are classified as discontinued operations, impacting reported net income and requiring careful analysis of ongoing business performance.
• Competitive Landscape [medium — market]: Hanesbrands operates in a competitive apparel market. While the company reported improved operating profit ($107.5M vs $94.0M in Q3 2025), net sales saw a slight decline ($891.7M vs $900.4M), indicating ongoing market pressures.
• Tax Benefit Volatility [low — financial]: The significant positive income tax benefit of $219.5 million in Q3 2025 was a primary driver of the surge in net income ($270.7M vs $29.9M). Reliance on such benefits can introduce volatility and mask underlying operational trends.

Industry Context

Hanesbrands operates in the highly competitive global apparel and activewear market, facing pressures from both established brands and emerging players. Key industry trends include a growing demand for sustainable products, direct-to-consumer (DTC) sales channels, and the influence of athleisure wear. The company's strategic divestitures and pending acquisition by Gildan reflect a response to these dynamic market conditions and a focus on optimizing its brand portfolio.

Regulatory Implications

The pending acquisition by Gildan Activewear Inc. will be subject to regulatory review and approval in relevant jurisdictions, potentially including antitrust considerations. Hanesbrands' ongoing operations must also comply with various financial reporting standards (GAAP) and tax regulations, particularly concerning the accounting treatment of discontinued operations and the recognition of tax benefits.

What Investors Should Do

1. Monitor the closing of the Gildan merger: Investors should track the progress and any potential hurdles in the completion of the acquisition, as it represents a significant event for HBI shareholders.
2. Analyze ongoing business performance separately from discontinued operations: Given the strategic exits, it's crucial to assess the profitability and growth of Hanesbrands' continuing operations to understand the underlying health of the core business.
3. Evaluate the impact of the tax benefit: Understand that the significant net income increase in Q3 2025 was heavily influenced by a one-time tax benefit, and future earnings may not reflect this level of profitability without similar benefits.

Key Dates

• 2025-08-13: Definitive Merger Agreement with Gildan Activewear Inc. — Announced the acquisition of Hanesbrands by Gildan for 0.102 Gildan shares and $0.80 cash per HBI share, signaling a major strategic shift for HBI shareholders.
• 2025-09-27: Quarterly Financial Reporting Date — Reported significant net income increase to $270.7M, driven by a large tax benefit, and a slight decrease in net sales to $891.7M.
• 2025-10-31: Common Stock Outstanding Record Date — 353,802,157 shares of common stock outstanding, relevant for EPS calculations and merger consideration.
• 2025-Late/2026-Early: Expected Merger Closing — The acquisition by Gildan is anticipated to close, marking the end of Hanesbrands as an independent entity.

Glossary

Discontinued Operations

A component of a business that has been disposed of or is classified as held for sale, and that represents a separate major line of business or geographical area of operations. Its results are reported separately on the income statement. (Hanesbrands is exiting several business lines (global Champion, U.S. outlet stores, Champion Japan) which are now classified as discontinued operations, significantly impacting reported net income.)

Income Tax Benefit

A reduction in the amount of income tax expense a company owes, often due to tax credits, deductions, or changes in tax laws. A negative income tax expense indicates a benefit. (A substantial income tax benefit of $219.5 million in Q3 2025 was a primary driver of Hanesbrands' reported net income increase.)

Operating Profit

A measure of a company's profit after deducting operating expenses from revenue. It excludes interest and taxes. (Hanesbrands reported an increase in operating profit to $107.5 million for Q3 2025 from $94.0 million in the prior year, indicating improved core business performance.)

Definitive Merger Agreement

A legally binding contract between two companies outlining the terms and conditions for a merger or acquisition. (Hanesbrands has entered into a definitive merger agreement with Gildan Activewear Inc., which will result in Gildan acquiring Hanesbrands.)

Year-Over-Year Comparison

Compared to the prior year's comparable periods, Hanesbrands has shown a dramatic turnaround in profitability. Net income for Q3 2025 surged to $270.7 million from $29.9 million in Q3 2024, largely due to a $219.5 million income tax benefit versus an expense last year. For the nine months, net income reversed from a $307.6 million loss to a $342.9 million gain. While net sales saw a slight decrease in Q3 2025 ($891.7M vs $900.4M), operating profit improved to $107.5 million from $94.0 million, indicating operational efficiencies. The company's balance sheet shows an increase in total stockholders' equity to $446.4 million from $34.0 million at the end of 2024, reflecting these improved results.

Key Financial Figures

• $0.01 — ich registered Common Stock, Par Value $0.01 HBI New York Stock Exchange Indicate
• $1,127 — cash flow hedges, net of tax of $(68), $1,127, $1,734 and $594, respectively ( 1,693
• $1,734 — ow hedges, net of tax of $(68), $1,127, $1,734 and $594, respectively ( 1,693 ) ( 11,4
• $594 — net of tax of $(68), $1,127, $1,734 and $594, respectively ( 1,693 ) ( 11,451 ) ( 5,
• $126 — ent plans, net of tax of $(15), $(578), $126 and $(409), respectively 3,580 3,987 10

Filing Documents

• hbi-20250927.htm (10-Q) — 1786KB
• hbi-20250927xex311.htm (EX-31.1) — 8KB
• hbi-20250927xex312.htm (EX-31.2) — 8KB
• hbi-20250927xex321.htm (EX-32.1) — 5KB
• hbi-20250927xex322.htm (EX-32.2) — 5KB
• 0001359841-25-000042.txt ( ) — 10039KB
• hbi-20250927.xsd (EX-101.SCH) — 67KB
• hbi-20250927_cal.xml (EX-101.CAL) — 78KB
• hbi-20250927_def.xml (EX-101.DEF) — 418KB
• hbi-20250927_lab.xml (EX-101.LAB) — 759KB
• hbi-20250927_pre.xml (EX-101.PRE) — 584KB
• hbi-20250927_htm.xml (XML) — 1827KB

Forward-Looking Statements

Forward-Looking Statements 1 PART I

Financial Statements (unaudited)

Item 1. Financial Statements (unaudited): Condensed Consolidated Statements of Operations for the quarters and nine months ended September 27, 2025 and September 28, 2024 2 Condensed Consolidated Statements of Comprehensive Income (Loss) for the quarters and nine months ended September 27, 2025 and September 28, 2024 3 Condensed Consolidated Balance Sheets at September 27, 2025, December 28, 2024 and September 28, 2024 4 Condensed Consolidated Statements of Stockholders' Equity for the quarters and nine months ended September 27, 2025 and September 28, 2024 5 Condensed Consolidated Statements of Cash Flows for the nine months ended September 27, 2025 and September 28, 2024 7 Notes to Condensed Consolidated Financial Statements 8

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 34

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 48

Controls and Procedures

Item 4. Controls and Procedures 49 PART II

Legal Proceedings

Item 1. Legal Proceedings 50

Risk Factors

Item 1A. Risk Factors 50

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 51

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 51

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 52

Other Information

Item 5. Other Information 52

Exhibits

Item 6. Exhibits 53

Signatures

Signatures 55 Table of Contents

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q of Hanesbrands Inc. (the "Company") contains information that may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as "may," "believe," "could," "will," "expect," "outlook," "potential," "project," "estimate," "future," "intend," "anticipate," "plan," "continue" or similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding our intent, belief and current expectations about our strategic direction, prospects and future results are forward-looking statements and are inherently subject to risks and uncertainties that could cause actual results to differ materially from those implied or expressed by such statements. These risks and uncertainties include, but are not limited to: trends associated with our business; our ability to successfully implement our strategic plans, including our supply chain restructuring and consolidation and other cost savings initiatives; the rapidly changing retail environment and the level of consumer demand; the effects of any geopolitical conflicts (including the ongoing Russia-Ukraine conflict and Middle East conflicts) or public health emergencies or severe global health crises, including effects on consumer spending, global supply chains, critical supply routes and the financial markets; our ability to deleverage on the anticipated time frame or at all; any inadequacy, interruption, integration failure or security failure with respect to our information technology; future intangible assets or goodwill impairment due to changes in our business, market condition or other factors; signifi

Financial Statements

Item 1. Financial Statements HANESBRANDS INC. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Quarters Ended Nine Months Ended September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024 Net sales $ 891,683 $ 900,367 $ 2,643,156 $ 2,618,969 Cost of sales 528,233 526,890 1,551,081 1,649,716 Gross profit 363,450 373,477 1,092,075 969,253 Selling, general and administrative expenses 255,922 279,440 749,981 903,005 Operating profit 107,528 94,037 342,094 66,248 Other expenses 8,053 9,343 34,348 29,021 Interest expense, net 47,116 48,542 137,971 149,404 Income (loss) from continuing operations before income taxes 52,359 36,152 169,775 ( 112,177 ) Income tax expense (benefit) ( 219,548 ) 11,430 ( 201,771 ) 31,486 Income (loss) from continuing operations 271,907 24,722 371,546 ( 143,663 ) Gain (loss) from discontinued operations, net of tax ( 1,171 ) 5,229 ( 28,655 ) ( 163,888 ) Net income (loss) $ 270,736 $ 29,951 $ 342,891 $ ( 307,551 ) Earnings (loss) per share - basic: Continuing operations $ 0.77 $ 0.07 $ 1.05 $ ( 0.41 ) Discontinued operations — 0.01 ( 0.08 ) ( 0.47 ) Net income (loss) $ 0.76 $ 0.09 $ 0.97 $ ( 0.87 ) Earnings (loss) per share - diluted: Continuing operations $ 0.76 $ 0.07 $ 1.04 $ ( 0.41 ) Discontinued operations — 0.01 ( 0.08 ) ( 0.47 ) Net income (loss) $ 0.76 $ 0.08 $ 0.96 $ ( 0.87 ) See accompanying notes to Condensed Consolidated Financial Statements. 2 Table of Contents HANESBRANDS INC. Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) (unaudited) Quarters Ended Nine Months Ended September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024 Net income (loss) $ 270,736 $ 29,951 $ 342,891 $ ( 307,551 ) Other comprehensive income: Translation adjustments 1,993 53,550 50,870 5,369 Unrealized loss on qualifying cash flow hedges, net of tax of $(68), $1,127, $1,734 and $594, respectively ( 1,693

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View this 10-Q filing on SEC EDGAR