HanesBrands Inc. (HBI) Earnings Call Transcript & Summary

Welcome back, everyone. Hello. Thanks for being here. Really pleased to kick off the conference sessions today with Hanesbrands. Hanesbrands is a company that I don't think is necessarily appreciated by consumers for the evolved nature of their sustainability efforts. So we're excited to learn more about that today. Representing Hanesbrands is Chris Fox, Chief Sustainability Officer. Chris is joined by T.C. Robillard, Chief Investment Relations Officer. Chris and T.C. have a presentation. We will leave a few minutes for questions at the end of the session. [Operator Instructions] Chris, I'm going to turn it over to you.

All right. Jim, thank you so much. And good morning, everyone. Really appreciate the opportunity to be here, Jim. My name is, as Jim said, again, is Chris Fox. I'm the Chief Sustainability Officer and 20-plus year veteran of Hanesbrands, much of which actually was as the Vice President of Corporate Social Responsibility. And sustainability and corporate responsibility have been in Hanes' DNA literally for decades and an awful lot of my career here. Doing the right thing every day, treating people as we would expect to be treated, taking care of the environment and the many places that we operate around the world and driving sustainability into our manufacturing processes and into our products, honestly, it's just who we are and who we very much want to continue to be. And really very simply, we believe it's just the right way to run a business. And our ambition is to make the world a more comfortable, livable and inclusive place. And we are truly global on 6 continents in over 40 countries. And unlike -- and many folks don't know this, unlike the vast majority in the apparel industry, we actually own and operate a very large portion of our own supply chain, employing more than 50,000 manufacturing level employees around the world. And when they are your operations, they're your people, they're your communities, kind of where you're living and working and raising your kids, sustainability, we believe, takes on a really very different meaning. And since spinning off from Sara Lee nearly 15 years ago in roughly 2007, we've accomplished a lot as you can see here on this page, especially in our environmental efforts. Our greenhouse gases -- since 2007, greenhouse gas emissions are down 40%. Energy use, down a total of 26%. Big money savings there. And nearly 50% of our total energy is now coming from renewable energy sources. And much of that renewable energy portfolio actually comes from very large biomass, steam and power plants that are located in our owned Latin America textile facilities in DR and Salvador. These were 8-figure investments, real investments we made years ago that have not only helped to significantly reduce our GHG emissions. But have also helped us save as I was mentioning before literally tens of millions of dollars in energy spend each year. The right thing to do for the environment, for sure, but also clearly the right thing to do for our business. And along with reducing energy use and GHG emissions, eliminating waste has also been a real key focus of ours. We're now recycling over 90% of our waste at our manufacturing and distribution facilities. And what's really, really particularly cool about our focus on waste and recycling is that for years, pushing 10 years, we've been actually selling much of our plant scrap and plant waste to recyclers, selling off what we literally used to throw out and send to landfill. And we invest about $1 million every year out of those sale proceeds into our employee and local community development efforts. So we literally have one part of our sustainability program actually funding another. And again, for about 10 years, we've called this -- what we believe is a really cool program, Green for Good. And over the last year, our efforts have also been thankfully recognized by a range of organizations. As you can see on the right, we've made the A list of CDP, Carbon Disclosure Project, for the first time last year, 1 of only 3 in the apparel industry to do so. We were recognized by ENERGY STAR for the 12th consecutive year for sustained excellence. We're ranked in a tie for 38th in Barron's Most Sustainable Companies. And most proudly, just this winter, we were honored by Ethisphere as one of the world's most ethical companies. And again, we're really proud of that award. So as you can see, great progress. We've done a bunch. We've accomplished a lot, but there's a lot more to do, much more to do. And here today to say very much, we get that, right? Much more to do. So over the last year, with that recognition that there's so much more to do, we really consciously stepped way back and took a hard look at where we wanted to be 10 years from now, in roughly of 2030. And in that step-back process, we asked ourselves a range of what we thought were really important questions. At the end of the day, what impact do we, as a publicly-traded company, want to have on this world, especially for the long haul? How can we continue to make a true difference in people's lives? How can we do our part to dramatically reduce greenhouse gas emissions? How can we make our products and packaging, for sure, far more sustainable going forward? And at the end of the day, how can we look 10 years' time -- in 10 years' time look back and really look back proudly on what we've accomplished and the real and significant difference, hopefully, we will have made globally in the range of markets that we're operating in around the world. And to help us answer these questions and construct a brand-new goal set, we worked for almost a year with a leading sustainability consulting firm with whom we've worked for many, many years, literally pushing 15 years, and they were a terrific help in this process. And with their help, we landed on what we believe our -- our is an aggressive new set of 2025, 2030 goals built around the 17 broad and very encompassing UN Sustainable Development goals. And from that, we developed our own goals around 3 pillars of People, Planet and Product. And in particular, we decided to focus our goals on 9 of the UN SDGs where we feel that we can make the greatest long-term impact. Doesn't mean that all 17 aren't important, but we decided that we would focus on 9. And you can see them kind of pop off the screen here: good health and well-being; quality education; gender equality; clean water and sanitation; affordable and clean energy; decent work and economic growth; reduced inequalities; responsible consumption and production; and last, but certainly not least, climate action. And with these UN SDGs as a backdrop, last fall, we publicly launched our new sustainability website, hbisustains.com. And the goal is kind of the broad goal set that you see here divided into those 3 pillars I just mentioned: People, Planet and Product. And all 3 pillars really are very important to us. But at the end of the day, it all really starts with people. Our people, our employees, folks making our product and the communities in which our 63,000 employees on our payroll live and work around the world. So bottom line, as you can see on the left, our goal is to meaningfully impact at least 10 million lives by 2030. And as I've said, we employ a lot of people. So uniquely, we have ability to directly impact the many who make our product and the communities in which they live and work. And first and foremost, there really is nothing more important to us that operating world-class, safe facilities. And we expect those that we do source product from to do the same. Period, no questions. We've had a facility and supplier code of conduct for decades, and in fact, one of the very first to have them going back into the 1990s. And we've got a detailed global human rights policy, both of which are publicly available on hbisustains.com. But we think that we're a lot more -- about a lot more than just compliance. We invite you to explore the people section of hbisustains.com, and you'll see -- when you jump on the site, it's broken down into a range of sections, but a specific section for People, for Planet and for Product. And you can learn a lot more about a whole range of employee education, health and wellness, and diversity and inclusion programs on the site. And at the end of the day, we really do believe that we are much more than just a paycheck for our employees. For example, and again, you can see a lot more -- in a lot more detail about these 3 examples on the site, along with many others. We've actually had a program in Latin America for years, pushing 10 years, that has graduated over 2,500 selling machine operators from high school at our expense funded by those Green for Good dollars I spoke about just a few minutes ago. And many of these high school graduates have gone on to college, often with scholarships and other support from us. Educating our people, in many ways, not much more important to us, huge impact on the employees and we found equally as strong an impact on their families and at the end of the day, a huge benefit to our business. These are the folks that we retain. Oftentimes, these are the folks that we are promoting through that pipeline. Also, all of our facilities have on-site free medical clinics. In Latin America alone, the Hanes medical team is comprised of nearly 30 doctors and 30 nurses who provide over 100,000 medical consultations every year, including 4,000 approximately prenatal visits every year for expecting moms. It's a really neat program. Again, you can learn more about it on the site. For expecting moms who participate in our Future Moms clubs, and these Future Moms clubs exist across our facilities, in particular in Latin America. And our other employee benefits often include free or subsidized transportation and meals, health and/or life insurance and a whole wide range of paid holidays. So as you can see, our employees really are very important to us, but so are our communities. Our Green for Good funds have helped support over the years millions of dollars in funds, everything from our surgical missions in the Dominican Republic in a really neat partnership we've had with Wake Forest University; after-school programs in El Salvador that we've worked on with a local NGO named Glasswing and USAID; and things like school rehab projects throughout Vietnam. That's been one of our big focuses, in particular, in Vietnam. And we now also have, which we're really proud of, a new goal to average 8 hours of volunteer time donated by all 63,000 employees across the globe. And it's going to take some time to ramp up to that, but that's our goal. And we will support this volunteerism and philanthropy really around 3 major themes. The first one comforting the needy, especially those experiencing homelessness. And this is a great fit, in particular, for our Hanes and our Bonds brands. And as you may know, we are already and are continuing to donate literally millions of garments a year to these causes. Diversity and inclusion in sports, turning into a major focus for our Champion brand globally. And women's health, obviously, a really natural fit for our intimate brands. So our facilities, our people, our communities, and as a company, we're committed to all 3 and so are our brands. As I mentioned before, Hanes, focusing on homeless causes to the new Champion natural state product launch to Bonds and their Planet Comfy campaign. Our brands are doing a bunch of great stuff, too. And again, I encourage you to take a look at the site. In particular, in each of the 3 pillars, People, Planet and Product, on the site, you'll see a Brands in Action section. And in that section, you'll learn a lot more about the range of really cool work that our brands are doing around the world to advance our overall sustainability goals and advance the goals of the individual brands as well. And as I mentioned earlier, we've made a lot of progress in our energy and other environmental metrics over the last 15 years. But again, we know we must do more. And the reality is we must all do more, right? So we as a company, and again, this is late last fall, as we were launching our new goals and our new site, we signed on to the science-based targets initiative, again, late last year, and are actually working to accelerate our submission of targets by the end of this year, typically a 2-year process that we're trying to get done in a year. A pretty aggressive timetable. And we believe at the end of the day, although time will tell as we go through the process, that the SPT goal setting process will require us to likely further cut our energy use and GHGs by at least another 25%. We've also committed to moving to 100% renewable electricity, zero landfill waste at our facilities. And again, hopefully, that generates even more income to put into our Green for Good programs. A full adoption of the Higg FEM throughout our supply chain, and we're well down the path already on that. A lot of great progress. And partnering with P&G and Tide to market the economic and environmental benefits of washing clothes in cold water versus hot. And our partnership with P&G and Tide literally just kicked off here in the last couple of months with television media. You may have seen the Mr. T and other ads, the Sprint that are aiming to educate, honestly, the American public to wash in cold water. A simple switch to cold will really make a significant difference in the overall greenhouse gas emissions of the life cycle of a t-shirt, for example. And in that life cycle, most of the GHG emissions actually come from heating water in the washing machine. New detergents like Tide, put in a plug for them, make washing in cold just as effective as washing in hot. And if consumers can make just that switch really will make a difference on the overall emissions in the life cycle of any garment, but a t-shirt for example. At the end of the day, we've all got to do our part. We're committed as a company to doing our part, and we're really thrilled to be able to partner with P&G and Tide to try and convince consumers there's a really easy way for them to do their part as well. And finally, for product, we're moving to 100% sustainable cotton and recycled or biodegradable polyester, a 25% reduction in packaging weight and the elimination of single-use plastics. And obviously, I think we all get -- we got to get out of that stuff and are really committed to doing everything that we can to do that. So much accomplished, but we recognize again that there's much more to do, especially over the next 5 to 10 years. We are committed to being leaders in this space and believe strongly, honestly, that those companies that get this right, get sustainability right are those that will add most to overall shareholder value in the future. Sustainability, bottom line, really and clearly is good business. So I've just hit the highlights today. To learn a lot more about what we're doing, where we're going in this space, again, take some time to visit hbisustains.com. There's a lot more in there, a lot more in those 3 pillars, a lot more as well in the transparency section. And you'll see that icon at over-the-top of the site, and a lot of much more detailed information there, SASB disclosures, TCFD, a lot of information around environmental and social metrics. So those interested in doing a real big deep dive into -- especially our metrics-driven initiatives, do take a look at that transparency section. So thank you for the time. And again, Jim, thanks for you and Stifel for giving us this opportunity. We really do appreciate it. So thanks for listening in. We will make the world a more comfortable, livable and inclusive place by 2030. That's our commitment. We've made that commitment publicly, and we fully intend on standing behind that. That's my job to hit those 2030 goals and lead this company in that direction and thrilled to have that opportunity. So with that, again, thank you so much and happy to answer -- both T.C. and I happy to answer any questions that you all might have.

Chris, excellent presentation. Thanks for that, and thanks for your sustainability leadership. We do have a question from the audience. The first question is what do I consider materials beyond polyester and cotton? For instance, wood-based fibers, bio-based polyester, recycled polyester has a worse environmental impact than previously thought, sustainable cotton has human rights challenges. Any thoughts related to that?

Yes. Well, obviously, the -- for us, especially in activewear, a lot of cotton and polycotton blends. And we're looking -- continuing to move down the path of recycled poly, believe there are benefits there, for sure, but also looking at some new technologies around biodegradability of polyester and other man-made fibers. And we've got a great R&D team. We're looking at stuff all the time kind of behind the curtain to see what new specialty focus on sustainability, what new technologies and opportunities exist out there that we can first test and then ideally bring to market. So we're looking at a broad range of those things not -- certainly not just cotton and poly.

And so, Chris, this question delves into the human rights issues or potential human rights issues with organically sourced cotton. Your supply chain, principally western hemisphere based, does that make it easier to audit to the materials level? And do you feel like that gives you advantage relative to more global supply chain [ since we ] have challenges?

Yes. No, I think we do the -- our owned operations are more focused in this hemisphere, although we do have some in Asia. And the reality is about 60% of our total cotton volume, especially feeding that internal supply chain engine, actually comes out of the U.S. And there's no question that it's easier to trace with a lot and bale ID in the U.S. cotton supply chain. It is easier to trace U.S. cotton than it is cotton in other parts of the world. So we do believe that, that is an advantage with the vast majority of our cotton actually coming out of this hemisphere and, in particular, the U.S.

Great. And I had a question related to your communication with consumers. The program with Tide, encouraging consumers to wash in cold water, that's exciting. We presented some research this morning, 3 in 4 consumers consider sustainability in their choice between brands. 3 in 5 consumers are actively researching brand sustainability efforts. Can you talk about what Hanes is doing to showcase -- better showcase to consumers your sustainability leadership and trying to use that as a marketing influence?

Yes. No. Honestly, it started with a lot of work and a lot of time and investment in that new sustainability website. And as you'll see, when you get on that, we very much cross-referenced that to our brand sites, so that consumers that are going to our brands and our selling sites have an easy cross-reference and pop back and forth from brand sites to sustainability if they want to use and to learn more. But our brands already, as I mentioned in the remarks earlier, we're doing a lot of cool stuff already. And that P&G Tide program, I think, is kind of the leader in that space right now for us in talking to the consumer about not only what we're doing, which obviously is important from a company level and from a brand level, but we also think it's really important to engage that consumer so that consumer can learn how they can make an impact, too. That's what's made that P&G and Tide partnership we think so exciting.

Great. And the data we presented this morning, Joe, that sustainability is particularly important to younger consumers, Gen Z and millennials. And I know that strategic significance to you guys, particularly in your Innerwear segment where there's an effort to increase the awareness and brand perception with younger consumers. One last question, and then we should probably wrap it up. Chris, just quickly, can you talk about how as a multi-branded organization sustainability fits within the reporting structure? You have corporate-level objectives, how does that translate down to the brand operating line?

Okay. Yes. So I'm the Chief Sustainability Officer, so have that broad kind of umbrella view and responsibility for driving it at a corporate level. But we actually put together about this time last year as we were looking towards building and launching the site what we call our Global Sustainability Consortium, which is a conglomeration of 50-or-so folks from around the world and many of those are on the front end of the business and in marketing roles in Australia with Bonds and with Champion Europe in Italy. So we have really engaged and brought the entire organization not just at the corporate level but at the brand level together to make sure that we fully understand what our goals are and that we can drive them the business regionally and, Jim, I think, as you're saying, really importantly, drive the messaging through the brand so that the consumer can fully understand what it is that we are doing as a company and how their brands are -- the brands that they're buying and the brands that they're wearing are participating in this space and driving this space as well.

Excellent. Chris, thank you so much. T.C., thanks for being with us.

My pleasure.

We really appreciate you guys participating in the conference today. Short break. Next on the agenda Gildan Activewear at 9 a.m. Eastern Time. Thank you.

Okay. Thank you, Jim. We really appreciate it.

Thank you.

Thanks guys.