Hanesbrands (NYSE:HBI) was the latest target of activist investor Barington Capital Group. In a letter to the company’s chairman Ronald Nelson, Barington called on the underwear maker to reduce cost and debt, and it questioned the ability of the company’s board and management to effectively lead.
“We invested in Hanesbrands because we believe in its recognized portfolio of value brands, strong distribution capabilities, and unique vertically integrated operating model,” said James Mitarotonda, chairman of Barington. “However, the Company’s poor execution and performance under current leadership has destroyed substantial shareholder value and left the Company in a precarious position.”
Barington highlighted that Hanesbrands’ share price has declined by over 50% in the last year, and it urged the company to reduce SG&A expense, reduce inventories, take steps to improve margins, and consider new management.
“In order to reverse Hanesbrands’ rapidly declining share price, we believe the Company must immediately focus on cash generation and debt reduction while also considering new management and directors to implement these performance enhancing initiatives,” said Mitarotonda.
Hanesbrands said in a statement that its Board of Directors and management team are committed to moving the company forward and regularly engage with shareholders, including Barington, to understand their perspectives.
“The Board and management team believe initiatives that are being executed as part of the Company’s Full Potential plan will unlock significant opportunities, which we look forward to discussing later this week as part of our second quarter 2023 earnings report. We are also, however, open-minded with regard to additional paths to improve performance and create value,” Hanesbrands said.
The company added, “We will continue to act in the best interests of the Company and all Hanesbrands shareholders.”
Shares of Hanesbrands climbed by 1.3% Tuesday morning. It is scheduled to report second-quarter earnings on August 10th.