HBI Q2 Deep Dive: Margin Expansion and Cost Controls Drive Upgraded Guidance

Clothing company Hanesbrands (NYSE:HBI) announced better-than-expected revenue in Q2 CY2025, with sales up 1.8% year on year to $991.3 million. The company expects next quarter’s revenue to be around $900 million, close to analysts’ estimates. Its non-GAAP profit of $0.24 per share was 34.8% above analysts’ consensus estimates.

Is now the time to buy HBI? Find out in our full research report (it’s free).

StockStory’s Take

Hanesbrands delivered second quarter results that exceeded Wall Street’s expectations, with the market responding positively to the company’s operational improvements and higher profitability. Management attributed the strong quarter to disciplined cost controls, ongoing productivity initiatives, and growth in new product categories. CEO Stephen Bratspies noted, “We’re generating structurally higher profit margins through increased productivity and lower fixed costs, even while simultaneously investing for growth.” The company highlighted success in basics, activewear, and newly launched categories such as loungewear and scrubs, while acknowledging continued headwinds in the intimate apparel segment.

Looking ahead, Hanesbrands’ upgraded full-year outlook is rooted in confidence about further margin expansion and continued cost discipline, even as the company navigates a muted consumer environment and evolving tariff landscape. Management expects stability in input costs and plans to mitigate tariff risks through supply chain adjustments and selective pricing actions. Bratspies emphasized that the company is “very confident that we will mitigate the tariffs at the rates that we’re experiencing today,” and noted that strategic investments in brand and innovation should support top-line growth despite category softness.

Key Insights from Management’s Remarks

Management credited the quarter’s margin gains and improved outlook to cost discipline, productivity enhancements, and category diversification, while addressing ongoing challenges in intimates and external pressures such as tariffs.

• Cost discipline and productivity: Management cited continued benefits from cost restructuring and productivity initiatives, particularly in facilities and distribution centers, as main drivers of margin expansion. CFO Scott Lewis highlighted that cost actions have scaled enough to offset growth investments and yield consistent SG&A leverage.
• Category diversification: Significant growth was reported in activewear (nearly 30%) and new business lines (scrubs and loungewear up 165%), helping to offset declines in the intimates category. Management views these new segments as important contributors to future growth and stability.
• Supply chain simplification: The company streamlined its global supply chain, focusing on efficiency and flexibility to respond to market changes. Bratspies underscored investments in advanced analytics and AI for inventory and assortment management, as well as demand forecasting.
• Intimates category headwinds: Ongoing softness in the intimates business, especially with the Maidenform brand, was acknowledged. Management outlined a pivot towards broader product assortments and increased focus on T-shirt bras and online channels to address these challenges.
• Tariff mitigation strategy: Management detailed a multi-faceted plan to offset upcoming tariff impacts, including leveraging U.S. content exemptions, diversified sourcing, cost reductions, and targeted pricing actions. The team expressed confidence that these measures are sufficient to absorb expected tariff increases without significant disruption.

Drivers of Future Performance

Hanesbrands expects to sustain margin expansion and profit growth through ongoing cost efficiency, supply chain flexibility, and brand investments, while managing potential tariff and category-specific headwinds.

• Tariff management and pricing: Management anticipates that future tariffs will not materially affect profitability due to offsetting measures such as supply chain adjustments, selective price increases, and leveraging U.S.-sourced inputs that are exempt from new tariffs. Strategic discussions with mass channel partners are ongoing to ensure pricing actions are accepted without harming demand.
• Focus on category growth areas: The company plans to deepen investment in high-growth areas like activewear, loungewear, and scrubs, viewing these as critical for offsetting ongoing softness in intimates. Initiatives include new product launches and expanded distribution in both retail and direct-to-consumer channels.
• Continued cost and productivity savings: Management expects further SG&A leverage and gross margin expansion through ongoing productivity programs, digital analytics, and supply chain optimization. These efforts are designed to support structural profitability even if volume growth remains modest.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will monitor (1) the pace of growth in new product categories like loungewear and scrubs, (2) the company’s ability to offset tariff impacts through supply chain actions and selective pricing, and (3) sustained SG&A leverage and gross margin expansion as cost discipline initiatives scale. Progress in revitalizing the intimates segment will also be a key indicator.

Hanesbrands currently trades at $6.24, up from $4.17 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

Our Favorite Stocks Right Now

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.