A lot has changed for the HBI story over the last 6 months -- and it's resulted in Street numbers being 22% too high.
- TGT C9 agreement won't be renewed. Decremental margin hit greater than the Street is modeling.
- Champion Europe distribution growth has peaked as European apparel is seeing its worst selling environment in recent memory. Europe strength has been obfuscating weakness in the core -- until now.
- Australia (12% of sales) is starting to see real economic cracks, and China economic woes only accelerate the decline down under.
- Channel disruption continues with Sears bankruptcy, showing it's a real secular problem, not one time.
- WMT is adding its first Private Label program in underwear with Gildan, and growing the size, at HBI's expense.
Though the market seems to be seeing some of the new risks to the model, the street numbers are still way off, and the stock is not reflecting the real risk/reward in the fundamentals.
We see 2:1 downside vs upside in the stock with the real bear case potentially taking this stock to sub $5.
Key slides below and replay link below.
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