US apparel group HanesBrands is the latest international fashion business to report tough trading conditions in the Australian market.
In its latest trading update, the parent company of Australian-born innerwear label Bonds confirmed that net sales from continuing operations fell 4 per cent globally to US$995 million (~A$1.5 billion) in the second quarter of 2024 compared to the same time last year.
On an organic constant currency basis, net sales decreased approximately 1 per cent, or US$11 million, compared to last year, with HanesBrands citing better-than-expected innerwear sales in the US which were essentially offset by the “expected macroeconomic headwinds in Australia”.
The group’s international net sales - which include Australia, the Americas and Asia - decreased approximately 4 per cent on a reported basis, including US$15 million from unfavourable foreign exchange rates.
“International sales increased 2 per cent on a constant currency basis compared to prior year with growth in the Americas and Asia more than offsetting the expected macroeconomic-driven decline in Australia,” the company reported.
Alongside HanesBrands, A.K.A Brands - which operates three Australian labels, Culture Kings, Princess Polly and Petal & Pup - also reported macroeconomic headwinds in Australia, revealing an 11.5 per cent fall in revenue across its Australian market for the first six months of 2024.
This is a drop of just over US$10 million, with second-quarter sales falling 5 per cent or US$2.3 million.
That fall in Australia defied A.K.A Brands’ US market, which boomed by more than 19 per cent in the second quarter to US$95.3 million, driven by a double-digit surge in net sales at Culture Kings for the market.
Overall, A.K.A Brands’ net sales lifted by 9.5 per cent, which was driven by a 16 per cent increase in the number of orders, due to growth in the US. The group added this boost was partially offset by a decline in the average order value compared to the prior quarter, driven by adverse macroeconomic conditions in Australia and New Zealand and actions taken to improve its inventory position at Culture Kings.
“Our second quarter results exceeded our expectations, showcasing the strength of our brands and the power of our business model,” interim CEO and CFO Ciaran Long said. “We delivered net sales growth of over 9 per cent, driven by the momentum in our US region where net sales grew more than 19 per cent year-over-year.
“Importantly, our strong top-line growth translated into adjusted EBITDA of $8 million, an increase of 44 per cent compared to the same quarter last year.”
Meanwhile, Woolworths Holdings Limited - the South African-based owners of Country Road Group - reported a 6.8 per cent decline in sales for the 53 weeks ending June 30, 2024.
Country Road Group manages five fashion brands including Country Road, Politix, Trenery, Mimco and Witchery.
The group’s sales also declined by 8 per cent on a comparable 52-week period and by 13.1 per cent in comparable stores.
WHL noted this should be considered in the context of a high prior-period base, in which sales grew by 12 per cent following a “strong post-COVID pent-up demand” in the first half.
Sales growth in the second half at Country Road Group declined by 11.3 per cent.
“Retail trading conditions in Australia and New Zealand deteriorated further in the second half, with consumer sentiment at near-record lows and the prolonged cost of living crisis continuing to impact both footfall and discretionary spend,” WHL reported.
Despite the challenging macroeconomic backdrop, WHL added that the Country Road brand delivered positive growth for the period. Trading space increased by 4 per cent during the period through the ongoing expansion of our concession channels. The contribution from online sales increased to 27.6 per cent of total sales, supported by our leading omni-channel capabilities.
Country Road Group’s sales tumble deviated from WHL’s overall group turnover and concession sales from continuing operations, which grew by 6.2 per cent and 5.6 per cent on a constant currency basis.
On a comparable 52-week period ended 23 June 2024, overall group sales grew by 4.3 per cent, and by 3.2 per cent in the comparable second half.
“Whilst the group has maintained its stringent focus on preserving gross profit margin and containing costs, we equally continue to invest behind our key strategic initiatives,” WHL reported. “This, coupled with the impact of a weaker trading environment, has resulted in negative operational leverage in both apparel businesses.
“This was particularly prevalent in CRG, which was further impacted by inflated import costs due to a weaker Australian dollar, and the business's inherently higher fixed cost base.
“Furthermore, the reassessment of the carrying value of the Politix business in CRG, has resulted in a non-cash impairment of goodwill which impacts the earnings per share for continuing operations and the Total Group.”