Dive Brief:

• HanesBrands trimmed its product offerings by more than 30% over the past two years amid widespread supply chain disruption, said CEO Steve Bratspies during a Q4 earnings call.
• The SKU cuts prioritized the apparel maker's most efficient inventory, and they likely won't be the last. "We can go further, by the way," Bratspies told investors. "I don't think we're done."
• The company also consolidated suppliers to cut costs, and it plans to add distribution capacity in the second half of this year and into next year to grow its DTC business.

Dive Insight:

HanesBrands has been slimming product lines over the past year amid pandemic-induced shipping disruptions. In Q4 2020, the company launched a 20% SKU reduction initiative to focus on its highest volume, fastest growing and most profitable products, according to a news release.

The SKU cuts, manufacturing efficiency improvements and HanesBrands' business mix offset most of the inflation and transportation cost headwinds the company encountered last quarter, said CFO Michael Dastugue on the earnings call.

Removing offerings also creates room for new product launches, Bratspies said.

"We're not contracting," Bratspies said. "We're expanding in terms of how we think about the business. But there's a lot of excess that builds up over time, and we've been able to reduce that as we go forward."

HanesBrands' inventory increased about 16% year over year, totaling $1.6 billion at the end of FY2021, according to the release. But the amount of product in transit "is well above that," as ocean shipping delays persist, Dastague said.

"The SKU rationalization is doing a great job of helping us to manage that," Dastugue said.

The company is working through supplier consolidations and seeking to maximize returns on its raw materials, Dastugue said.

"We're looking at making investments in equipment to make sure that we're utilizing the raw materials appropriately, minimizing waste," Dastugue said.

Increased domestic fulfillment capacity will improve the efficiency of its HanesBrands' DTC business, Bratspies said. "We have a lot of work going on there right now," he said.

Surging cost inflation in January prompted the American Apparel & Footwear Association to call for "swift and effective policies to immediately alleviate the increasingly overwhelming costs on companies and address the shipping crisis."