HanesBrands CEO says 30% of inventory is tied up in transit, much higher than pre-Covid

HanesBrands CEO Steve Bratspies told CNBC on Thursday that 30% of the apparel maker’s inventory is tied up in transit, a significantly higher level than pre-pandemic that reflects the logistics challenges hampering the global economy.

“We have more inventory in that stage in the pipeline right now that we’re trying to move through and get to the right place at the right time,” Bratspies said in a “Squawk on the Street” interview after the company reported a third-quarter earnings beat and a revenue miss earlier in the day.

“It’s definitely higher than a normal operating basis we like to see,” he said, adding that in-transit inventory for the company typically stood at about 10%.

HanesBrands — the parent of Champion, Hanes and Bonds, among others — is not alone in its situation. Last week, Stanley Black & Decker CEO Jim Loree told CNBC the toolmaker had about $800 million of goods in transit, up from about $300 million at the start of the pandemic in 2020.

Taken together, the CEOs’ comments shed light on how the supply chain bottlenecks that have materialized during the Covid crisis are hitting individual companies as they try to meet strong consumer demand and get ready for the busy holiday shopping season.

Despite the challenges, Bratspies said he believes HanesBrands is in a “good position” relative to some of its competitors in the apparel industry.

“While we’re struggling to get it in the right place at the right time, we have the inventory, and I think that’s a bit of a differentiator for us,” said Bratspies, who took over as HanesBrands CEO in August 2020. He’d previously served as Walmart’s chief merchandising officer. “I actually am glad we have the inventory we have.”

HanesBrands is working closely with its transportation partners to ensure products get to their appropriate destinations in a timely manner, Bratspies said. However, when asked by CNBC’s David Faber if there are truly “any fixes” the company can pursue, Bratspies responded: “Honestly, I think it’s a matter of time.”

“I’m OK with that in-transit number being where it is. We made a decision earlier in the year to actually increase our production because we saw this coming. I think it positions us OK for the fourth quarter and the beginning of next year,” Bratspies said. “I just think it’s going to take some time to work out.”

Shares of HanesBrands fell 2.6% on Thursday, as Wall Street digested the company’s mixed quarterly results. The company earned 53 cents per share, topping expectations by 6 cents, while revenue of $1.79 billion fell just short of analysts’ forecasts of $1.8 billion.