(Reuters) - Underwear maker Hanesbrands Inc (HBI.N) said it would cut production of basic apparel used in screen printing and exit its private label business and the Outer Banks sportswear brand as it seeks to prop up falling margins.
As part of the restructuring, Hanesbrands said it has agreed to sell its European imagewear division to an affiliate of the Netherlands-based Smartwares B.V. for 15 million euros ($18.80 million).
The imagewear segment, which sells basic apparel such as T-shirts to wholesalers in the screen-print market, accounts for 8 percent of the company’s sales.
Hanesbrands, owner of the Hanes, Champion and Wonderbra brands, said the restructuring would reduce expected sales by about $60 million, mostly in the second half.
The company, which expects to incur non-cash pretax charges of $85 million to $95 million in the second quarter, said the changes would have an insignificant impact on operating profit, and reiterated its previous 2012 earnings forecast of $2.50 to $2.60 per share.
Hanesbrands reported a quarterly loss for the first time in two years in April, as rising cotton costs and increased competition ate into its margins.
The company’s gross margins have slipped by more than 9 percentage points over the last two quarters, according to Thomson Reuters StarMine data.
Hanesbrands will also change the name of its imagewear operations to branded printwear, mainly to Hanes and Champion branded products in the United States to improve operating margins.
Shares of the company closed at $27.89 on Tuesday on the New York Stock Exchange.
Reporting by Meenakshi Iyer in Bangalore; Editing by Maju Samuel and Saumyadeb Chakrabarty