Divesting Champion: Is It the Right Decision for HanesBrands?

Authors
Suresh Gopalan, Susita Asree
Region
North America
Topic
Accounting & Finance
Strategy & General Management
Length
9 pages
Keywords
SWOT Analysis
financial trend analysis
debt reduction strategies
strategic decision
divestiture
DOI
https://doi.org/10.69521/jcs.v43i1.3
Student Price
$4.00
Target Audience
Graduate Students
Undergraduate Students

This case describes a strategic decision faced by Hanesbrands Inc. (HBI). HBI experienced pressure from Barrington Capital Group L.P. (BCP), an activist investor, to improve its financial performance. BCP identified three areas of concern. The first issue was HBI's long-term debt. The second issue pertained to declining revenues and profit margins. The third issue was the decline in HBI’s stock price. BCP insisted on several actions including asset divestments, debt reduction, restructuring the product portfolio, and revamping upper management. HBI’s management, led by CEO Bratspies, announced several strategic options that included potential divestiture of the Champion brand to reduce long-term debt and improve cash flow. Students are asked to examine HBI’s situation and make a recommendation to retain or divest the Champion brand.

Learning Outcomes

After completing this assignment, students should be able to: 

1. Analyze financial trends of a company and make inferences about a firm’s financial condition. 

2. Conduct a SWOT analysis. 

3. Identify and compare the relative advantages and disadvantages of alternatives available to a firm. 

4. Choose and defend a recommendation among mutually exclusive alternatives.