Hanesbrands: Champion Sale Is Beneficial to Shareholders Despite Hit to Valuation

After months of speculation, Hanesbrands announced that it has agreed to sell Champion to Authentic Brands Group. The sale is an admission that Champion could not be revitalized without costly investment and it will reduce future cash flow generation. However, we also think it greatly reduces risk to equityholders as proceeds will be used for debt reduction. Moreover, the sale will allow management to focus on their core innerwear brands that provide Hanes with an intangible asset that supports our narrow moat rating, which is unchanged.