Scott Lewis
Chief Financial Officer at Hanesbrands
Thanks, Steve. At a high level, we delivered solid first quarter results as we've met or exceeded guidance across all of our key metrics. And as I look at our results, I'm reminded of where we were a year ago and the progress we've made delivering on the core financial objectives we laid out. Gross margins are back to historical levels. We're taking costs out of the business. We're generating consistent cash flow, and we're paying down debt and reducing leverage. We're also continuing to strengthen our operating model. We're increasing brand investment. We're rolling out even greater levels of product innovation, all of which is expected to generate strong earnings growth this year, as well as position us for more consistent top and bottom line growth over time.
For today's call, I'll touch on the highlights from the quarter, our improved financial position, and then I'll provide some thoughts on our outlook. For additional details on the quarter's results and our guidance, I'll port you to our news release and FAQ document.
Looking at the details of the quarter, net sales of $1.16 billion was at the midpoint of our guidance range. This represents a decrease of $233 million, or nearly 17% versus prior year. Of this decrease, approximately $15 million was from FX, $20 million was from the U.S. Hosiery divestiture last year, and $65 million was from discrete timing related items within the Activewear segment that we discussed on last quarter's call. These include the strategic shift of the Champion kids business to a license model, accelerated orders from customers ahead of our SAP implementation, and shipment timing within our collegiate business, all of which benefited last year's first quarter.
Adjusting for these, the comparable sales base of our business decreased approximately 10% year-over-year in the first quarter. Looking at sales by segment within U.S. Innerwear, as expected, the category remained challenging in the quarter. Sales decreased 8% as compared to prior year. This was roughly 200 basis points below our outlook, driven by a higher than anticipated level of inventory management actions by select retailers. However, we are seeing that our strategy is working. We are winning in the marketplace. Our point of sale trends outperformed the market as we gained another 50 basis points of share in the quarter.
In our U.S. Activewear business, sales decreased approximately 31%, or $97 million as compared to prior year, which was in line with our outlook. Approximately $65 million, or two-thirds of the decline, was driven by the previously mentioned timing related items in the prior year quarter. Adjusting for this, Activewear sales decreased nearly 14%, which represents a sequential improvement in the underlying year-over-year trends in both the Champion brand and the Activewear segment.
And in our international business, constant currency sales decreased 9% compared to last year, which was in line with our outlook. For the quarter, growth in Latin America, Japan, and China were more than offset by decreases in Europe and Australia as macroeconomic headwinds continue to impact demand in these regions. According to margins, gross margin of 39.9% was strong, coming in 140 basis points above our outlook. As compared to last year, gross margin increased 720 basis points, driven primarily by the benefits from lower input costs, cost savings initiatives, as well as the impact from business mix.
With respect to SG&A, we decreased expenses $13 million as compared to last year, in line with our outlook. The lower expense was driven primarily by the benefits from cost savings initiatives and disciplined expense management. These savings helped fund a 50% increase in brand marketing investments, which was focused on our US Innerwear and Global Champion businesses in the quarter. This resulted in an operating margin of 7.3% for the quarter, an increase of 270 basis points over last year and ahead of our expectation, driven by the strong gross margin performance.
Looking at the remainder of the P&L, interest and other expenses were $76 million. Tax expense was $15 million, and earnings per share for the quarter was a loss of $0.02, which was ahead of our outlook.
Turning to cash flow and the balance sheet, we continue to strengthen our balance sheet and our financial flexibility in the quarter. We generated cash flow from operations of $26 million. This was driven by better than expected profit performance and disciplined working capital management. Leverage at the end of the quarter was five times on a net debt to adjusted EBITDA basis, which was nearly a half a turn lower than last year. The improvement in our leverage was driven by lower debt, reflected in the $500 million of debt we paid down last year. All of this has led to a strong liquidity position of more than $1.2 billion at the end of the first quarter.
And now, turning to guidance. All of my comments were referred to adjusted results and will be based on the midpoint of our guidance ranges. We reiterated our full year guidance for sales, operating profit, earnings per share, and operating cash flow. Our view for the year is unchanged since our previous call. As a reminder, we highlighted that we expect the macro consumer environment to remain challenging for our categories in 2024, with progression in the year-over-year sales trends as we move through the year.
We continue to remain highly confident in our operating profit guide, which implies 26% growth over the last year, as we believe we have appropriately de-risked in this uncertain consumer environment. Our confidence in delivering $500 million to $520 million of operating profit is based on our visibility to input costs on our balance sheet for the rest of the year, and our proven cost savings programs that continue to exceed our expectations.
With respect to our second quarter outlook, we expect net sales on a reported basis to decrease approximately 6% as compared to last year. Adjusting for the impact from the U.S. Hosiery divestiture and FX headwinds, organic constant currency sales are expected to decrease approximately 3%. That said, we expect second quarter operating profit to increase approximately 40% over prior year, and operating margin to expand nearly 300 basis points to 9%, driven by the benefits from lower input costs and our cost savings initiatives. Given the lower debt balances, we expect interest expense to decrease year-over-year, resulting in earnings per share of $0.09 as compared to a loss of $0.01 last year.
So, in closing, the year has unfolded as anticipated. We have confidence and visibility in our full year outlook. We're paying down debt and lowering interest expense, and we're increasing investments to drive growth. This has created a multi-year flywheel to generate meaningfully higher earnings and significantly reduce debt, which we believe will drive strong shareholder returns over the next several years.
And with that, I'll turn the call over to TC.
