Back in 2018, Target dropped a bombshell on basic apparel company Hanesbrands (HBI 7.69%), which sells products primarily under the Hanes and Champion brands. Target announced that it would end its exclusive deal to carry C9 by Champion, a value-oriented lineup of activewear attire that had been sold at the retailer for years.
Financially, this was a big deal for Hanesbrands. The company disclosed that C9 accounted for $380 million of revenue over the 12-month period preceding the announcement. Hanesbrands' annual revenue last year was just shy of $7 billion.
The contract with Target ended early this year, and up until now Hanesbrands had little to say about the future of the C9 line. On Tuesday, the company announced a path forward. Hanesbrands has struck a multiyear deal with Amazon Fashion making C9 by Champion an Amazon exclusive worldwide. The products are already available on Amazon's website.
Image source: Hanesbrands.
Taking C9 global
C9 is launching on Amazon with over 100 styles, with the focus currently on the most popular items. Over time, Hanesbrands expects to expand the assortment of items available. C9 products will join mainline Champion products already available through Amazon Fashion. This deal also marks the first time that C9 is available globally.
Initial products include leggings, jackets, t-shirts, shorts, underwear, socks, and sports bras, as well as various accessories like gloves, shoes, and fitness equipment. The lineup will be aimed at value-conscious consumers.
"We are delighted to launch the C9 Champion line with Amazon Fashion to provide consumers with a new channel to access the brand. C9 Champion had strong consumer equity and a loyal following for the past 15 years," said Hanesbrands CEO Gerald Evans Jr.
A step in the right direction
Hanesbrands' guidance for 2020 took into account the exit from the C9 business, so it's unclear whether that outlook includes the impact from this deal. The company had guided for 2020 sales between $6.675 billion and $6.775 billion, down a few hundred million dollars from 2019.
Selling C9 on Amazon compared to Target has a downside: There's a lot more competing apparel available on the e-commerce giant's website. In a Target store, C9 was popular partly because options for low-cost athletic wear were limited by the size of the store. Target launched its own line of activewear under the All in Motion brand earlier this year, effectively replacing C9.
On the other hand, selling through Amazon puts the C9 lineup in front of more people around the globe. While it will take time for C9 sales to approach previous levels, sales could soar beyond those levels if the inexpensive products catch on with Amazon customers.
Champion is a growth engine for Hanesbrands, offsetting sluggish sales in the company's core innerwear business. Hanesbrands expects global Champion sales to grow by 10% in 2020. Overall activewear sales in the U.S., which are spread across multiple brands, will be down around 17% this year.
Striking a deal with Amazon for the C9 line provides Hanesbrands another way to grow Champion sales in the coming years. 2020 will be a transition year for the company, with sales down due to Target's decision to dump the brand. It's also unclear at this time how the novel coronavirus outbreak will impact Hanesbrands' results. In the long run, the Champion brand is positioned to continue to drive growth for the apparel company.
