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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (73340)	8/14/2023 4:17:34 PM
From: Harshu Vyas	Respond to of 78476

Hi Paul, It's an interesting one, for sure. They are making operating profits - but, interest payments are bleeding them dry. And since they don't seem to have large pricing power, competitors like Nike can squeeze them as much as they please and continue to generate the bulk of their profits in shoes. What I find weird on their balance sheet is the alarming amount of inventory - inventory, alone, can cover current liabilities. Majority of it is finished goods - if this is "normal" for HBI, ok, but seems slightly off. I guess w/c isn't a problem, though. Will have to refi before 2026 - $2.1b due! Are buying it back, but not nearly quick enough. This is the primary risk. $149m also due next year. Rates are unfavourable, too. Averages above 7%. A high risk play. Don't think it's worth taking. The balance sheet reads like a nightmare. Even if you add-back the $1b in accumulated depreciation (and assume, wrongly, that it's all from the factories), there's a massive hole to fill. I think they will have to downsize and sell some brands. Actually think it could be worth shorting - book value is $350m and that's with a large amount of intangibles. Don't know the brands well enough to know if these intangible assets count for anything. If they can sell these brands for more than what's on the balance sheet, it could work out - if not... Hope to be proven wrong - may have missed something. Skimmed through the financials as quickly as I could. Best, Harshu Vyas