By Elizabeth Holmes
Hanesbrands Inc. is moving beyond the white T-shirt.
The company known for making hundreds of millions of pairs of underwear is trying its hand at fashion through a new graphic T-shirt division. Having overhauled its supply chain and looking for a new area of growth, Hanes is betting it can use its size and scale to make decorated tees faster and cheaper than competitors.
But with that comes risk. Hanes Ink, which the company will formally announce this week, exposes Hanes to the hits and misses of fashion, a tricky business even for veterans.
"That's the challenge here," Jim Phelan, vice president of Hanes Ink, said of the difference between the core business and the new venture. "One's a replenishment, ongoing business. The other one is very much being on trend."
The potential is sizeable. T-shirt consumption has risen sharply, to more than 10 per person last year from around four in 1990, according to Hanesbrand data from market-research firm NPD Group and the Census Bureau. Americans bought 3.2 billion T-shirts in the 12 months ended in May, up 4.1% from a year earlier.
Hanes, which had net sales of $4.3 billion last year, has tested the graphic waters for several years, beginning with a contract to produce T-shirts for the theme parks of Walt Disney Co. in 2007. A deal to make a plus-size line for Wal-Mart Stores Inc., called Just My Size, followed in 2009. Programs with Macy's Inc., Kohl's Corp. and Target Corp. came last year and sales topped $100 million.
Now, with its own division, three design offices and a strong emphasis on women's fashion, the company expects to triple that sales figure in the next five years.
The company's foray into graphic T-shirts was born out of a $500 million overhaul of its supply chain. After the company spun off from Sara Lee Corp. in 2006, Chief Executive Richard Noll consolidated fragmented production facilities by closing plants throughout the Caribbean and Central America to focus on three giant hubs in China, the Dominican Republic and El Salvador.
The new setup lowered costs and substantially increased capacity, meaning Hanes could make more shirts at a cheaper price. For years, the company has been selling small batches of its plain T-shirts to graphic designers or screen printers who would decorate them and then sell them to retailers at a markup. Hanes thought it could eliminate the middleman, Mr. Phelan said.
"They're trying to take advantage of economies of scale," says Eric Beder, a retail analyst with Brean Murray, Carret & Co. "The more you can fill up the pipeline, the higher you can drive profits." The trick, Mr. Beder says, is picking the right products and choosing the right design team.
Hanes, based in Winston-Salem, N.C., opened creative centers in New York, Los Angeles and Miami. Carole Bolger, who designed T-shirts for Gap Inc. in its heyday, heads up the office in Manhattan's Garment District.
Surrounded by swatches of Pantone colors and photos from high-end runway shows, including Thakoon and Roberto Cavalli, Ms. Bolger and her team churn out a tremendous amount of artwork—necessary because Hanes Ink's designs are exclusive to each of its retailers, so the shirt that a shopper sees at Kohl's isn't the same as one at J.C. Penney Co. The strategy helps each retailer stand out and keeps them from competing on price.
The wide audience means an equally wide range of styles. A shirt that some designers on her team think is garish—a gray top with pink fluorescent paint and lots of glitter—is a best seller, Ms. Bolger said. Holiday-specific merchandise had some of designers chuckling, because it could be considered "cornball," Ms. Bolger said. "You know what? A lot of people wear this stuff." (One shirt Ms. Bolger designed for Mother's Day read, "If it's not one thing, it's your mother".)
Hanes hopes to mitigate its exposure to missed trends by shortening its production timeline. Apparel manufacturers, especially those with factories in Asia, operate on lengthy lead times, making it harder to replenish popular product and keeping fashion misses on shelves longer.
By dividing up production into several stages—first make the shirt, dye the shirt and then decorate the shirt—Hanes says it has built in flexibility. Women's shirts can be turned around in six to 10 weeks, less than half the typical apparel lead times.