Hanesbrands on Wednesday revealed that Target won't renew the contract for its exclusive line of C9 by Champion activewear apparel when it expires at the end of January 2020. The brand won't be available at Target as of July that year, according to an email to Retail Dive from the retailer.
The lower-priced Champion brand has been a feature of Target's activewear line since 2004, according to Target's email. The move doesn't affect the companies' contracts for underwear and other product categories, Hanesbrands executives said, according to a transcript of a conference call with analysts published by Seeking Alpha.
A Target spokesperson told Retail Dive in an email that "the most important things to point out are that this transition is more than a year out. Additionally, this is a multi-year, broad strategy to reimagine our portfolio of owned and exclusive brands, and Target will continue to have a presence in the activewear and sporting goods categories after this change. We'll share more on that news in the near future."
Target is in the midst of a renaissance in its private label across several categories, and, as in the case of its kids apparel lines, that has sometimes meant jettisoning old standbys.
CL King analyst Steven Marotta pointed out in a client note Wednesday that the C9 line at Target generated around $380 million over 12 months. "While we are not privy to Target’s specific rationale for contract non-renewal, based on similar recent actions, we believe the company is endeavoring to capture gross margin by offering more private label products in categories now occupied by C9," Marotta said in the note.
Private label is emerging as a way for several retailers to compete with Amazon's huge assortment — and Target has returned to its previously strong approach of design-led differentiation, launching new lines that include, along with kids and other apparel, various furniture and home goods lines. In fact, last year the mass merchant announced plans to develop 12 new labels over the following 18 months, using the same extensive research and design approach applied to developing the Pillowfort and Cat & Jack kids lines, both launched in 2016.
"Target is known for providing our guests with incredible products at a tremendous value," the company said in the email. "Over the last year alone, we've introduced more than a dozen new brands — spanning multiple categories across our assortment — that have delighted guests of all ages."
With athleisure and activewear a competitive segment, it stands to reason that Target would apply the same process to develop its own in-house line (possibly expanding its existing activewear label, JoyLab), to replace C9, although the retailer wasn't specific. "Looking ahead, our guests can continue to count on Target when shopping for activewear and sporting goods, and we look forward to sharing more information about the addition of a new portfolio of performance brands soon," Target said in its statement.
But some analysts are skeptical. Omar Saad, Evercore Senior Managing Director, who leads the firm's softlines, luxury and department stores team, expressed surprise in light of the Champion brand's global strength, according to Seeking Alpha's transcript. The brand has helped foster Hanesbrands' return to growth — the company in November reported organic sales growth for the first time in eight quarters — and is opening Champion concept stores in various cities, including Los Angeles.
GAMCO Investors analyst Doug Thomas was more blunt. "I just feel like Target must be really out of touch with maybe their core consumers ... given the success you guys are having in Champion," he said, noting that "this is the time, in my view and I guess a lot of other people's view, to redouble their commitment to Champion."