The underwear and apparel maker said Wednesday it will close plants affecting nearly 5,000 employees, mostly in Mexico and the Dominican Republic. Positions in Canada, the United States and Puerto Rico also will be eliminated.
Going forward, the company will open up more plants in lower-cost South American and Asian countries. The stock is up on the news, because Wall Street, of course loves the idea:
"The math works," Morgan Stanley analyst Brian McGough wrote in a research note. "This is completely in line with the longer-term plan to right-size the cost structure of this business."
Hey Brian, did you know that the word gullible isn't in the dictionary?
What are we to make of any company that finds the Dominican Republic labor market too expensive? According to the CIA, the GDP per capita is about $8,400 in that country. And seeing as the company seems set on jumping on whatever country has the lowest labor costs, how long can we expect it to stay in the countries that it's going to? How long before the next round of labor cuts (and attendant "one-time" charges)?
Look, none of this rant is motivated by any bleeding heart or anti-globalization sympathies. It's never nice when someone loses their job, but that's not my main beef. I'm just wondering why people would think that the company is exhibiting sound practices by getting on this treadmill, rather than, say, pursuing more efficient industrial practices.
HBI 6-mo. chart:
Disclosure: Given the runup in shares, I may take out a small, speculative short position in the company. If nothing else, this will force me to pay attention to it and test my sense that Wall Street's love of moves like this is misguided.