Gildan returns to profit, reflects positive outlook for 2016

Gildan Activewear has said that its fourth quarter sales and earnings were in-line with the company’s previously projected guidance, despite the impact of unseasonably warm weather and a weak holiday season in retail. The company also announced guidance, reflecting higher sales and earnings for 2016. In addition, the company also announced a 20 percent increase in the amount of its quarterly dividend.

Consolidated net sales in the fourth quarter amounted to 543.8 million dollars, up 39.2 percent, reflecting an increase of 77.7 percent in printwear segment sales and an increase of 12.4 percent in sales of branded apparel. Excluding the distributor inventory devaluation discount in the prior year quarter, consolidated net sales in the quarter were up 24 percent. Net earnings were 67.6 million dollars or 0.28 dollar per share on a diluted basis, compared with a net loss of 41.2 million dollars or 0.17 dollar per share in the same quarter last year.

Review of Q4 sales across segments

Excluding the impact of the prior year distributor inventory devaluation discount, printwear sales in the fourth calendar quarter increased 37 percent compared to the same quarter last year. The increase was mainly due to strong unit sales volume growth in the US and Canada, the acquisition of Comfort Colors and higher shipments in international markets, partially offset by unfavourable product-mix due to a lower proportion of fleece sales compared to last year and the negative impact of the decline of international currencies.

The printwear segment reported operating income of 62.8 million dollars compared to an operating loss of 21 million dollars in the corresponding quarter of the prior year. The company achieved printwear operating margins in the quarter of 22 percent.

Net sales for branded apparel were 258.9 million dollars, up 12.4 percent reflecting increased sales in all product categories. Sales of underwear were up by more than 20 percent. With the retail distribution gains during the year, the company doubled its retail door count for underwear, with Gildan branded underwear selling in approximately 18,000 retail doors at the end of the year. The growth in branded apparel sales reflected an increase of 85 percent in Gildan branded programs, including the impact of the conversion of private label programs, as well as strong sales of licensed brands which more than offset lower sales of private label and Gold Toe branded products.

Operating income in Branded Apparel for the three months ended January 3, 2016, was 31 million dollars, up significantly compared with 8.3 million dollars in the fourth calendar quarter of 2014. Operating margins in the quarter were 12 percent compared to 3.6 percent a year ago.

Year-to-date sales and earnings report

Consolidated net sales revenues for the twelve months ended January 3, 2016 amounted to 2,568.7 million dollars, up 11.7 percent.

The annual increase in revenues reflected an increase of 12.1percent in printwear sales and sales growth of 11.1 percent in branded apparel. The net sales increase was primarily due to strong unit sales volume growth in both operating segments, the impact of the acquisitions of Doris and Comfort Colors and the non-recurrence of the printwear distributor devaluation discount in the fourth calendar quarter of 2014.

Net earnings for calendar 2015 were up 25.1 percent to 346.1 million dollars or 1.42 dollars per share on a diluted basis, compared to 276.7 million dollars or 1.12 dollars per share for calendar 2014. Operating margins for calendar 2015 were up 190 basis points. Adjusted EBITDA of 504 million dollars was in line with the company’s guidance.

Fiscal 2016 outlook reflects positivity

The company’s 2016 guidance assumes the continuation of current retail and printwear market conditions. For 2016 the company is projecting adjusted EPS of 1.50 dollars –1.60 dollars on a diluted basis, on projected consolidated net sales in excess of 2.6 billion dollars, compared to adjusted EPS of 1.46 dollars and consolidated net sales of 2,568.7 million dollars for the twelve months ended January 3, 2016. Printwear sales in 2016 are projected to be in excess of 1.6 billion dollars and branded apparel sales are projected to be in excess of 1 billion dollars. Adjusted EBITDA is projected to be approximately 545 dollars –570 million dollars.

The company’s Board of Directors has approved a 20 percent increase in the amount of the current quarterly dividend and has declared a cash dividend of 0.078 dollar per share.