Gildan's Q4 sales decline of 8 percent

Gildan Activewear Inc. said that the company generated sales for the fourth quarter of 720 million dollars down 8 percent, consisting of activewear sales of 595 million dollars, down 5 percent and sales of 125 million dollars in the hosiery and underwear category, down 21 percent compared to the prior year quarter.

The company recorded operating margin of 12.9 percent after reflecting a non-cash impairment charge related to hosiery cash-generating unit (CGU), and adjusted operating margin of 18.8 percent, within the target range, with GAAP diluted EPS of 47 cents and adjusted diluted EPS of 65 cents, which was below analyst expectations.

“I am extremely proud of our team’s record performance in 2022 with revenue up 11 percent over 2021 and strong margin delivery in every fiscal quarter,” said Glenn J. Chamandy, president and CEO of Gildan.

“And despite near term headwinds related to the economic environment, which impacted our performance in the fourth quarter and which may persist through the first part of 2023, we remain excited about the Gildan Sustainable Growth strategy, as well as our strong competitive positioning and ability to support our customers, as we work towards delivering on our long term growth aspirations,” Chamandy added.

Highlights of Gildan’s Q4 and full year results

International sales in the quarter were up 16 percent over the prior year, benefiting from inventory replenishment and higher net selling prices. In the hosiery and underwear category, the company said, sales decline compared to last year was due to weak POS in retail and the impact of retailers continuing to reduce inventory levels with these impacts slightly offset by higher net selling prices.

The company’s net sales were 3,240 million dollars in 2022, up 11 percent over the same period last year, reflecting a 17 percent increase in activewear, partly offset by a decline of 14 percent in the hosiery and underwear category.

For the full year, the company generated operating income of 603 million dollars or 18.6 percent of sales, down from 652 million dollars or 22.3 percent of sales in the same period last year. On an adjusted basis, Gildan generated operating income of 639 million dollars, which translated to an adjusted operating margin of 19.7 percent.

Gildan expects low single digits revenue growth in 2023

For 2023, Gildan expects revenue growth to be in the low single digit range.

Full year adjusted operating margin is expected to to fall within 18 percent to 20 percent annual target range, despite expected margin pressure in the first quarter driving 200 to 300 basis points below the low end of the company’s target range. Adjusted diluted EPS is forecasted to be in line with 2022, which assumes the continuation of share repurchases aligned with the capital allocation targets of purchasing approximately 5 percent of the outstanding public float in 2023.

The company’s board of directors has approved a 10 percent increase in the amount of the current quarterly dividend and has declared a cash dividend of 0.186 cents per share, payable on April 10, 2023, to shareholders of record on March 14, 2023.