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Gildan Activewear Q3 net sales improve 5.3 percent

By Prachi Singh

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Report

Gildan Activewear Inc. for its third quarter ended September 30, 2018 recorded total sales growth of 5.3 percent to 754.4 million dollars driven by a 12.1 percent increase in activewear sales, partly offset by a 16.6 percent decline in the hosiery and underwear category, which the company said was, despite the impact of Hurricane Florence that limited shipments during September. Adjusted diluted EPS of 0.57 dollar was up 7.5 percent over the same quarter last year.

Highlights of Gildan’s third quarter results

The increase in the activewear category, where the company generated 612.4 million dollars in sales for the quarter, was driven by higher unit sales volume and net selling prices and a 27.6 percent increase in international sales. The decline in the smaller hosiery and underwear category, where the company recorded 142 million dollars in overall sales, was mainly due to lower sock volumes, primarily in mass, and lower licensed brand sales. The company said that distribution disruptions due to the impact of Hurricane Florence resulted in approximately 15 million dollars in lost sales in this category as the company was unable to fulfill certain replenishment orders in September.

Gross margin of 29 percent was down 200 basis points over the same period last year, while net earnings amounted to 114.3 million dollars or 0.55 dollar per share on a diluted basis, compared with 116.1 million dollars or 0.52 dollar per share on a diluted basis, for the same period last year. Excluding the impact of after-tax restructuring and acquisition-related costs, Gildan reported adjusted net earnings of 118.1 million dollars, essentially flat compared to last year.

Net sales for the nine month period up 3.3 percent

The company added that net sales of 2,165.8 million dollars for the nine months were up 3.3 percent or 68.7 million dollars, driven by an 11 percent increase in activewear sales, partly offset by a 20.4 percent decline in the hosiery and underwear sales category. The increase in the activewear category, the company said, was mainly due to volume growth in imprintable products in the US, strong shipments internationally across the company's major markets, as well as increased shipments to retailers and global lifestyle brands.

The decline in the hosiery and underwear sales category was mainly due to lower unit sales of socks, particularly to mass retailers, which are shifting emphasis toward their own private label brands, lower licensed brand and Gold Toe sales, as well as the impact of the non-recurrence of the initial roll-out of certain program gains which occurred during the first half of the prior year.

Gross margin for the first nine months of 2018 of 28.2 percent was down 160 basis points over the prior year. Net earnings were 291.2 million dollars or 1.37 dollars per share on a diluted basis, compared to 307.4 million dollars or 1.36 dollars per share on a diluted basis, for the same period last year. Before reflecting after-tax restructuring and acquisition-related costs, adjusted net earnings were 304.2 million dollars or 1.43 dollars per share on a diluted basis, compared to 319.3 million dollars or 1.41 dollars per share on a diluted basis, in the same period last year.

Gildan Activewear narrows full year EPS outlook

The company narrowed its projected adjusted diluted EPS range for the full year to 1.85 dollars to 1.87 dollars, within its previous range of 1.85 dollars to 1.90 dollars but continues to project net sales growth for the full year to be in the mid-single-digit range driven by expected double digit growth in activewear sales. After incorporating the impact of lost orders as a result of shipping limitations caused by Hurricane Florence during the third quarter and lower than previously anticipated licensed brand sock sales, the company is now projecting sales in the hosiery and underwear category to be down approximately 125 million dollars for the full year compared to its previous projection of a decline of approximately 85 million dollars.

Adjusted EBITDA is projected to come in towards the lower end of our previous guidance range of 605 to 620 million dollars versus previous guidance of in excess of 425 million dollars.

For the fourth quarter, the company is projecting adjusted diluted EPS to be in the range of 0.42 dollar to 0.44 dollar, double digit activewear sales growth, and a strong improvement in SG&A leverage over the prior year quarter.

Picture:Facebook/Gildan

Gildan Activewear