Gildan lowers EPS outlook for Q1 and FY19

Gildan Activewear Inc. has said in a statement that it expects to take a charge of approximately 19 to 23 million dollars in the first quarter, related to the impairment of a trade receivable from Heritage Sportswear, one of the company’s US distributor within the imprintables channel. Gildan has therefore updated its first quarter adjusted diluted EPS guidance. After accounting for the projected charge of 9 to 11 cents per share, the company anticipates adjusted diluted EPS to be in the range of 14 cents to 16 cents compared to its previous guidance of adjusted diluted EPS in the range of 24 cents to 26 cents.

The company added that after unsuccessful ongoing efforts to sell the Heritage business, the receiver appointed to administer the Heritage business filed a motion in court for approval of the orderly wind down of Heritage’s operations and sale of its assets by liquidation. And the above mentioned charge is the result of this filing.

As Heritage is a wholesale distributor selling blank apparel to screenprinters and decorators, who in turn resell the decorated garments to end users, the company expects the Gildan business formerly carried out by Heritage (representing Gildan net sales of approximately 60 million dollars in 2018) will be mostly absorbed by other wholesale distributors within the channel. Consequently, the company does not expect any adverse impact on its initial full year sales projection for 2019 due to the wind down of operations of Heritage.

Reaffirming its 2019 full year guidance, the company has projected sales growth in the mid-single digit range and is updating its full year GAAP and adjusted diluted EPS guidance to reflect the anticipated charge related to Heritage. The company is now projecting GAAP diluted EPS to be in the range of 1.80 dollar to 1.90 dollar compared to its previous guidance of GAAP diluted EPS of 1.90 dollar to 2 dollar and adjusted diluted EPS in the range of 1.90 dollar to 2 dollar compared to its previous guidance of adjusted diluted EPS of 2 dollar to 2.10 dollar.

Picture: Facebook/Gildan