Gildan Activewear, Montreal, Quebec, Canada, recently announced its results for the three months ended Oct. 4, 2015, and updated its sales and earnings guidance for calendar year 2015.
Adjusted diluted earnings-per-share (EPS) for the third calendar quarter was in line with the company’s previous guidance. Results for the fourth calendar quarter are expected to be significantly in excess of earnings in the fourth calendar quarter of any previous year, as the company benefits from manufacturing cost reductions from its capital expenditure programs and lower cotton costs, combined with continuing top-line growth in sales revenues in both operating segments.
The company reported net earnings of $123.1 million, or $0.50 per share on a diluted basis, for the three months ended Oct. 4, 2015, on consolidated net sales of $674.5 million. This compares with net earnings of $122.7 million, or $0.50 per share on a diluted basis, on consolidated sales of $666 million for the three months ended Oct. 5, 2014.
Before reflecting, restructuring and acquisition-related costs of approximately $3.3 million after-tax in the quarter relating primarily to the integration of acquisitions, Gildan Activewear reported adjusted net earnings of $126.4 million, or $0.52 per share on a diluted basis, for the three months ended Oct. 4, 2015, up 2.9 percent and 4 percent, respectively, compared with adjusted net earnings of $122.8 million, or $0.50 per share on a diluted basis, for the same period last year.
Gildan Activewear resumed a trajectory of EPS growth in the third calendar quarter of 2015, after three quarters in which results were negatively impacted by the misalignment in the timing of lower printwear selling prices, and the benefit of lower manufacturing and cotton costs. The improved earnings performance in the third quarter reflected unit sales-volume growth and operating margin expansion.
During the quarter, the company benefited from lower manufacturing costs due to savings from its investments in yarn spinning and other capital projects, lower cotton and purchased input costs, and the non-recurrence of the transitional manufacturing costs, which were incurred in 2014. Overall, higher unit sales-volumes and lower manufacturing costs in the quarter more than offset lower net selling prices and unfavorable product mix for printwear, due to the later timing of fleece shipments, and increases in selling, general and administrative, financial and income tax expenses. Consolidated net sales in the quarter were below the company’s guidance for net sales of close to $700 million, mainly as a result of lower-than-anticipated branded apparel sales, which were impacted by continuing lower-than-anticipated inventory replenishment by a major U.S. retail customer and weaker-than-anticipated demand during the back-to-school period.
Adjusted diluted EPS for the third calendar quarter of 2015 were within the company’s guidance range of adjusted diluted EPS of $0.51 to $0.53, which it provided on July 31, 2015, as the impact of lower-than-anticipated branded apparel sales was offset mainly by higher-than-projected net selling prices and more favorable product mix for printwear for the quarter compared to the company’s previous projection.
Outlook
The company is now projecting adjusted diluted EPS for the 12 months ending Jan. 3, 2016 to be in the range of $1.46 to $1.48 on projected sales of close to $2.55 billion. The company’s most recent guidance was for adjusted diluted EPS of approximately $1.50 on projected net sales of close to $2.6 billion.
Sales growth in printwear for the full calendar year is now projected to be close to 10 percent, compared to the company’s previous projection of printwear sales growth in excess of 10 percent. The projected slight reduction in printwear sales is due to unfavorable product mix in the fourth quarter as warmer seasonal weather is expected to result in lower seasonal sales of high-value fleece and long-sleeve T-shirts.
Branded apparel sales growth for the full calendar year is now expected to be approximately 12 percent, compared to previously anticipated sales growth of approximately 15 percent. The lower projected sales growth in branded apparel primarily reflects the sales shortfall in the third calendar quarter and the assumption of the continuing impact of issues with retailer inventory replenishment combined with soft retail market conditions in the fourth calendar quarter of 2015.
The company is projecting adjusted diluted EPS of $0.28 to $0.30 for the December quarter, on projected sales revenues in excess of $500 million, compared with an adjusted net loss of $0.15 per share on sales revenues of $390.6 million in the corresponding quarter of the prior year. Projected net earnings for the fourth quarter of calendar 2015 are expected to be a record for a fourth calendar quarter and up by more than 60 percent, compared to the previous record in the fourth calendar quarter of 2013. The company’s projected results for the fourth calendar quarter reflect expected continued unit-volume growth in both operating segments, including the impact of new retail program shipments in branded apparel and the impact of the acquisition of Comfort Colors.
The projected sales and earnings momentum in the fourth quarter is expected to position the company for continued earnings growth in calendar 2016, as the company expects to achieve continuing volume growth and further manufacturing cost reductions, combined with lower cotton costs. The ramp-up of the company’s new yarn-spinning facilities is on plan and the company continues to expect to achieve its projected three-year target of $100 million in annual cost savings by the end of 2017.
For more information, visit www.gildan.com.