Gildan Activewear Posts Record 2nd Quarter
Gildan Activewear Inc. announced its financial results for the second quarter of its 2010 fiscal year. The company also updated the sales and margin assumptions in its outlook for the full fiscal year, as well as its capital expenditure and capacity expansion plans to support its continuing sales growth and cost reduction objectives. In addition, the company provided an update on its retail strategy and indicated that it had received two major vendor awards from Walmart.
Second Quarter Sales and Earnings
Gildan reported net earnings of U.S. $48.8 million and diluted EPS of U.S. $0.40 for its second fiscal quarter ended April 4, 2010, after reflecting a restructuring charge of U.S. $0.01 per share related to the consolidation of its U.S. distribution activities announced on December 10, 2009. Earnings and EPS were a record for the second quarter of any fiscal year. Before restructuring charges, adjusted net earnings amounted to U.S. $49.8 million or U.S. $0.41 per share in the second quarter of fiscal 2010, compared to U.S. $7.2 million or U.S. $0.06 per share in the second quarter of fiscal 2009. The significant increase in net earnings and EPS in the second quarter compared to last year was due to strong growth in activewear and underwear unit sales volumes, more favorable manufacturing, cotton and energy costs, and more favorable activewear product-mix, partially offset by the U.S. $0.03 per share impact of transitional manufacturing inefficiencies due to the Haiti earthquake, and higher selling, general and administrative expenses. Results for the second quarter were significantly ahead of the assumptions in the Company's full year outlook provided on February 9, 2010, as more favorable than projected net selling prices, unit sales volumes and product-mix in the U.S. wholesale distributor channel more than offset higher than projected selling, general and administrative expenses and the later timing of shipments of socks, which is expected to benefit the second half of the fiscal year.
Net sales for the second quarter of fiscal 2010 amounted to U.S. $326.8 million, up 33.5 percent from U.S. $244.8 million in the second quarter of last year. Sales of activewear and underwear were U.S. $273.2 million, up 51.0 percent from U.S. $180.9 million last year, and sales of socks were U.S. $53.6 million, down 16.3 percent from last year, primarily due to the timing of replenishment and the transition to new programs for mass-market retailers, which are expected to benefit sock shipments in the second half of the fiscal year.
The strong recovery in sales of activewear and underwear compared to fiscal 2009 was due to higher market share in the U.S. wholesale distributor channel, the non-recurrence of distributor destocking which occurred in the second quarter of fiscal 2009, a 3.4 percent increase in overall industry demand in the U.S. distributor channel, increased penetration of international and other screen-print markets and the impact of more favorable activewear product-mix, together with significantly increased shipments of underwear and activewear to retail customers. The second quarter of fiscal 2010 was the first quarter since the first quarter of fiscal 2008 to benefit from positive growth in overall industry demand in the U.S. distributor channel. The positive trend in market recovery continued to improve each month during the quarter, with the month of March showing overall industry growth of 8.9 percent. Net selling prices for activewear were essentially flat compared to the second quarter of fiscal 2009.