Gildan Reports Second Quarter Results
Gildan Activewear Inc. announced its financial results for the second quarter of its 2012 fiscal year last week, reconfirming its prior earnings guidance for the full fiscal year. The earnings report came on the heels of the company's announcement that it had reached an agreement to acquire Anvil Knitwear. As previously reported by Promo Marketing, the purchase is expected to occur by the end of May for $88 million.
Gildan Activewear reported net earnings of $26.9 million for its second fiscal quarter ended April 1, 2012, compared with net earnings of $61.7 million in the second quarter of fiscal 2011. Before restructuring and acquisition-related costs, adjusted net earnings for the second quarter of fiscal 2012 were $27.8 million, compared to $64.6 million in the second quarter of last year.
The decline in the company's results compared to last year was due to significantly higher cotton costs, which negatively impacted EPS in the second quarter by close to U.S. $0.70 compared to the second quarter of last year. The impact of higher cotton and other input costs and higher income taxes compared to last year were partially offset by higher printwear sales volumes, the benefit of selling price increases to U.S. retail customers which were implemented in the fourth quarter of fiscal 2011, improved manufacturing efficiencies and the accretive impact of the acquisition of Gold Toe Moretz.
Net sales in the second quarter amounted to $482.6 million, up 25.9 percent from $383.2 million in the second quarter of fiscal 2011, and essentially in line with its forecast of close to $500 million. Sales for the printwear segment amounted to $360.9 million, up 11.5 percent from fiscal 2011, and sales for the branded apparel segment were $121.6 million, up 104.2 percent from the second quarter of last year.
The increase in sales in the printwear segment compared to the second quarter of fiscal 2011 was due to higher unit sales volumes, as U.S. distributors rebuilt inventories to more normal levels after destocking in the first quarter of the fiscal year in anticipation of the selling price decrease announced in December 2011. In addition, industry demand from U.S. screenprinters, as reported in the CREST report, increased by 4.9 percent compared to the second quarter of last year, and Gildan Activewear's market share in the U.S. distributor channel was 63 percent, compared to 62 percent in the second quarter of fiscal 2011. Shipments to national account customers were essentially unchanged from the second quarter of last year. International unit sales volumes in the printwear business segment reflected strong growth compared to the second quarter of fiscal 2011.
In the second quarter, the printwear division reported operating income of $50.1 million, compared with $89.2 million in the second quarter of fiscal 2011. The decline in the results for the printwear segment was due to the impact of higher cotton and other input costs, partially offset by higher unit sales volumes and manufacturing efficiencies.
The company said that industry shipments from U.S. wholesale distributors to U.S. screenprinters are now projected to increase by approximately 5 percent in the second half of the fiscal year compared with the second half of fiscal 2011. The company had previously assumed that total industry shipments in the second half of fiscal 2012 would be unchanged from last year. Shipments in the U.S. wholesale distributor channel in the month of April have continued to be strong, in line with the revised outlook.
The company is assuming a market share of approximately 70 percent in the U.S. distributor channel for the balance of the fiscal year subsequent to the acquisition of Anvil. The company had previously planned to increase its market share to 65 percent due to its organic growth.
Selling prices for the printwear business for the balance of the fiscal year are assumed to be slightly lower than in the second quarter.
The full report is available on Gildan Activewear's website.