Gildan plans to run at full capacity to rebuild inventories
Gildan Activewear Inc, announced record sales and earnings for a fiscal quarter. The Company also provided updated full year fiscal 2011 EPS guidance of approximately U.S. $2.00 per share, compared to its prior guidance of U.S. $2.00 - U.S. $2.10 per share communicated in May 2011.
Third Quarter Sales and Earnings
Net earnings for the third fiscal quarter ended July 3, 2011 were U.S. $94.1 million or U.S. $0.77 per share on a diluted basis, up respectively 41.7% and 42.6% from adjusted net earnings of U.S. $66.4 million or U.S. $0.54 per share in the third quarter of last year, after adjusting last year's comparative results to reflect a restructuring charge of U.S. $0.01 per share related to the consolidation of U.S. retail distribution activities. The growth in net earnings and EPS compared to last year was primarily due to higher net selling prices, combined with manufacturing efficiencies and the U.S. $0.03 per share accretive impact of the acquisition of Gold Toe Moretz, which more than offset the unfavourable impact of significantly higher cotton and other input costs and lower unit sales volumes.
EPS were U.S. $0.07 ahead of the Company's guidance for the third quarter of approximately U.S. $0.70 which it had provided on May 11, 2011, due primarily to more favourable net selling prices which more than offset the impact of lower than projected unit sales volumes and unfavourable product-mix.
Net sales in the third quarter amounted to U.S. $529.8 million, up 34.0% from U.S. $395.3 million in the third quarter of fiscal 2010. The Company had previously forecast that third quarter sales would be close to U.S. $550 million. Sales of activewear and underwear amounted to U.S. $424.6 million, up 20.9% from fiscal 2010, and sales of socks were U.S. $105.2 million, up 139.1% from last year.
The growth in sales of activewear and underwear compared to the third quarter of fiscal 2010 was due to an approximate 26% increase in average net selling prices, partially offset by a 3.9% reduction in unit volume shipments which were down from last year and lower than forecast due to capacity constraints and low inventory availability, combined with lower industry demand which continued to deteriorate throughout the quarter. Overall industry shipments from U.S. distributors to U.S. screenprinters declined by approximately 9% in the third quarter, according to the CREST report produced by Capstone Research, Inc. The Company had projected that industry demand would grow by 3% during the quarter. The decrease in shipments in the U.S. wholesale distributor channel was partially offset by unit volume growth in other screenprint markets and an increase of over 80% in shipments of activewear and underwear to U.S. retailers.
The increase in sales of socks compared to the third quarter of last year was due to the impact of the acquisition of Gold Toe Moretz, together with the earlier timing of shipments of back-to-school programs and more efficient operations in the Company's new retail distribution centre in Charleston, S.C. and the implementation of selling price increases.