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Q4 net earnings fall due to high-cost cotton, Gildan
05 Dec '11
5 min read
The growth in sales of activewear and underwear compared to the fourth quarter of fiscal 2010 was due to an approximate 23% increase in average net selling prices, partially offset by a 7.6% reduction in unit volume shipments which declined due to a 6.3% reduction in industry shipments from U.S. distributors to U.S. screenprinters and seasonal destocking in the U.S. screenprint market which was less than anticipated.
Gildan's market share in the U.S. distributor channel in the fourth quarter was 62.3%, according to the CREST report, and was essentially unchanged from 62.1% in the fourth quarter of last year. Consequently, the Company has recaptured the slight loss of market share incurred earlier in the fiscal year, when it was unable to fully service demand for its products due to capacity constraints and sub-optimal inventory levels.
The increase in sales revenues for socks was due to the acquisition of Gold Toe Moretz. Shipments of socks in the fourth quarter of fiscal 2011 were negatively impacted by weak market conditions and inventory destocking by mass-market retailers. Also, sales of socks in the fourth quarter of fiscal 2010 were positively impacted by the later timing of shipments of back-to-school programs.
Gross margins in the fourth quarter were 20.4% compared with the Company's guidance in August of approximately 22%, and 27.3% in the fourth quarter of last year. Gross margins were lower than forecast due to higher than forecast selling price promotions in the U.S. wholesale distributor channel in the month of September and lower than projected sock manufacturing efficiencies.
The decrease in gross margins compared to last year was due to the significant increase in the cost of cotton, which was not fully recovered in higher selling prices, and the non-recurrence of the proceeds from the insurance claim for the Haiti earthquake and a cotton subsidy received in Gildan's U.S. yarn-spinning joint venture, which together positively impacted gross margins by over 400 basis points in the fourth quarter of last year. These negative factors were partially offset by more favourable activewear product-mix and the impact of the acquisition of Gold Toe Moretz.
SG&A expenses in the fourth quarter increased to U.S. $53.3 million from U.S. $42.0 million in the fourth quarter of last year. The increase in SG&A expenses was due to the impact of including Gold Toe Moretz, which resulted in approximately U.S. $15 million of additional SG&A expenses, partially offset by the non-recurrence of a U.S. $1.5 million provision for doubtful accounts receivable in the fourth quarter of last year and lower distribution expenses.
Adjusted EPS in the fourth quarter included income tax recoveries totalling approximately U.S. $7.6 million arising from losses in the Company's U.S. legal entities.
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Gildan's market share in the U.S. distributor channel in the fourth quarter was 62.3%, according to the CREST report, and was essentially unchanged from 62.1% in the fourth quarter of last year. Consequently, the Company has recaptured the slight loss of market share incurred earlier in the fiscal year, when it was unable to fully service demand for its products due to capacity constraints and sub-optimal inventory levels.
The increase in sales revenues for socks was due to the acquisition of Gold Toe Moretz. Shipments of socks in the fourth quarter of fiscal 2011 were negatively impacted by weak market conditions and inventory destocking by mass-market retailers. Also, sales of socks in the fourth quarter of fiscal 2010 were positively impacted by the later timing of shipments of back-to-school programs.
Gross margins in the fourth quarter were 20.4% compared with the Company's guidance in August of approximately 22%, and 27.3% in the fourth quarter of last year. Gross margins were lower than forecast due to higher than forecast selling price promotions in the U.S. wholesale distributor channel in the month of September and lower than projected sock manufacturing efficiencies.
The decrease in gross margins compared to last year was due to the significant increase in the cost of cotton, which was not fully recovered in higher selling prices, and the non-recurrence of the proceeds from the insurance claim for the Haiti earthquake and a cotton subsidy received in Gildan's U.S. yarn-spinning joint venture, which together positively impacted gross margins by over 400 basis points in the fourth quarter of last year. These negative factors were partially offset by more favourable activewear product-mix and the impact of the acquisition of Gold Toe Moretz.
SG&A expenses in the fourth quarter increased to U.S. $53.3 million from U.S. $42.0 million in the fourth quarter of last year. The increase in SG&A expenses was due to the impact of including Gold Toe Moretz, which resulted in approximately U.S. $15 million of additional SG&A expenses, partially offset by the non-recurrence of a U.S. $1.5 million provision for doubtful accounts receivable in the fourth quarter of last year and lower distribution expenses.
Adjusted EPS in the fourth quarter included income tax recoveries totalling approximately U.S. $7.6 million arising from losses in the Company's U.S. legal entities.
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Gildan Activewear Inc
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