The higher unit sales volumes compared to last year were achieved in spite of lower seasonal re-stocking by U.S. wholesale distributors than in the second quarter of fiscal 2012, when distributors replenished inventories after abnormally high destocking in the first quarter of last year, and lower seasonal demand for T-shirts by screenprinters due to the weather conditions in the second quarter. The increase in sales volumes was largely offset by the impact of lower selling prices, including the distributor inventory devaluation discount.
The 27.4% growth in sales for the Branded Apparel segment was due to the impact of the acquisition of Anvil and increased sales of Gildan branded activewear to retail customers, partially offset by slightly lower sales of socks compared to the second quarter of last year. Consumer spending in the U.S. mass-retail market in the second quarter was negatively impacted by colder weather conditions, the later timing of income tax refunds and an increase in payroll taxes.
Consolidated gross margins in the second quarter were 28.9% compared to 17.8% last year. The significant recovery in gross margins was due to the impact of lower-cost cotton and more favourable product-mix for Branded Apparel, partially offset by the impact of the reduction in net selling prices for Printwear, the distributor inventory devaluation discount, higher manufacturing costs, and the impact of the charge for discontinuation of certain Anvil product-lines.
The increase in manufacturing costs was due to short-term issues impacting the cost of goods produced in the first quarter, which were consumed in cost of sales in the second quarter, inflationary cost increases, and the earlier timing of the Easter holiday shutdown, which more than offset the positive impact of manufacturing efficiencies due to the continuing ramp-up of Rio Nance V.
Gildan Activewear