Gildan Activewear Inc. announced its results for its second fiscal quarter ended March 30, 2014. Net earnings of U.S. $0.64 per share were a record for the second quarter of a fiscal year and at the top end of the guidance range which the Company had provided on February 5, 2014.
The Company slightly increased its guidance for full year sales revenues but reiterated its prior guidance range for adjusted EPS for the full fiscal year, to include the impact of additional transitional manufacturing costs which are being incurred to support its projected sales growth in 2014 and 2015.
-EPS for Q2 of U.S. $0.64, up 8.5% from U.S. $0.59 in Q2 of Fiscal 2013
-Full Year Sales Revenues Now Expected to be Approximately U.S. $2.4 Billion, Versus Prior Guidance of Approximately U.S. $2.35 Billion
-Full Year Guidance for Adjusted EPS Reconfirmed at U.S. $3.00-$3.10 as Increased Sales Projected to be Offset by Transitional Manufacturing Costs to Support Sales Growth
-Planned New Textile Facility to be Located in Costa Rica
Second Quarter Consolidated Results
Net sales in the second quarter amounted to U.S. $548.8 million, up 4.9% from U.S. $523.0 million in the second quarter of fiscal 2013. The Company had projected net sales for the quarter in excess of U.S. $550 million. Adjusted net earnings were U.S. $79.2 million or U.S. $0.64 per share on a diluted basis for the second fiscal quarter ended March 30, 2014, up 8.9% and 8.5% respectively compared with adjusted net earnings of U.S. $72.7 million or U.S. $0.59 per share for the second quarter of fiscal 2013.
The growth in sales and EPS in the second quarter compared to last year was achieved in spite of the impact of colder weather which negatively impacted demand for T-shirts and contributed to soft retail market conditions.
The Company's results reflected strong growth in sales of underwear to U.S. retailers, increased sales to global lifestyle brands and international printwear markets and the non-recurrence of a distributor inventory devaluation discount in the second quarter of fiscal 2013. These positive factors were partially offset by higher cotton costs compared to the second quarter of last year.
Consolidated gross margins in the second quarter were 27.9% compared to 28.9% in the second quarter of last year, as the impact of higher cotton costs compared to last year was only partially passed through into higher net selling prices in Printwear and selling prices for Branded Apparel were not increased.
Gross margins were also negatively impacted by inflationary cost increases and transitional manufacturing inefficiencies which are being incurred primarily in sock operations and the former Anvil textile operations, to support new programs and the introduction of new products, and which offset the favourable impact of other manufacturing cost reduction projects.