Gildan Activewear Q3 results in line with its EPS guidance
Gildan Activewear Inc announced its financial results for its third fiscal quarter ended July 6, 2008. The Company also reconfirmed its most recent full year EPS guidance for fiscal 2008, which it had revised on April 29, 2008.
Third Quarter Sales and Earnings:
Gildan reported net earnings of U.S. $54.0 million and diluted EPS of U.S. $0.44 for the third quarter of fiscal 2008. Results for the third quarter include U.S. $2.3 million or U.S. $0.02 per share of restructuring charges, related to ongoing carrying costs pursuant to the closure of Canadian and U.S. manufacturing facilities, and a planned consolidation of sewing operations in Haiti.
In the third quarter of fiscal 2007, the Company reported net earnings of U.S. $52.4 million or U.S. $0.43 per share, including $4.6 million or U.S. $0.04 per share of restructuring charges related to manufacturing closures. Before reflecting the impact of restructuring charges in both fiscal years, adjusted net earnings and adjusted diluted EPS were U.S. $56.3 million and U.S. $0.46 respectively, compared to adjusted net earnings of U.S. $57.0 million and EPS of U.S. $0.47 in the third quarter of fiscal 2007.
The change in adjusted EPS, before restructuring charges, was due primarily to higher activewear selling prices and unit sales volumes, which were more than offset by higher cotton and energy costs, more unfavourable activewear product-mix, higher selling, general and administrative and depreciation expenses, the non-recurrence of a prior year income tax recovery which positively impacted EPS by U.S. $0.05 in the third quarter of last year, a provision for a doubtful receivable account, and charges to write off or dispose of surplus fixed assets.
As reflected in the Company's guidance for the year, the third quarter of the 2008 fiscal year comprised 14 weeks instead of the normal 13 weeks for a fiscal quarter. The inclusion of an extra week is required in every fifth or sixth fiscal year to maintain the alignment of the Company's financial reporting cycle with the calendar year. Consistent with the Company's prior practice, the extra week is included in the third quarter.
The Company's results for its third fiscal quarter were in line with its most recent EPS guidance. More favourable than projected activewear selling prices, unit volumes and product-mix were offset by a provision for a doubtful receivable account, and charges to write off or dispose of surplus fixed assets.
Sales in the third quarter amounted to U.S. $380.8 million, up 30.6% from U.S. $291.6 million in the third quarter of last year. The increase in sales revenues was due to an increase of U.S. $43.8 million in sock sales due to the acquisition of V.I. Prewett & Son in the first quarter of fiscal 2008, an approximate 6% increase in activewear unit selling prices and a 10.4% increase in unit sales volumes for activewear and underwear.
Growth in activewear unit sales was significantly constrained by lack of inventory, as a result of lower than anticipated production from the Company's Dominican Republic textile manufacturing facility. The Company has made good progress in improving the performance of the Dominican Republic facility during the third quarter, although its inventory levels for activewear continue to be very low.