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Gildan Activewear to suspend its earnings guidance
Feb '09
Gildan Activewear Inc announced its financial results for the first quarter of its 2009 fiscal year, and suspended its EPS guidance for the full fiscal year, which it had initiated on December 11, 2008, due to increasing uncertainty about macro-economic conditions and the potential impact of the economic and financial crisis on Gildan's served markets and customer base. The Company also updated its capital expenditure plans for fiscal 2009.

First Quarter Sales and Earnings:
Gildan reported net earnings of U.S. $4.3 million and diluted EPS of U.S. $0.04 for its first fiscal quarter ended January 4, 2009, compared with net earnings of U.S. $27.9 million and diluted EPS of U.S. $0.23 in the first quarter of fiscal 2008. The Company had provided EPS guidance of US $0.00 - $0.05 for the first quarter of fiscal 2009.

The reduction in net earnings and EPS in the first quarter compared to last year was primarily due to significantly lower unit sales volumes, combined with higher cotton and energy costs reflected in inventories consumed in cost of sales during the quarter, more unfavourable activewear product-mix, and increased provisions for accounts receivable. Cotton costs are projected to be at their highest point during the year in the first quarter of fiscal 2009, and were at their lowest point during fiscal 2008 in the first quarter.

These negative factors were partially offset by favourable manufacturing efficiencies and higher net selling prices for activewear, compared to the first quarter of fiscal 2008. Compared to the Company's EPS guidance for the quarter, the impact of lower than projected selling price discounts was offset by lower than projected unit sales volumes, due to continuing inventory destocking by U.S. wholesale distributors, and increased provisions for accounts receivable.

Sales in the first quarter of fiscal 2009, which is seasonally the lowest quarter of the fiscal year for Gildan's activewear sales, amounted to U.S. $184.0 million, down 26.5% from U.S. $250.5 million in the first quarter of last year.

Increased market share penetration in the U.S. screenprint channel was more than offset by an 11.6% decline in overall industry unit shipments in the channel and the significant impact of inventory reductions during the quarter by U.S. wholesale distributors.

Sales were also negatively impacted by more unfavourable activewear product-mix. Sales of socks included an extra two weeks of sales from the Prewett acquisition, which was effective from October 15, 2007.

However, unit sales of socks decreased due to the elimination of unprofitable sock product-lines during fiscal 2008, and a reduction in inventories carried by retailer. Unit sales of Gildan socks from the Company's major retail customers to consumers were essentially unchanged compared with the previous year, in spite of weak overall retail market conditions.

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Gildan Activewear Inc

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