Strong growth in activewear unit sales volumes at Gildan
Gildan Activewear Inc. announced its financial results for the first quarter of its 2010 fiscal year and also reconfirmed its sales and gross margin assumptions which it had previously provided in its outlook for the full fiscal year.
First Quarter Sales and Earnings
Gildan reported net earnings of U.S. $28.0 million and diluted EPS of U.S. $0.23 for its first fiscal quarter ended January 3, 2010, after reflecting a restructuring charge of U.S. $0.01 per share related to the consolidation of its U.S. distribution activities announced on December 10, 2009. Net earnings were U.S. $4.4 million or U.S. $0.04 per share in the first quarter of fiscal 2009. Before reflecting restructuring charges in both fiscal years, adjusted net earnings amounted to U.S. $29.2 million or U.S. $0.24 per share in the first quarter of fiscal 2010, compared to U.S. $5.3 million or U.S. $0.04 per share in the first quarter of fiscal 2009.
The significant increase in net earnings and EPS in the first quarter compared to last year was due to strong growth in activewear unit sales volumes, more favourable manufacturing, cotton and energy costs, and more favourable activewear product-mix, partially offset by lower activewear selling prices. EPS for the first quarter was slightly higher than the Company's internal forecast as the impact of lower than anticipated promotional activity in the U.S. wholesale distributor channel and more favourable product-mix more than offset the impact of the timing of replenishment of the U.S. wholesale distributor channel, which is benefitting activewear shipments early in the second quarter of the fiscal year.
Net sales in the first quarter of fiscal 2010 amounted to U.S. $220.4 million, up 19.8% from U.S. $184.0 million in the first quarter of last year. Sales of activewear and underwear were U.S. $152.9 million, up 32.0% from U.S. $115.8 million last year, and sales of socks were U.S. $67.5 million, compared to U.S. $68.2 million last year. The first quarter is seasonally the lowest quarter in the fiscal year for Gildan's activewear sales.
The strong recovery in sales of activewear and underwear compared to fiscal 2009 primarily reflected a 31.5% increase in activewear unit sales volumes, due to higher market share in the U.S. wholesale distributor channel, lower seasonal inventory destocking by distributors than in the first quarter of fiscal 2009, and increased penetration of international and other screenprint markets. These positive factors, together with more favourable activewear product-mix, were partially offset by an 8.9% decline in overall industry unit shipments from U.S. distributors to U.S. screenprinters, and an approximate 3.5% reduction in net selling prices for activewear, compared to the first quarter of fiscal 2009.
Overall inventories in the U.S. distributor channel at December 31, 2009 were down by 15.5% compared with a year ago. Gildan's share of distributor inventories was 49.8%, compared with its market share of 61.3% in the first quarter as shown above. Preliminary S.T.A.R.S. data for the month of January 2010 indicates that overall industry shipments declined by 1.5% compared to January 2009, and that Gildan's market share for all product categories combined was 64.3%, compared with 61.3% for the December quarter.