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Growth in sales revenues, decline in socks sales, Gildan
16
Oct '10
Gildan Activewear Inc. announced its financial results for the third quarter of its 2010 fiscal year. The Company also updated its outlook for the full fiscal year.

Third Quarter Sales and Earnings
Before restructuring charges, adjusted net earnings for the third fiscal quarter ended July 4, 2010 were U.S. $66.4 million or U.S. $0.54 per share, compared to U.S. $44.9 million or U.S. $0.37 per share in the third quarter of fiscal 2009. Net earnings were U.S. $64.7 million or U.S. $0.53 per share, after reflecting a restructuring charge of U.S. $0.01 per share related to the consolidation of U.S. distribution activities announced on December 10, 2009.

Earnings and EPS were a record for a fiscal quarter. The 45.9% increase in adjusted EPS in the third quarter compared to last year was primarily due to strong growth in activewear unit sales volumes and lower promotional activity in the U.S. distributor channel, partially offset by supply chain inefficiencies due to the integration of new retail products and the impact of the Haiti earthquake, higher selling, general and administrative expenses, and the non-recurrence of a U.S. $0.05 per share prior year income tax recovery recorded in the third quarter of fiscal 2009.

Net sales for the third quarter of fiscal 2010 amounted to U.S. $395.3 million, up 28.4% from U.S. $307.8 million in the third quarter of last year. Sales of activewear and underwear were U.S. $351.3 million, up 36.1% from U.S. $258.1 million last year, and sales of socks were U.S. $44.0 million, down 11.5% from last year.

The growth in sales of activewear and underwear compared to fiscal 2009 was primarily due to higher market share in the U.S. wholesale distributor channel, combined with a strong recovery in overall industry demand, which increased by 10.5% compared to the third quarter of last year, continuing strong growth in international and other screenprint markets, an approximately 2% increase in net selling prices for activewear, more favourable activewear product-mix and increased shipments of underwear and activewear to retail customers.

The Company noted that demand in the U.S. distributor channel at the end of the quarter may have been positively impacted by purchases by screenprinters in advance of an industry selling price increase which was effective at the beginning of the fourth quarter.

At the end of the June quarter, overall inventories in the U.S. distributor channel as reported by S.T.A.R.S. were down by 1.8% compared with a year ago. Gildan's share of distributor inventories was 52.5% at June 30, 2010, compared with its market share of 63.9% for the quarter as shown above.

The Company was constrained from fully capitalizing on strong demand for its products due to low activewear finished goods inventories during the quarter, as a result of lost production due to the Haiti earthquake combined with the strong recovery in industry demand. The Company ended the quarter with a high open order position.


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