Gildan Activewear coping well with current cotton market
Gildan Activewear Inc announced record financial results for the second quarter of its 2011 fiscal year, and also increased its sales and earnings projections for the full fiscal year.
Second Quarter Sales and Earnings
Net earnings for the second fiscal quarter ended April 3, 2011 were U.S. $61.4 million or U.S. $0.50 per share on a diluted basis, including a restructuring charge of U.S. $0.03 per share related to the consolidation of U.S. distribution activities and the closure of the Company's remaining U.S. sock manufacturing operations. Excluding the restructuring charge, adjusted net earnings for the second quarter were U.S. $64.3 million or U.S. $0.53 per share, up 29.1% and 29.3% respectively from adjusted net earnings of U.S. $49.8 million or U.S. $0.41 per share in the second quarter of fiscal 2010. Both net earnings and earnings per share in the second quarter of fiscal 2011 were a record for the second quarter of a fiscal year.
The growth in net earnings compared to last year was primarily due to higher net selling prices for activewear and growth in activewear unit sales volumes, as well as the impact of more favourable income taxes. These positive factors were partially offset by higher cotton costs, lower sales of socks, inefficiencies relating to the ramp-up of new manufacturing and distribution facilities, and a U.S. $3.7 million loss on the disposal of its corporate aircraft which the Company has replaced.
Net sales in the second quarter amounted to U.S. $383.2 million, up 17.3% from U.S. $326.8 million in the second quarter of fiscal 2010. The Company had previously forecast that second quarter sales would be approximately U.S. $375 million. Sales of activewear and underwear amounted to U.S. $342.4 million, up 25.3% from fiscal 2010, and sales of socks were U.S. $40.8 million, down 23.9% from last year.
The growth in sales of activewear and underwear compared to the second quarter of fiscal 2010 was due to a 19% increase in average net selling prices for activewear and a 6.1% increase in unit volume shipments. The increase in unit volumes was attributable to 6.0% growth in overall industry demand in the U.S. distributor channel during the quarter, strong growth in international and other screenprint markets and increased shipments of activewear and underwear to mass-market retailers.
Gildan's market share in the U.S. wholesale distributor channel was essentially unchanged, even though the Company was unable to fully service demand for its brand due to continuing low finished goods inventory levels as a result of current capacity constraints. In addition, the Company was unable to fully meet distributor demand to replenish inventories, so that inventory replenishment by distributors was lower than in the second quarter of fiscal 2010. The Company continued to have a significant open order position at the end of the second quarter. Gildan's share of inventories in the U.S. distributor channel was 52.0% on March 31, 2011, compared with its market share of 62.6% for the second fiscal quarter.