Gildan Activewear Q3 results in line with its EPS guidance

19 Aug '08

5 min read

The growth in activewear unit sales in the third fiscal quarter was due to the additional week of shipments and continuing market share penetration in all product categories in the U.S. wholesale distributor channel. The table below summarizes data from the S.T.A.R.S. report produced by ACNielsen Market Decisions, which tracks unit volume shipments from U.S. wholesale distributors to U.S. screenprinters, for the quarter ended June 30, 2008.

Although overall industry shipments from distributors to screenprinters declined by 3.5% during the June quarter, according to the S.T.A.R.S. report, distributor demand for Gildan products remained very strong. The Company had a high open order position throughout the quarter, which has continued into the fourth quarter. Overall inventories in the channel continue to be in good balance in relation to expected industry demand.

During the third quarter, the Company began shipment of its first retail underwear program. The Company is pleased with consumer demand for its retail products during the third quarter, and with the improvement in its service levels to mass retailers. Also, the Company has continued to implement its strategy to rationalize its sock product-mix, in order to focus on basic higher-volume products and programs which capitalize on Gildan's modern large-scale manufacturing capacity.

Gross margins in the third quarter of fiscal 2008 declined slightly to 31.6%, compared to 32.4% in the third quarter of fiscal 2007.

The positive gross margin impact of higher activewear selling prices and favourable manufacturing efficiencies arising from the consolidation of textile facilities in the fourth quarter of fiscal 2007 was more than offset by higher cotton, energy, chemicals and transportation costs, the impact of production inefficiencies in the Dominican Republic textile facility, as inventories produced in the second fiscal quarter were consumed in cost of sales, a lower proportion of high-valued sport shirt sales, and the impact of the acquisition of Prewett.

Socks manufactured by Gildan in the U.S. have lower gross margins than activewear and sock products manufactured in the Company's Honduran manufacturing facilities, and therefore dilute overall gross margins.

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Gildan Activewear Inc

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