Gildan Activewear is backing off its previous earnings forecast for its fiscal year due to capacity constraints and lower inventories. It appears the company raided the warehouse in the first of its fiscal year and sold more units at lower prices to meet Q1 and Q2 earnings targets.
The action has left their inventory at levels too low to meet their previous EPS guidance of $2.25 to $2.30 per share, which was based on 15% projected growth in unit sales volumes and “modest selling price increases to partially pass through the higher cost of cotton”.
The company now plans to post full year earnings per share in the $2.05 to $2.15 range, which still represents a 15% to 20% increase from fiscal 2003, or up 6% to 12% to $1.90 to $2.00 after adjustments from the transition to U.S. functional currency.
GIL reported that fiscal Q2 net earnings rose 6.7% to $14.3 million, or 48 cents per diluted share, compared to $13.4 million, or 45 cents per diluted share, in the Q2 2003. Gross margin fell 300 bass points to 26.6%.
Second quarter sales increased 24.5% in the quarter to $141.4 million, from $113.6 million in the year-ago quarter. A 24.6% increase in unit sales increased and a higher valued product-mix was partially offset by lower selling prices. Unit shipments in Europe increased by 38.9% versus Q2 last year, and shipments in Canada were up by 10.2%. Selling prices in the Canadian market were negatively impacted as a result of the lower landed selling prices for U.S. competitors in the Canadian market, due in large part to the weaker U.S. dollar against the C$.
