Gildan Activewear Inc. adjusted net earnings rose 10.7 percent for the first quarter ended Dec. 29, to $43.3 million or 35 cents a share.
The results excluding restructuring and acquisition-related costs in both years came in at the top end of the guidance range provided on Nov. 21. It also represented a record for its first fiscal quarter, which is seasonally the lowest sales quarter for T-shirts in the fiscal year. (All figures for the Canadian-based company are in U.S. dollars.)
Sales rose 7.3 percent to $451.4 million, slightly above projected sales of approximately $450 million.
Sales for the Printwear segment amounted to $261.8 million, up 7.4 percent. Unit sales volumes increased 5.9 percent, including a 31.2 percent jump in international sales volumes, Gildan officials said on a conference call. The positive impact of higher unit sales volumes and more favorable activewear product-mix was partially offset by lower net selling prices. The increase in Printwear sales volumes was realized despite increased seasonal destocking by wholesale distributors. Inventories were in line at the quarter’s end.
The Printwear segment reported operating income of $48.3 million, up 5.2 percent.
Net sales for Branded Apparel were $189.6 million, up 7.1 percent. The gain was primarily due to continuing strong consumer demand for Gildan branded underwear and continuing market penetration by Gold Toe socks. Those gains offset the impact of lower sales of private label programs and lower sales to global lifestyle brands. Overall retail market conditions continued to be weak in the holiday season, Gildan officials indicated.
The Branded Apparel segment’s operating profits climbed 11.7 percent to $21.9 million.
Companywide consolidated gross margins eased slightly to 26.4 percent from 26.8 percent in the first quarter of last year. The impact of lower Printwear net selling prices was partially offset by more favorable Printwear product-mix and slightly lower cotton costs.
SG&A expenses declined to 16.1 percent of sales from 16.5 percent a year ago as higher marketing and advertising expenses was offset by sales leverage.
The company re-iterated its guidance for the full fiscal year, which includes adjusted EPS in the range of $3.00-$3.10, up 11.5 percent to 15.2 percent compared to fiscal 2013. Cotton prices are now assumed to be higher than previously projected due to the recent rise in cotton futures prices, as well as further inflationary cost increases. However, those higher prices are expected to be offset by slightly higher net selling prices.
As already reported in its November Q413 conference call, Gildan has identified $100 million in new retail programs in FY14, which will largely impact sales and earnings in the second half of the year.
On the call, Glenn Chamandy, Gildan’s president and CEO, said the programs includes an increase in shelf space for its major national Gildan-branded underwear program, and significantly expanded Gildan underwear, activewear, and socks at regional accounts. It also reflects a new fleece program for Gildan smart basics and programs for G brand activewear in national chains and department stores. Chamandy also said Gold Toe has seen a “real resurgence” and regained its top position in socks at department stores while also making gains in underwear and activewear, including expanding into fleece.
For the second fiscal quarter, adjusted EPS is projected at 61 to 64 cents, up 3.4 percent to 8.5 percent on a projected sales revenues in excess of $550 million, up in excess of 5 percent from last year. Cotton costs in the second quarter are expected to be comparable to the first quarter but higher than the second quarter of fiscal 2013.
Gross margins in the second and third quarters are also expected to be negatively impacted by short-term costs being incurred to further improve the efficiency and product capabilities of certain manufacturing operations. Quarterly EPS is assumed to increase sequentially in successive quarters during the balance of the fiscal year.
