For the second consecutive year Gildan Activewear Inc. has released record financial results for the company’s fiscal second quarter ended April 4 and upped its sales guidance in response to the positive changes in market conditions.  The company, which posted net earnings of $48.8 million, or 40 cents per diluted share, increased sales guidance by 8 percentage points to 25% growth for the year versus a previous outlook for 17% growth for the year. 

 

Net sales for the second quarter of fiscal 2010 amounted to $326.8 million, up 33.5% from $244.8 million in the second quarter of last year. 

 

On a segmented basis, sales of activewear and underwear were $273.2 million, up 51.0% from $180.9 million last year, and sales of socks were $53.6 million, down 16.3% from fiscal Q2 last year. 

 

Gildan attributed the socks business decline to the timing of replenishment and the transition to new programs for mass-market retailers, which are expected to benefit sock shipments in the second half of the fiscal year.  The strong activewear gain was due to “higher market share in the U.S. wholesale distributor channel, the non-recurrence of distributor destocking which occurred in the second quarter of fiscal 2009, a 3.4% increase in overall industry demand in the U.S. distributor channel, increased penetration of international and other screenprint markets and the impact of more favorable activewear product-mix, together with significantly increased shipments of underwear and activewear to retail customers.”

 

Although gross margin was impacted by the impact of the Haiti earthquake, gross margins in the second quarter were 27.8%, compared to 15.8% in the comparable year. The increase in gross margins was primarily due to gains in manufacturing efficiencies, lower cotton and energy costs as well as a more favorable product-mix in terms of activewear. 

 

Increasing demand requires additional shipments which the company is predicting will escalate in the following months. Laurence Sellyn, executive vice president and CFO of Gildan, maintained that the company is, “projecting in the back half of the year to have activewear and underwear shipments to be up roughly about 23% over last year, and sock sales to be up approximately 15% over last year.”  Gildan is now projecting full year sales revenues to be approximately $1.3 billion for fiscal 2010.