Gildan Activewear reported strong demand across most businesses along with sweeping price increases drove profit past expectations for the fiscal first quarter ended Jan 2, but the company issued a disappointing outlook amidst concerns over surging cotton costs, which have increased worldwide by more than 130% since the start of the season.
For the first quarter, Gildan reported healthy earnings of $35.9 million, or 29 cents per share, against earnings of $28.0 million, or 23 cents per share, in the year-ago period. Management pointed to strong demand of tees, socks and underwear during the quarter, although GIL noted that they bought its cotton in advance for Q1, paying 90 cents per pound for material that is now priced at nearly twice that amount.
Total sales for the quarter were $331.2 million, up by more than half from revenues of $220.4 million in the prior-year period. Sales of Activewear and Underwear grew 76.7% to $270.1 million, and sales of socks were $61.2 million, down 9.3% from fiscal Q3 2010.
Regarding outlook, Gildan projected net sales of “slightly in excess” of $1.6 billion for the full year with gross margins of approximately 25%. In a release, GIL reported “ the benefit of recent further selling price increases is currently forecast to be fully offset by the impact of higher than previously projected cotton cost increases in the second half of the fiscal year, as well as by lower than previously projected unit sales volumes and reduced manufacturing and distribution efficiencies.”
