Gildan Activewear Inc. reported that third quarter net sales jumped 30.6% to $380.8 million from $291.6 million last year due to an increase of $43.8 million in sock sales as a result the acquisition of V.I. Prewett & Son in the first quarter of fiscal 2008, an approximate 6% increase in activewear unit selling prices, and a 10.4% increase in unit sales volumes for activewear and underwear. Net income for the quarter increased to $54.0 million, or 44 cents per diluted share, from $52.4 million, or 43 cents per diluted share last year.

The change in adjusted EPS, before restructuring charges, was due primarily to higher activewear selling prices and unit sales volumes, which were more than offset by higher cotton and energy costs, more unfavourable activewear product-mix, higher selling, general and administrative and depreciation expenses, the non-recurrence of a prior year income tax recovery which positively impacted EPS by 5 cents in the third quarter of last year, a provision for a doubtful receivable account, and charges to write off or dispose of surplus fixed assets.

As reflected in the company’s guidance for the year, the third quarter of the 2008 fiscal year comprised 14 weeks instead of the normal 13 weeks for a fiscal quarter. The inclusion of an extra week is required in every fifth or sixth fiscal year to maintain the alignment of the company’s financial reporting cycle with the calendar year. Consistent with the company’s prior practice, the extra week is included in the third quarter.

The company’s results for its third fiscal quarter were in line with its most recent EPS guidance. More favourable than projected activewear selling prices, unit volumes and product-mix were offset by a provision for a doubtful receivable account, and charges to write off or dispose of surplus fixed assets.

Growth in activewear unit sales was significantly constrained by lack of inventory, as a result of lower than anticipated production from the company’s Dominican Republic textile manufacturing facility. The company has made good progress in improving the performance of the Dominican Republic facility during the third quarter, although its inventory levels for activewear continue to be very low.

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.

Gildan          Gildan                          Gildan         Industry

Market Share    Market Share                    Unit Growth    Unit Growth

Q3 2008         Q3 2007                         Q3 2008 vs.    Q3 2008 vs.

                                                Q3 2007        Q3 2007

51.9%           47.6%   All activewear products   5.5%           (3.5)%

52.6%           48.3%   T-shirts                  5.5%           (3.2)%

51.7%           42.2%   Fleece                   23.4%            0.3%

34.6%           34.0%   Sport shirts            (10.6)%         (12.6)%

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. 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.

Selling, general and administrative expenses were $43.9 million, or 11.5% of sales, compared to $28.4 million, or 9.7% of sales in the third quarter of fiscal 2007. The increase in selling, general and administrative expenses was due to the acquisition of Prewett, higher distribution and transportation expenses, a provision of $2.6 million for non-collection of accounts receivable from a U.S. retail customer, which filed for bankruptcy protection during the third quarter, higher corporate infrastructure costs, including the impact of the higher-valued Canadian dollar, a charge for the disposal of surplus fixed assets, and professional fees for special projects. The increase of $5.1 million in depreciation and amortization expenses was primarily due to the ramp-up of major capacity expansion projects and the acquisition of Prewett, including the amortization of acquired intangible assets, as well as a charge to write down surplus fixed assets.

Gildan Activewear Inc.

Interim Consolidated Statements of Earnings and Comprehensive Income

(In thousands of U.S. dollars, except per share data)

                            Three months ended           Nine months ended

                    July 6, 2008  July 1, 2007  July 6, 2008  July 1, 2007

————————————————————————–

                      (unaudited)   (unaudited)   (unaudited)   (unaudited)
Sales                   $380,774      $291,610      $924,994      $709,573

Cost of sales            260,418       197,221       626,051       482,558

————————————————————————–
Gross profit             120,356        94,389       298,943       227,015
Selling, general and

 administrative

 expenses                 43,893        28,430       113,096        83,080
Restructuring and other

 charges (note 7)          2,289         4,589         3,929        22,339

————————————————————————–
Earnings before the

 undernoted items         74,174        61,370       181,918       121,596
Depreciation and

 amortization (note 9a)   15,326        10,272        43,249        28,521

Interest, net (note 10b)   1,204         1,453         6,065         3,501

Non-controlling interest

 of consolidated joint

 venture                     185           503           357           625

————————————————————————–
Earnings before income

 taxes                    57,459        49,142       132,247        88,949
Income tax expense

 (recovery) (note 12)      3,448        (3,255)        9,076          (205)

————————————————————————–
Net earnings and

 comprehensive income    $54,011       $52,397      $123,171       $89,154

————————————————————————–

————————————————————————–
Basic EPS  (note 8)        $0.45         $0.44         $1.02         $0.74
Diluted EPS (note 8)       $0.44         $0.43         $1.01         $0.73