Setting a record first quarter, Gildan Activewear Inc. reported a net sales growth of $665.4 million, a gain of 12.2 percent, in the first quarter ended April 2, 2017 compared to the first quarter in 2016. The gain was driven by organic growth and 2016 acquisitions of Alstyle, Peds and American Apparel.
Gildan saw increases of 13.6 percent in the printwear segment and 9.2 percent in branded apparel. Increased market share in men’s underwear in the retail channel and continued growth in the faster-growing product categories of printwear reflected continued progress with the company’s strategic initiatives.
“Despite an environment where we continue to see mixed market conditions, including the impact of store closings, we believe our performance during the first quarter positions us well to deliver on our previous guidance for the full year,” EVP and CFO Rhodri J. Harries said during a conference call. Harries said Alstyle and American Apparel combined drove approximately $40 million of sales growth.
Consolidated gross margin in the first quarter of 2017 was 28.4 percent, up 200 basis points compared to the same period last year.
Net earnings totaled $83.5 million, or 36 cents per share on a diluted basis for the three months compared with net earnings of $63.2 million, or 26 cents per share on a diluted basis for the three months ended April 3, 2016.
Gildan reported adjusted net earnings of $90.1 million, or 39 cents per share on a diluted basis for the first quarter of 2017, up from $69 million, or 28 cents per share on a diluted basis in the prior year quarter.
The company generated free cash flow of $41.3 million in the first quarter of 2017 compared to a use of $58.4 million of free cash in the same quarter last year. The approximate $100 million improvement in free cash flow in the quarter was due to higher earnings, strong working capital management and lower capital expenditures.
Printwear segment operating income totaled $105.9 million, up 24.3 percent compared to $85.2 million for the same period last year. Operating margins for printwear were 23.8 percent, up 210 basis points over the prior year quarter due primarily to the favorable net impact of net selling prices, manufacturing and raw material costs, partly offset by unfavorable foreign exchange impacts and SG&A expenses from the Alstyle acquisition
Net sales for the printwear segment for the first quarter of 2017 amounted to $445.6 million, up 13.6 percent from $392.1 million in the first quarter last year. The increase in printwear net sales was mainly due to sales of $39.5 million from the Alstyle and American Apparel acquisitions, higher net selling prices and favorable product-mix, partly offset by unfavorable foreign exchange impacts.
Operating income for the branded apparel segment of $18.6 million in the three months increased approximately 24.8 percent compared to $14.9 million in the same quarter last year.
Branded apparel operating margins of 8.4 percent improved 100 basis points over the same quarter last year primarily attributable to the favorable net impact of net selling prices, manufacturing and raw material costs, as well as the benefit of volume leverage on SG&A expenses.
Looking forward, Gildan predicts the rest of 2017 will go according to projections. The company reaffirmed its full year 2017 financial guidance, which it initiated on February 23, 2017, of adjusted diluted EPS in the range of $1.60 to $1.70 on expected consolidated net sales growth in the high-single-digit range.
Printwear and branded apparel net sales in 2017 are each expected to increase in the high single-digit range driven by organic growth and the projected aggregate impact of approximately $160 million to $185 million from the acquisitions of Alstyle, Peds, and American Apparel.
The company continues to expect earnings growth in 2017 to be weighted in the first half of the year as higher raw material costs are projected in the second half of the year.
“Beyond our good start to the year, we remain very pleased about our prospects and the plans we are putting in place to position the company to drive future long-term growth and strong shareholder returns,” said Harries.
Photo courtesy Gildan Activewear
