Gildan Activewear Inc. expects to report adjusted diluted EPS of approximately 35 cents for its second quarter ended March 30, 2008, up 13% from the second quarter of last year, but down from early guidance. The company had previously projected EPS of approximately 42 cents for the second quarter of fiscal 2008. For the full 2008 fiscal year, the company is now projecting adjusted diluted EPS of $1.45 to $1.50, up 12% to 16% compared to fiscal 2007. The company's most recent EPS guidance, which was updated in January 2008, was $1.85 to $1.90.
The lower than anticipated growth in EPS in the second fiscal quarter, compared to the company's previous EPS guidance, is primarily due to lower than projected unit sales growth in activewear as a result of a shortfall in production for the Dominican Republic textile facility, a write-down of inventories of discontinued retail product-lines pursuant to the rationalization of Gildan's product-mix within the sock category, and additional costs incurred to service mass-market retailers during the integration of retail information systems. These unfavourable variances were partially offset by more favourable activewear product-mix and lower than anticipated promotional discounts in the U.S. wholesale distributor channel.
The lower than anticipated production in the Dominican Republic textile facility will continue to prevent the company from capitalizing on strong sales demand for its products in the second half of the fiscal year, in particular during the peak summer selling season for T-shirts in the third fiscal quarter, and also result in higher than projected manufacturing costs and supply chain inefficiencies. In addition, the company expects to be negatively impacted by higher than projected increases in freight and energy costs in the second half of the fiscal year. These factors are expected to be partially moderated by the impact of assumed more favourable selling prices in the U.S. screenprint channel in the third and fourth fiscal quarters, as a result of a recently announced selling price increase.
Management remains confident in the company's growth strategy and long-term competitive advantages, and is confident that during the second half of the fiscal year it will successfully resolve the operational issues which are curtailing its EPS growth in fiscal 2008.
