Gildan Activewear Inc. announced that it expects to take a charge of approximately $19 to $23 million in the first quarter of 2019, related to the impairment of a trade receivable from Heritage Sportswear, one of the company’s U.S. distributor customers within the imprintables channel.
On March 26, 2019, after unsuccessful ongoing efforts to sell the Heritage business as a going concern, the receiver appointed to administer the Heritage business filed a motion in court for approval of the orderly wind down of Heritage’s operations and sale of its assets by liquidation. As a result of this filing, the company has determined to take a charge and is therefore updating its first quarter adjusted diluted EPS guidance to reflect the projected charge related to Heritage estimated to be approximately 9 cents to 11 cents per share, which was not projected in the company’s initial 2019 guidance provided on February 21, 2019.
Accordingly, after accounting for the projected charge, the company anticipates adjusted diluted EPS for the first quarter of 2019 to be in the range of 14 cents to 16 cents compared to its previous guidance of adjusted diluted EPS in the range of 24 cents to 26 cents. The company’s sales guidance for the first quarter remains unchanged.
As Heritage is a wholesale distributor selling blank apparel to screenprinters and decorators, who in turn resell the decorated garments to end users, the company expects the Gildan business formerly carried out by Heritage (representing Gildan net sales of approximately $60 million in 2018) will be mostly absorbed by other wholesale distributors within the channel. Consequently, the company does not expect any adverse impact on its initial full-year sales projection for 2019 due to the wind-down of operations of Heritage.
The company is reaffirming its 2019 full year guidance of projected sales growth in the mid-single digit range and is updating its full-year GAAP and adjusted diluted EPS guidance to reflect the anticipated charge related to Heritage. The company is now projecting GAAP diluted EPS to be in the range of $1.80 to $1.90 compared to its previous guidance of GAAP diluted EPS of $1.90 to $2.00, and adjusted diluted EPS for 2019 to be in the range of $1.90 to $2.00 compared to its previous guidance of adjusted diluted EPS of $2.00 to $2.10.
Gildan’s brands include Gildan, American Apparel, Comfort Colors, Gildan Hammer, Gold Toe, Anvil, Alstyle, Secret, Silks, Kushyfoot, Secret Silky, Therapy Plus, Peds and MediPeds, and under the Under Armour brand through a sock licensing agreement providing exclusive distribution rights in the United States and Canada.
