Gildan reports decline in Q2 net earnings, net sales up 2.9 percent

Gildan reported net earnings of 99.4 million dollars or 0.41 dollars per share on a diluted basis for the three months ended July 5, 2015, compared with net earnings of 116 million dollars or 0.47 dollars per share on a diluted basis for the three months ended July 6, 2014. Consolidated net sales in the second calendar quarter amounted to 714.2 million dollars, up 2.9 percent from 693.8 million dollars in the corresponding quarter of the prior year, reflecting an increase of 12.3 percent in sales for branded apparel, partially offset by a 1.2 percent decline in printwear sales.

Consolidated net sales in the quarter were below the company’s guidance of net sales of 750 million dollars, which it provided on May 14, 2015 primarily as a result of lower than anticipated inventory replenishment by a major U.S. retail customer and lower than anticipated printwear sales in Europe. Adjusted diluted EPS of 0.42 dollar for the quarter ended July 5, 2015 was slightly below the guidance provided by the company on May 14, 2015 of adjusted EPS of 0.43 –0.45 dollars due to lower than anticipated net sales.

The increase in branded apparel sales reflected an increase of approximately 70 percent in sales of Gildan branded programs, including the impact of converting private label programs, as well as increased sales of licensed and global lifestyle brands and the acquisition of Doris. The positive impact of these factors was partially offset by lower sales of private label and Gold Toe branded products and the impact of the non-recurrence of the extra week included in the second calendar quarter of the prior year. Growth in shipments of Gildan branded products reflected continued strong growth in all product categories, including the shipment of new underwear programs to new retail customers and the conversion of the company’s largest private label sock program to the Gildan brand during the quarter.

Consolidated net sales of 1,350.4 million dollars in the first six months were up 8.7 percent compared to 1,242.6 million dollars in the same period last year reflecting a 5.5 percent increase in printwear segment sales and 15.9 percent sales growth in branded apparel. Net earnings were 155.4 million dollars or 0.64 dollars per share on a diluted basis, compared to 195.2 million dollars or 0.79 dollars per share for the same period of the prior year.

The company is now projecting adjusted diluted EPS for the 12 months ending January 3, 2016 to be at the bottom of its previous guidance range of 1.50 dollars –1.55 dollars on projected sales of close to 2.6 billion dollars primarily to reflect the less favourable than projected results in the second quarter of 2015 and the continuing impact of the issues affecting second quarter sales and earnings.

Sales growth in branded apparel is now expected to be approximately 15 percent compared to previously anticipated sales growth in excess of 20 percent. Branded apparel sales in the fourth calendar quarter are projected to be slightly higher than previously projected due to the initial sales impact of additional new retail programs. Adjusted EBITDA for the 12 months ending January 3, 2016 is now projected to be close to the bottom end of the company’s previous range of 525 –540 million dollars.