Gildan Activewear Reports Record Second Quarter Sales and EPS

August 2, 2018 – Gildan Activewear Inc. (GIL: TSX and NYSE) reported record second quarter sales and adjusted diluted EPS ahead of its expectations. Strong sales momentum in key growth areas such as fashion basics and international markets continued during the second quarter.

Adjusted diluted EPS for the quarter was up 6.1 per cent, largely in line with sales growth, despite higher manufacturing and supply chain costs in the quarter, partly offset by a 50 basis point improvement in SG&A expenses as a percentage of sales. SG&A leverage reflected the benefit of cost reductions resulting from the Company’s recent organizational consolidation which is progressing well.

Operating results

Net sales of $764.2 million in the second quarter ended July 1, 2018, were up 6.8% compared to the prior year driven by a 17.3% increase in activewear sales. The sales increase in activewear was driven by strong shipments of imprintable products, as well as increased shipments to global lifestyle brand customers and retailers. International sales in the second quarter were up 35.2%, reflecting strong growth momentum across all markets. The increase in activewear sales also reflected higher net selling prices, including the impact of foreign exchange, and favourable product-mix, driven by strong double digit growth in fleece shipments and growth in fashion basics.

Net earnings for the three months ended July 1, 2018 amounted to $109.0 million, or $0.51 per share on a diluted basis, compared with net earnings of $107.7 million, or $0.48 per share on a diluted basis for the same period last year. Excluding the impact of after-tax restructuring and acquisition-related costs, Gildan reported adjusted EPS of $0.52 per share on a diluted basis for the second quarter of 2018, up 6.1% from $0.49 per share on a diluted basis in the same quarter last year. The increase in adjusted diluted EPS was mainly due to higher sales and the benefit of a lower share count compared to the prior year, partly offset by a lower operating margin.

Year-to-date results

Net sales of $1,411.5 million for the six months ended July 1, 2018 were up $30.8 million, or 2.2% compared to the same period last year. The sales increase was driven by a 10.5% increase in activewear sales, partly offset by a 22.2% decline in the hosiery and underwear sales category. Activewear sales grew mainly as a result of strong shipments in the second quarter across all major regions, including a 30.2% year-to-date increase in international sales. Activewear sales growth also reflected the benefit of higher net selling prices, including foreign exchange, and favourable product mix compared to the same period last year. The decline in the hosiery and underwear sales category was mainly due to lower unit sales of socks, particularly to mass retailers which are shifting emphasis toward their own private label brands, as well as the impact of the non-recurrence of the initial roll-out of certain program gains which occurred during the first half of the prior year.

Net earnings for the first six months of 2018 were $176.9 million, or $0.82 per share on a diluted basis compared to net earnings of $191.2 million, or $0.84 per share on a diluted basis for the same period last year.

Outlook

The Company updated its full year 2018 financial guidance and is now projecting adjusted diluted EPS to be in the range of $1.85 to $1.90 compared to its previous guidance of $1.80 to $1.90. Net sales growth is now projected to be in the mid-single-digit range, the upper end of the Company’s previous range of low to mid-single digit growth. The Company expects adjusted EBITDA to be in the range of $605 to $620 million compared to $595 to $620 million previously, and free cash flow for 2018 is now expected to be in excess of $425 million for the year, higher than its previous estimate of in excess of $400 million. Guidance for capital expenditures remains at approximately $125 million for 2018.