Gildan Activewear Reports First Quarter 2019 Results

May 1, 2019 – Gildan Activewear Inc. (GIL: TSX and NYSE) announced its results for the first quarter ended March 31, 2019 and updated its full year guidance.

First quarter were better than the Company’s guidance which called for a decline in the mid to high-single-digit range, primarily due to stronger than anticipated sales of fleece products and an earlier start of initial shipments of the Company’s new private label men’s underwear program which will be available to consumers in the second quarter.

During the first quarter, Gildan Activewear generated sales of $623.9 million (all figures U.S.), down 3.6 per cent compared to the prior year quarter reflecting declines of 4.1 per cent in activewear and 1.8 per cent in the hosiery and underwear category. As expected, the decline in activewear, where $493.6 million in sales for the quarter was generated, was primarily due to lower levels of distributor restocking of imprintables compared to the level of restocking that occurred in the first quarter last year in advance of the price increase implemented in March 2018. These factors were partly offset by double digit growth in fleece shipments, which drove more favourable product-mix, and the impact of higher net selling prices.

The slight sales decline in the hosiery and underwear category, which saw $130.4 million in overall sales, was mainly attributable to lower Gildan® branded socks and underwear sales in the mass retail channel, which was largely offset by higher socks sales of licensed and global lifestyle brands compared to last year as well as the benefit of earlier than anticipated shipments of a new private label men’s underwear program in the mass channel, for which initial shipments began towards the end of the first quarter.

During the first quarter of 2019, the Company recorded an impairment of trade accounts receivable of $24.4 million, of which $21.7 million related to the wind down of operations of Heritage Sportswear which is under receivership, as announced on March 26, 2019, and $2.5 million related to the bankruptcy of Payless ShoeSource. Consequently, operating income of $32.7 million and adjusted operating income 1 of $43.3 million were down $43.6 million and $39.4 million, respectively, compared to the same period last year, reflecting the lower sales base, inflationary cost pressures on gross profit, and the trade receivable impairment charge.

Net earnings for the three months ended March 31, 2019 amounted to $22.7 million, or $0.11 per share on a diluted basis, compared with net earnings of $67.9 million, or $0.31 per share on a diluted basis, for the same period last year. Excluding the impact of after-tax restructuring and acquisition-related costs in both years, Gildan reported adjusted net earnings1 of $32.8 million, or $0.16 per share on a diluted basis, down from $74.6 million, or $0.34 per share on a diluted basis in the first quarter of 2018 mainly due to the decline in operating income and higher net financial expenses. The earnings decline on a per share basis was partly offset by the benefit of a lower share count compared to the prior year.