Gildan Activewear reports strong First Quarter results

May 4, 2017 – Gildan Activewear Inc. (TSX:GIL)(NYSE:GIL) first quarter results reflected a strong start to the year as the company announced 12.2% net sales growth in the quarter.

Sales growth and operating margin expansion in the quarter translated to strong adjusted diluted EPS growth of 39% compared to last year. Free cash flow in the first quarter was up significantly over last year due to strong working capital management and lower capital expenditures. Increased market share in men’s underwear in the retail channel and continued growth in the faster growing product categories of Printwear reflected continued progress with the Company’s strategic initiatives, despite mixed market conditions.

Consolidated Results

Gildan’s consolidated net sales of $665.4 million (all figures U.S.) in the first quarter ended April 2, 2017 grew 12.2% compared to the first quarter in 2016, reflecting sales increases of 13.6% in the Printwear segment and 9.2% in Branded Apparel.

The increase in consolidated net sales was mainly due to the impact of the 2016 acquisitions of Alstyle and Peds, as well as the American Apparel acquisition which closed during the first quarter of 2017, and organic growth driven by higher net selling prices and favourable product-mix. These positive factors were partially offset by unfavourable foreign exchange and the planned exit of private label programs in Branded Apparel.

Net earnings totalled $83.5 million, or $0.36 per share on a diluted basis for the three months ended April 2, 2017, compared with net earnings of $63.2 million, or $0.26 per share on a diluted basis for the three months ended April 3, 2016.

Excluding after-tax restructuring and acquisition-related costs of $6.6 million in the quarter and $5.8 million in the same quarter last year, Gildan reported adjusted net earnings of $90.1 million, or $0.39 per share on a diluted basis for the first quarter of 2017, up from $69.0 million, or $0.28 per share on a diluted basis in the prior year quarter. The increase in adjusted net earnings in the quarter was mainly driven by sales growth and higher operating margins, partially offset by higher income taxes compared to the same quarter last year.

Adjusted EPS growth also reflected the benefit of share repurchases. Gildan generated free cash flow of $41.3 million in the first quarter of 2017 compared to a use of $58.4 million of free cash in the same quarter last year. The approximate $100 million improvement in free cash flow in the quarter was due to higher earnings, strong working capital management, and lower capital expenditures.

Segmented Operating Results

Net sales for the Printwear segment for the first quarter of 2017 amounted to $445.6 million, up 13.6% from $392.1 million in the first quarter last year.

The increase in Printwear net sales was mainly due to sales of $39.5 million from the Alstyle and American Apparel acquisitions, higher net selling prices, and favourable product-mix, partly offset by unfavourable foreign exchange impacts. Printwear segment operating income for the three months ended April 2, 2017 totaled $105.9 million, up 24.3% compared to $85.2 million for the same period last year.

Net sales for the Branded Apparel segment in the quarter were $219.7 million, up 9.2% from $201.2 million in the first quarter of 2016. The increase in Branded Apparel sales was primarily due to sales of $20.9 million from the Peds acquisition and organic sales growth which was partially offset by the impact from the planned exit of certain private label programs.