Gildan Activewear Reports Strong Results for the Fourth Quarter of 2018

February 21, 2019 – Gildan Activewear Inc. (GIL: TSX and NYSE) announced results for the fourth quarter and year ended December 30, 2018, and initiated guidance for 2019. Strong performance in the fourth quarter reflected an increase of 16% in GAAP diluted EPS, and an increase of 39% in adjusted diluted EPS, driven by sales growth of approximately 14% and a 230 basis point improvement in adjusted operating margin over the same quarter last year.

Net sales for the fourth quarter ended December 30, 2018 of $742.7 million were up 13.6% compared to the fourth quarter of 2017 driven by a 22.3% increase in activewear sales, partly offset by a 7.9% sales decline in the hosiery and underwear category, which was anticipated.

The increase in the activewear category in the fourth quarter, where the company generated $569 million in net sales, was mainly due to higher unit sales volumes, a better product-mix driven primarily by higher fleece shipments, and higher net selling prices.  Activewear volume growth reflected higher shipments of imprintable products in North America and a 29% increase in international shipments, as well as higher sales to global lifestyle brands and retailers. Sales in the hosiery and underwear category totaled $173 million, as anticipated, down $15 million from the fourth quarter last year primarily due to lower Gildan® sock sales in mass and lower mass retailer replenishment of Gildan® underwear in the quarter, partly offset by shipments under one of our new private label underwear programs in the fourth quarter.

Net earnings totaled $59.6 million or $0.29 per share on a diluted basis for the three months ended December 30, 2018, compared with net earnings of $54.9 million or $0.25 per share for the three months ended December 31, 2017. Adjusted net earnings of $88.9 million were up 31.5% from $67.6 million in the fourth quarter last year.

Full Year Results

Net sales of $2,908.6 million in 2018 were up 5.7% over last year and in line with the company’s guidance. Sales growth for the year reflected a 13.6% increase in activewear sales, partly offset by a 17.0% decline in the hosiery and underwear category as projected in our latest guidance. The increase in activewear sales was driven by higher unit sales volume and net selling prices, more favourable product mix, and positive foreign exchange impacts compared to the prior year. Activewear unit volume growth was mainly due to higher shipments of imprintable products in the U.S., including fashion basics and fleece products, combined with strong double digit unit sales volume growth in international markets and higher unit sales of global lifestyle brand products. The decline in the hosiery and underwear category was mainly due to lower sock volumes in the mass market channel, particularly as a result of the shift to private label brands by mass retailers, as well as declines in licensed and Gold Toe® brand sales. Favourable product-mix was driven by higher sales of fleece and fashion basics and higher value sock sales.

Net earnings for 2018 were $350.8 million, down from $362.3 million in 2017. On a diluted basis, GAAP EPS totaled $1.66, up 3.1% from $1.61 in the prior year. Adjusted net earnings for 2018 were $393.1 million or $1.86 per diluted share, up 1.6% and 8.1%, respectively, compared to adjusted net earnings of $386.9 million or $1.72 per diluted share in 2017, and in line with the company’s guidance of adjusted diluted EPS of $1.85 to $1.87. The increase in adjusted net earnings for 2018 over the prior year was mainly due to the contribution of higher sales, which more than offset the decline in adjusted operating margin and higher financial expenses.

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