Announces production move out of Mexico into Central America and the Caribbean Basin.
October 31, 2019 – Gildan Activewear Inc. (GIL: TSX and NYSE) announced that for the third quarter ended September 29, 2019, sales of $740 million were down 2% compared to the prior year quarter mainly due to weak sales of activewear in the imprintables channel both in North America and internationally, combined with lower sock sales, including the exit of sock programs in mass, which largely offset strong sales of activewear to global lifestyle brands in the retail channel.
While weaker imprintables order flow in North America and ongoing softness in international imprintables markets is currently dampening sales and earnings growth in 2019, Gildan continues to remain focused on the execution of supply chain initiatives aimed at driving increased operational efficiency across our manufacturing base and continue to expect benefits from these initiatives to materialize, translating to gross margin expansion as we move into 2020. As part of these initiatives, at the end of October, Gildan decided to move forward with plans for the closure of our textile and sewing operations in Mexico and the relocation of the equipment at these facilities to our operations in Central America and the Caribbean Basin. We are also evaluating additional opportunities to reduce costs and enhance the execution of our growth drivers, including reducing complexity in certain areas of our business.
Q3 2019 operating results
Sales for the third quarter totalled $739.7 million, down 1.9% compared to the prior year quarter. Lower sales reflected activewear sales of $619.2 million, up 1.1% compared to the third quarter of 2018, offset by a 15.1% decline in the hosiery and underwear category where Gildan generated $120.5 million in overall sales.
Excluding the impact of after-tax restructuring and acquisition-related costs in both years, the Company reported adjusted net earnings of $108.4 million, or $0.53 per share on a diluted basis, in the third quarter of 2019, down from $118.1 million, or $0.57 per share on a diluted basis, in the third quarter of 2018. The 7.0% decline in adjusted diluted EPS was mainly due to the decline in sales and adjusted operating margin.
Year-to-date operating results
Net sales for the nine months ended September 29, 2019 of $2,165.2 million were flat compared to the same period last year, as an increase of $26.2 million, or 1.5% in activewear sales offset a 6.5% decline in the hosiery and underwear category. The growth in activewear where we generated sales of $1,778.3 million was mainly due to favourable product-mix, driven primarily by higher fleece sales, as well as higher net selling prices, partly offset by the impact of lower unit sales volumes in imprintable basics. The decline in the hosiery and underwear sales category was mainly due to lower unit sales of socks, including the impact of our exit of a sock program in the dollar channel, partly offset by double-digit growth in underwear sales.
Net earnings for the nine months ended September 29, 2019 amounted to $227.3 million, or $1.11 per share on a diluted basis, compared with net earnings of $291.2 million, or $1.37 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, the Company reported adjusted net earnings of $256.2 million, or $1.25 per share on a diluted basis, for the nine months ended September 29, 2019, down from $304.2 million, or $1.43 per share on a diluted basis for the first nine months of 2018.