Gildan Activewear reports Third Quarter results

November 2, 2017 – Gildan Activewear Inc. (GIL: TSX and NYSE) announced its results for the third quarter ended October 1, 2017. The company generated strong earnings per share growth during the third quarter, with EPS of $0.52 and adjusted EPS of $0.53 (all figures US), up 6% compared to the prior year.

With stronger adjusted EPS year-to-date, Gildan increased its full year guidance range for adjusted EPS to $1.70- $1.72, which at the mid-point of the range represents projected growth of 13% compared to last year.

During the quarter, Gildan continued to make good progress with the American Apparel integration, including the continued ramp up of production and the successful launch of the American Apparel consumer e-commerce platform.  As a result of increased profitability and stronger working capital management, the Company now expects its free cash flow for the full year to be in excess of $450 million, compared to its previous guidance of in excess of $425 million.

Consolidated Results

Consolidated net sales of $716.4 million in the third quarter ended October 1, 2017, were essentially flat compared to the prior year as Printwear sales growth of 4.1% was offset by a 6.9% decline in Branded Apparel sales compared to the third quarter of last year. Consolidated gross margin in the third quarter came in at a strong 31.0%, reflecting a 60 basis point increase over the same period last year.

Excluding the impact of after-tax restructuring and acquisition-related costs of $2.5 million in the quarter and $2.0 million in the prior year quarter, Gildan reported adjusted net earnings of $118.6 million, or $0.53 per share on a diluted basis for the third quarter of 2017, up from $116.4 million, or $0.50 per share on a diluted basis in the same quarter last year. The 6.0% increase in adjusted diluted EPS in the quarter was mainly driven by a higher gross margin, lower income taxes, and the benefit of share repurchases, partly offset by higher SG&A expenses due in part to the American Apparel acquisition.

Segmented Operating Results

Printwear net sales for the third quarter of 2017 were $480.7 million, up $18.8 million, or 4.1% over the same period last year. The increase reflected a sales contribution of $15.4 million from the acquisition of American Apparel, continued strong growth in fashion and performance basics which contributed to favourable product mix, double digit unit sales volume growth in international markets, and higher net selling prices, partly offset by lower sales of basics.

Printwear segment operating income for the three months ended October 1, 2017, totaled $127.5 million, up 3.3% compared to $123.4 million for the same period last year. Printwear operating margin for the quarter was 26.5%, effectively in line with the third quarter last year. The benefit of higher net selling prices and favourable product mix mitigated the unfavourable impact of higher raw material and other input costs, as well as the impact of higher SG&A expenses primarily due to the acquisition of American Apparel.

Net sales for the Branded Apparel segment in the quarter were $235.7 million, down $17.4 million, or 6.9% compared to the third quarter of 2016, mainly due to weakness in the sock category, particularly in department stores and national chains, as well as the sporting goods channel, combined with the unfavourable impact from the transition to a new sock program at a mass-retailer.

Year-to-date sales and earnings

Consolidated net sales of $2,097.1 million in the first nine months of 2017 was up $99.9 million, or 5.0% compared to the same period last year, reflecting sales increases of 6.1% in the Printwear segment and 2.8% in Branded Apparel. The increase in consolidated net sales was mainly due to the impact of the 2016 acquisitions of Alstyle and Peds and the American Apparel acquisition which closed during the first quarter of 2017, as well as higher net selling prices, increased unit sales volumes of printwear fashion and performance products, and favourable product mix.

Net earnings for the first nine months of 2017 were $307.4 million, or $1.36 per share on a diluted basis, up from net earnings of $272.3 million, or $1.15 per share on a diluted basis for the same period last year. Before reflecting after-tax restructuring and acquisition-related costs in both years, adjusted net earnings were $319.3 million or $1.41 per share on a diluted basis in the first nine months of 2017, up 13.3% and 18.5%, respectively, compared to adjusted net earnings of $281.8 million or $1.19 per share on a diluted basis in the same period last year.