Gildan’s second-quarter sales fall 6%, revise outlook

Gildan Activewear Inc. net sales for the second quarter exceeded our expectations at $840 million, but reflected a 6% decline from the record quarter last year.

Net sales for the first half were $1,543 million, down 8% from sales a year earlier.

“We are pleased with our revenue performance which exceeded our expectations for the quarter, compared to a strong comparative period,” said Glenn J. Chamandy, President and Chief Executive Officer of Gildan, adding, ” Additionally, in a challenging macroeconomic environment, we are generating market share gains given our strong competitive position and continued execution of our GSG strategy. ยป

Gildan Q2 Earnings Highlights

In activewear, Gildan generated sales of $692 million, down 9%. During the second quarter, the year-over-year point-of-sale trend for the sportswear category was positive, driven by performance in North America. International markets were tougher than expected, with sales in the quarter down 2%.

The company saw growing momentum in the hosiery and underwear category with sales totaling $149 million, up 8% year-over-year. This increase is mainly driven by the growth in the volume of underwear sales, reflecting the expansion of the private label offer and the deployment of new programs in the retail channel. Additionally, while industry demand for men’s underwear remained down year-over-year, outlet trends improved sequentially.

The company generated gross profit of $217 million or 25.8% of sales in the second quarter, down $48 million from a year earlier. Operating profit was $183 million or 21.7% of sales, compared to $174 million or 19.4% of sales the previous year. Adjusted operating income was $139 million or 16.5% of sales, down $37 million or 310 basis points from a year ago.

Gildan reported diluted EPS and GAAP-adjusted diluted EPS for the quarter of 87 cents and 63 cents, respectively, up from 85 cents and down from 86 cents a year earlier.

Gildan Year-to-Date Results of Operations

In activewear, the company generated sales of $1,280 million, down $146 million or 10% in the first six months from the same period last year which benefited from the restocking of distributor inventory following the pandemic and a tight manufacturing environment in 2021.

International sales of $118 million were down 10% from the prior year period. In the hosiery and underwear category, Gildan saw notable strength with sales totaling $264 million, up $18 million from a year ago or 7%, driven by growth in the volume of underwear and socks.

The company generated gross profit of $404 million in the first half, down $101 million from a year earlier, due to lower sales and lower gross margins. Gross margin of 26.2% decreased 410 basis points year over year. The company generated operating profit of $311 million or 20.1% of sales, while adjusted operating profit was $241 million or 15.6% of sales, down $93 million. dollars or 440 basis points from the previous year.

Gildan reported first half GAAP Diluted EPS and Adjusted Diluted EPS of $1.41 and $1.08 respectively, both down from GAAP Diluted EPS and Adjusted Diluted EPS by 1, $62 the previous year.

Gildan adjusts its outlook for the full year

Gildan finds that current market conditions are having an adverse impact on the activewear product line, both in North American and international markets, as customers focus on lower priced products. Combined with near-term uncertainty related to the macro environment, the company now expects full-year revenue to be flat in the low single digits, compared to previous expectations of low single-digit year-over-year increase.

The company’s adjusted operating margin for the full year is expected to remain slightly below the lower end of its current annual target range of 18-20%. Gildan expects adjusted diluted EPS to be between $2.55 and $2.65.

The company’s board of directors has declared a cash dividend of 186 cents per share, payable September 18, 2023 to shareholders of record as of August 24, 2023.

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