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Gildan Q3 adjusted EPS up 6 percent, increases full year outlook

By Prachi Singh

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Business

Gildan Activewear generated growth in earnings per shareduring the third quarter, with EPS of 0.52 dollar and adjusted EPS of 0.53 dollar up 6 percent compared to the prior year. The company said, stronger than expected adjusted EPS was due to more favourable product mix in printwear, earnings contribution from the impact of the American Apparel transaction, and lower income taxes, partly offset by lower than expected branded apparel sales, reflecting the continuation of a challenging retail market.

With stronger adjusted EPS year-to-date, the company increased its full year guidance range for adjusted EPS to 1.70 dollars-1.72 dollars, which at the mid-point of the range represents projected growth of 13 percent compared to last year. During the quarter, the company said, it 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 ecommerce platform.

Consolidated Q3 results of Gildan Activewear

Consolidated net sales of 716.4 million in the third quarter ended October 1, 2017, were flat compared to the prior year as printwear sales growth of 4.1 percent was offset by a 6.9 percent decline in branded apparel sales compared to the third quarter of last year.

Consolidated gross margin came in at a strong 31 percent, reflecting a 60 basis point increase over the same period last year. The company generated adjusted operating margin for the quarter of 17.8 percent, slightly down from 18.3 percent in the prior year quarter. Net earnings amounted to 116.1 million dollars or 0.52 dollar per share on a diluted basis, compared with net earnings of 114.4 million dollars or 0.49 dollar per share on a diluted basis for the same period last year.

Gildan reported adjusted net earnings of 118.6 million dollars or 0.53 dollar per share on a diluted basis for the third quarter of 2017, up from 116.4 million dollars or 0.50 dollar per share on a diluted basis in the same quarter last year. The 6 percent increase in adjusted diluted EPS in the quarter, Gildan said, 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.

Segment-wise sales result in Q3

Printwear net sales for the third quarter of 2017 were 480.7 million dollars up 18.8 million dollars or 4.1 percent over the same period last year. The increase reflected a sales contribution of 15.4 million dollars 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.

Net sales for the branded apparel segment were 235.7 million dollars, down 17.4 million dollars or 6.9 percent 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. Lower sock sales in the quarter were partly offset by higher sales of Gildan branded men’s underwear compared to the third quarter of 2016 and strong performance of activewear.

Consolidated net sales of 2,097.1 million dollars in the first nine months of 2017 was up 99.9 million dollars or 5 percent compared to the same period last year, reflecting sales increases of 6.1 percent in the printwear segment and 2.8 percent 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.

Gross margin for the nine months of 29.8 percent was up 160 basis points compared to the same period last year, driven by higher gross margins in both operating segments. Net earnings were 307.4 million dollars or 1.36 dollars per share on a diluted basis, up from net earnings of 272.3 million dollars or 1.15 dollars 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 dollars or 1.41 dollars per share on a diluted basis in the first nine months of 2017, up 13.3 percent and 18.5 percent, respectively.

Gildan raises EPS and EBITDA guidance for FY17

After reflecting third quarter earnings per share results and more tempered sales expectations for branded apparel in the current retail environment, the company updated its guidance for the full year. Consolidated net sales growth for the full year is now projected to be in the mid to high single digit range compared to the company's previous estimate of high single digit net sales growth. The company continues to expect strong full year printwear net sales growth in the high single digit range, while it is now projecting branded apparel net sales growth in the low single digit range versus its previous projection of high single digit growth, given current retail market conditions.

Due to stronger adjusted EPS to date, the company is now projecting adjusted diluted EPS for the full year to be in the range of 1.70 dollars to 1.72 dollars, up 13 percent at the mid-point of the range compared to adjusted EPS of 1.51 dollars in the prior year. This compares to the company's previous guidance expecting adjusted diluted EPS to be at the high end of 1.60-1.70 dollars. The company also updated its expectation for adjusted EBITDA for 2017 to be in the range of 580 -590 million dollars, up from its prior estimate of adjusted EBITDA at the high end of the 555-585 million dollars guidance range.

The Board of Directors has declared a cash dividend of 0.0935 dollar per share, payable on December 11, 2017 to shareholders of record on November 16, 2017.

Picture:Facebook/Gildan

Gildan Activewear