Gildan Activewear’s financial results for its first quarter, which ended April 1, showed that the Montreal, Quebec-headquartered supplier’s performance was largely in line with expectations and is on track to attain its full year financial targets.
As expected and consistent with guidance it initiated on February 22, adjusted earnings per share were down in the quarter compared to the record level achieved in the first quarter of last year. The company continued to see strong sales momentum in higher growth product areas such as fashion basics, as well as strong double-digit sales growth in international markets. However, as anticipated, temporary product availability constraints limited Gildan’s ability to fully capitalize on sales demand in the quarter. At the same time, the company also launched its full assortment of Gildan branded men’s underwear on Amazon.
Gildan also notes that, as it had expected, results were affected by higher raw material and other input costs and planned investments in the areas of e-commerce and distribution. Cost reductions resulting from its organizational consolidation effected at the beginning of 2018 started to flow through in the quarter. The company expects the benefit from these cost reductions to have a larger impact in the second half of the year. Free cash flow in the first quarter was better than the company anticipated.
Net sales of $647.3 million in the first quarter were down 2.7 percent compared to the prior year, a change reflecting a 3.2 percent increase in activewear sales and a 20.4 percent decline in the hosiery and underwear category. Gildan attributes the increase in activewear sales mainly to higher net selling prices, including foreign exchange and favorable product mix driven by double digit sales growth in the fashion basics category. International sales in the first quarter were up 24 percent. The decline in the hosiery and underwear sales category was mainly due to the decline in unit sales volumes of socks at mass retailers, which are shifting emphasis toward private label brands, and to the impact of the non-recurrence of the initial rollout of a licensed program to a large national chain retailer, which occurred in the first quarter of the prior year.
