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Gildan Activewear Reports Second Quarter 2019 Results and Updates 2019 Full Year Guidance

Time:2019-08-03 07:20Underwear site information Click:

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Record second quarter sales and adjusted diluted EPS1

Q2 2019 sales of $802 million, up 5%, GAAP diluted EPS of $0.49, and adjusted diluted EPS of $0.56 up 8% over prior year quarter

Company reaffirms 2019 sales guidance and updates full year adjusted EPS guidance to higher end of range

(1) Please refer to "Definition and reconciliation of non-GAAP financial measures" in this press release.

(all amounts are in U.S. dollars except where otherwise indicated)

MONTREAL, Aug. 01, 2019 (GLOBE NEWSWIRE) -- Gildan Activewear Inc. (GIL: TSX and NYSE) today announced its results for the second quarter ended June 30, 2019 and updated its full year guidance.

As expected, sales for the second quarter returned to a growth trajectory, consistent with the expected sales cadence for 2019 previously communicated. Sales of $802 million in the quarter, which set another second quarter record, were up approximately 5% over last year, setting us on track to deliver our full year sales target of mid-single-digit growth. Our growth drivers continued to perform well, including growth momentum in fashion basics, fleece, and global lifestyle brand sales. Underwear sales grew more than 50% over the prior year quarter, reflecting the successful launch of our new private label men’s underwear program with our largest mass retail customer. We are pleased with the performance of the product launch and have received confirmation from the retailer that we will be awarded additional shelf space to expand the program offering in the fourth quarter.

For the second quarter of 2019, we generated GAAP diluted EPS of $0.49, and adjusted diluted EPS of $0.56 up 8% over the prior year quarter, reflecting the benefit of a richer product-mix, higher net selling prices, and a 50-basis point improvement in SG&A expenses as a percentage of sales. These positive factors more than offset gross margin pressure from increases in raw materials and other input costs, which were anticipated and previously communicated. During the quarter, we continued to execute on our manufacturing optimization initiatives and remain on track to generate gross margin expansion which we expect to flow through in the fourth quarter as we exit the year.

Q2 2019 operating results
Sales for the second quarter totaled $801.6 million, up 4.9% compared to the prior year quarter. Higher sales reflected activewear sales of $665.6 million, up 6.5% compared to the second quarter of 2018, partly offset by a 2.2% decline in the hosiery and underwear category where we generated $136.0 million in overall sales. Activewear sales growth was driven by higher unit sales volumes of fashion basics and fleece, volume growth in global lifestyle brand products, and higher e-commerce sales volumes, as well as more favourable product-mix and higher net selling prices, partly offset by lower unit sales of basics. While international sales were up slightly, we saw softness in Europe and slower growth in China, particularly in the first two months of the quarter, which we believe was largely tied to the pace of broader economic activity in these regions. Growth in international sales was stronger in the month of June and we continue to project double digit growth in the second half of the year. The slight sales decline in the hosiery and underwear category resulted from lower sock sales volumes which were largely offset by the large increase in underwear sales during the quarter. The underwear sales increase was due to the full roll-out of a new private label men's underwear program with our largest mass retail customer, which began to ship at the end of the first quarter this year. This new program replaced our previous branded program with this retailer and now occupies significantly more shelf space than our former branded program. The decline in sock sales was primarily due to lower unit sales in mass, including the exit of a sock program in the dollar channel, as we had previously communicated, and lower sales in other channels, including sports specialty, partly offset by higher sock sales to global lifestyle brands.

As expected, gross margin of 27.8% in the second quarter of 2019 was down from 28.3% in the second quarter last year. The 50-basis point decline reflected anticipated increases in raw material costs, inflationary pressure on other input costs, and unfavourable foreign exchange. These factors more than offset the benefit of higher net selling prices and favourable product-mix.

SG&A expenses for the second quarter of 2019 of $92.0 million remained essentially flat compared to the second quarter of 2018, despite the rise in sales. As a percentage of sales, SG&A expenses were 11.5%, reflecting a 50-basis point improvement over the same period last year, primarily due to cost benefits stemming from the Company's ongoing focus on SG&A rationalization.

The Company incurred $16.3 million of restructuring and acquisition-related costs in the second quarter, compared to $3.0 million in the same period last year. Restructuring and acquisition-related costs in the second quarter of 2019 related primarily to previously announced manufacturing optimization initiatives, including consolidation of textile, hosiery, sewing, and yarn operations, as well as warehouse consolidation and sales and marketing initiatives.

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