Gildan Activewear announced its results for the second quarter ended July 5, 2015, and updated its sales and earnings guidance for calendar year 2015.
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Gildan reported net earnings of $99.4 million or $0.41 per share on a diluted basis, compared with net earnings of $116 million or $0.47 per share on a diluted basis for the three months ended July 6, 2014.
Before reflecting restructuring and acquisition-related costs of approximately $3.2 million after-tax in the quarter relating primarily to the integration of acquisitions, Gildan reported adjusted net earnings of $102.6 million or $0.42 per share for the three months ended July 5, 2015, compared with adjusted net earnings of $116.6 million or $0.47 per share for the same period last year.
Consolidated net sales in the second calendar quarter of 2015 amounted to $714.2 million, up 2.9% from $693.8 million in the corresponding quarter of the prior year, reflecting an increase of 12.3% in sales for Branded Apparel, partially offset by a 1.2% decline in Printwear sales largely due to the selling price reductions implemented in December of 2014 and the lower number of shipping days compared to the corresponding quarter of last year.
Sales in the second calendar quarter of 2014 included an extra week to realign the 52-week fiscal year with the calendar year.
Consolidated net sales in the quarter were below the company’s guidance of net sales of $750 million, which it provided on May 14, 2015 primarily as a result of lower than anticipated inventory replenishment by a major U.S. retail customer and lower than anticipated Printwear sales in Europe.
Net earnings for the second calendar quarter of 2015 continued to reflect the impact of the Printwear selling price reductions implemented in December 2014, in advance of the benefit of lower manufacturing and cotton costs. The positive earnings impact of higher sales and operating margins in Branded Apparel and lower income taxes was more than offset by lower Printwear sales and operating margins and higher financial expenses.
Adjusted diluted EPS of $0.42 for the quarter ended July 5, 2015 were slightly below the guidance provided by the company on May 14, 2015 of adjusted EPS of $0.43 – $0.45 due to lower than anticipated net sales. During the three months ended July 5, 2015, the company generated $18.5 million of free cash flow after financing capital expenditures of $67.3 million and seasonal working capital changes.
Capital investments were primarily for new yarn-spinning facilities in the U.S., textile projects in Rio Nance and the expansion of the company’s printwear distribution centre in Eden, NC. The company ended the quarter with cash and cash equivalents of $44.6 million and outstanding bank indebtedness of $593.0 million ■