admin Gildan Activewear Inc. net sales for the second quarter were above our expectations at 840 million dollars but reflected a 6 percent decline over a record quarter last year.
Net sales for the first half period were 1,543 million dollars, down 8 percent over the prior year sales.
“We are pleased with our top line performance which came in ahead of our expectations for the quarter, up against a strong comparative period” said Glenn J. Chamandy, Gildan’s president and CEO, adding, “Further, in a challenging macro environment, we are driving market share gains given our strong competitive position and continued execution on our GSG strategy.”
Highlights of Gildan’s Q2 results
In activewear, Gildan generated sales of 692 million dollars, down 9 percent. During the second quarter, the year-over-year POS trend for the activewear category was positive driven by performance in North America. International markets were more challenging than expected, with sales in the quarter down 2 percent.
The company saw increasing momentum in the hosiery and underwear category with sales totaling 149 million dollars, up 8 percent year-over-year. This increase was mainly driven by underwear sales volume growth, reflecting the expansion of private label offering and the roll-out of new programs in the mass retail channel. Further, while industry demand for men’s underwear remained down year-over-year, POS trends improved sequentially.
The company generated gross profit of 217 million dollars or 25.8 percent of sales in the second quarter, down 48 million dollars over the prior year. Operating income was 183 million dollars or 21.7 percent of sales compared to 174 million dollars or 19.4 percent of sales, in the prior year. Adjusted operating income reached 139 million dollars or 16.5 percent of sales, down 37 million dollars or 310 basis points, compared to the prior yea.
Gildan reported GAAP diluted EPS and adjusted diluted EPS for the quarter of 87 cents and 63 cents, respectively, up from 85 cents and down from 86 cents, in the prior year.
Gildan’s year-to-date operating results
In activewear, the company generated sales of 1,280 million dollars, down 146 million dollars or 10 percent in the first six months compared to the same period last year which benefited from distributor inventory replenishment following the pandemic and a tight manufacturing environment in 2021.
International sales of 118 million dollars were down 10 percent versus the prior year period. In the hosiery and underwear category, Gildan observed notable strength with sales totaling 264 million dollars, up 18 million dollars over the prior year or 7 percent, driven by both underwear and sock volume growth.
The company generated gross profit of 404 million dollars in the first half, down 101 million dollars over the prior year, driven by the decline in sales and lower gross margins. Gross margin of 26.2 percent was down by 410 basis points year-over year.
The company generated operating income of 311 million dollars or 20.1 percent of sales, while adjusted operating income was 241 million dollars or 15.6 percent of sales, down 93 million dollars or 440 basis points over the prior year.
Gildan reported GAAP diluted EPS and adjusted diluted EPS for the first half of 1.41 dollars and 1.08 dollars respectively, both down from GAAP diluted EPS and adjusted diluted EPS of 1.62 dollars, in the prior year.
Gildan adjusts full year outlook
Gildan is seeing current market conditions unfavourably impact activewear product mix, 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 revenues for the full year flat to down low single digits, compared to the previous expectations of a low single digit year-over-year increase.
The company’s full year adjusted operating margin is expected to remain slightly below the low end of its current 18 percent to 20 percent annual target range. Gildan expects adjusted diluted EPS in the range of 2.55 dollars to 2.65 dollars.
The company’s board of directors has declared a cash dividend of 186 cents per share, payable on September 18, 2023 to shareholders of record as of August 24, 2023.
