Impacted by higher operating expenses and lower printwear sales and operating margins, Gildan Activewear (asi/56842) announced that its net income dropped 14.3% in its recently-completed second quarter. Last week, the apparel maker reported that earnings in the calendar quarter ending July 5 were $99.4 million. That compares to $116 million during the same quarter the prior year.
Before reflecting restructuring and acquisition-related costs, Gildan reported adjusted net earnings of $102.6 million – $0.42 per share for the three months ended July 5. During the comparable period in 2014, Gildan’s net earnings were $116.6 million, or $0.47 per share.
“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,” Gildan said in a statement.
While Gildan’s earnings declined, consolidated net sales in its second quarter increased 2.9% – from $693.8 million in 2014 to $714.2 million this year. A 12.3% rise in branded apparel sales ($236.3 million) propelled the surge, but was partially offset by a 1.2% decline in printwear sales ($477.8 million). Having one less business week in the second quarter of 2015 compared to 2014 hurt printwear sales, but wasn’t the only factor driving the decline. Gildan said lower net selling prices, the negative impact of the devaluation of international currencies relative to the U.S. dollar and lower unit sales volumes in Europe weighed on printwear’s performance.
Gildan’s second quarter played a role in compelling the company to issue a grayer forecast for 2015. Adjusted diluted earnings-per-share for the 12 months ending January 3, 2016 is expected to be in the bottom of the company’s guidance range – $1.50 to $1.55 on anticipated total sales of $2.6 billion. Previously, Gildan was forecasting sales slightly in excess of $2.65 billion. Printwear sales, the company says, should grow about 10%, down from the previously projected 12%. Sales growth in the branded-apparel segment is now expected to be approximately 15%, compared to previously anticipated sales growth in excess of 20%.