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Gildan Announces Full-Year, Q4 Earnings

Montreal-based Gildan Activewear (asi/56842) increased net sales 8.1% in the fourth quarter of 2016, while full-year sales ticked up 0.6% to nearly $2.59 billion, according to an earnings statement released Thursday. A 1% sales rise in the apparel maker’s printwear division drove the annual increase, but sales in the branded apparel segment were flat for the year. Meanwhile, adjusted net earnings also accelerated in 2016, advancing to $356.3 million, or $1.51 in adjusted diluted earnings per share – a 3.4% jump over $1.46 in 2015.

According to Gildan, a number of hurdles inhibited greater 2016 sales growth. Factors included lower net selling prices, lower retailer inventory replenishment, the non-recurrence of customer inventory re-stocking in 2015, and the exit of approximately $65 million in retailer private label programs. All that combined with unfavorable foreign currency exchange and product-mix to present challenges. Nonetheless, Gildan said that negative factors were more than offset by the benefit of positive POS growth in printwear, organic sales growth in branded apparel excluding the planned exit of private label programs, and the acquisitions of Peds and Alstyle (asi/34817).

Indeed, the acquisitions proved especially significant in the fourth quarter, contributing approximately $50 million in sales to the three-month period. The quarter’s 8.1% jump in sales over Q4 2015 resulted from a 14.4% rise in printwear revenue and a 1.2% rise in branded apparel sales – gains that were partly offset by the impact of significant retailer inventory destocking and the anticipated impact of Gildan’s exit of private label programs in branded apparel, as well as lower net selling prices in printwear. According to Gildan, quarterly adjusted net earnings also grew, going up to $74.5 million, or $0.32 per share, compared to $68.9 million, or $0.28, during the same quarter the prior year. Consolidated gross margin in the fourth quarter of 2016 was 26.7%, in line with the comparable period in 2015.

In addition to announcing earnings, Gildan also provided a forecast for the how the company will fare in 2017. This year, net sales in the printwear and branded apparel segments are each expected to increase in the high single-digit range. Gildan also expects to achieve adjusted diluted EPS in the neighborhood of $1.60 to $1.70, which at the mid-point of the guidance range represents growth of 9% over 2016. “The company,” Gildan said in statement, “is also projecting another record year of strong free cash flow generation in excess of $400 million.”