Gildan Activewear returned to the black in the first quarter, as sales jumped 28.4 percent over the same period a year ago.
In a Nutshell: Gildan Activewear Inc., in reporting first-quarter results, said while benefits from its Back to Basics initiatives were translating to more efficient inventory management, higher than anticipated sales also contributed to a lower than planned increase in inventory levels.
The company said its point-of-sale (POS) imprintables channels have been running slightly better, with overall POS in U.S. and international markets down approximately 10 percent compared with pre-pandemic levels.
In retail, sales in all product categories are tracking above prior-year levels. Overall, Gildan said it was encouraged by the economic recovery it is seeing related to continued reopenings, the impact of U.S. stimulus on consumer demand and the strong progress of the vaccine rollout in the U.S. However, large gatherings have not yet restarted and on the supply chain side, it is monitoring labor shortages in the U.S. affecting certain industries, including yarn spinners, tightness in raw material inputs, as well as the impact of port backlogs and transportation-related factors globally.
Consequently, the company said it remains cautious regarding the pace of the overall recovery. However, Gildan said it was confident that the combination of the steps it took during the crisis in 2020 and the strength of its Back to Basics strategy is positioning the company well to capitalize on market share opportunities and create value for shareholders over the long term.
Sales: Sales for the first quarter ended April 4 increased 28.4 percent to $589.6 million.
Activewear sales were up 30.1 percent to $484.6 million, while sales of hosiery and underwear rose 21.4 percent to $105 million. The increase in activewear sales was driven by double-digit unit sales volume growth in North American and international imprintables markets, and activewear sold in retail channels, as well as a favorable product mix, partly offset by lower net selling prices.
Imprintables volume growth reflected the impact of net restocking by distributors and positive point-of-sales results (POS) compared with the first quarter last year. The increase in the hosiery and underwear category was driven by the strength of underwear, which reflected strong double-digit volume growth over both the first quarters of 2020 and 2019.
Earnings: Net earnings were $98.5 million, or 50 cents per share on a diluted basis and adjusted net earnings were $95 million, or 48 cents per share on a diluted basis, compared with a net loss of $99.3 million, or 50 cents per diluted share, and adjusted net earnings of $11.2 million, or 6 cents per diluted share, in the first quarter last year.
Gildan generated operating income of $113.8 million, or 19.3 percent of sales, in the first quarter compared with an operating loss of $92.3 million in the same period last year. Adjusted operating income totaled $110.3 million, or 18.7 percent of sales, compared with $19.9 million, or 4.3 percent of sales, last year, driven by the impact of higher sales and adjusted gross margin.
Gross margin in the quarter of 32 percent and adjusted gross margin of 31.1 percent were up 880 and 650 basis points (BPS), respectively, over the same quarter last year. Compared with the first quarter of 2019, gross margin was up 620 BPS and 530 BPS on an adjusted basis. Margin performance in the quarter was enhanced by the positive impact of an approximate $18 million accrual of a one-time payment from the USDA related to its Pandemic Assistance for Cotton Users (PACU) program.
CEO’s Take: Glenn J. Chamandy, president and CEO, said: “Our first-quarter results reflected a strong start to 2021, as continued benefits from our Back to Basics strategy supported sell-through across all channels and drove strong operating margin performance, allowing us to deliver net earnings significantly above prior year and first quarter 2019 levels. While large events have not yet restarted, we continue to be encouraged by the strength of our imprintables business and on the retail side we were pleased with strong double-digit growth in underwear and activewear sales compared to the first quarters of 2020 and 2019.”