Citing lower-than-expected printed sportswear sales, Gildan Activewear Inc. said it expects to report diluted earnings per share (EPS) for the third quarter ended Sept. 29 of approximately 51 cents and adjusted diluted EPS of around 53 cents, both down 7 percent over the third quarter of 2018.
Sales for the third quarter are expected to be approximately $740 million, down 2 percent over the same quarter last year, reflecting estimated activewear sales of $620 million and sales of $120 million in the hosiery and underwear category. The company’s previous guidance provided on Aug. 1 called for adjusted diluted EPS growth to be flat in the third quarter, on projected sales growth in the mid-single-digit range compared to the year-ago period.
“During the third quarter of 2019, we experienced significantly weaker than expected demand for imprintables in North America and ongoing softness in international imprintable markets,” Gildan said. “Specifically in the U.S. imprintables channel, where the company was expecting low-single-digit growth in distributor point-of-sales (POS), actual POS during the third quarter was down high-single-digits compared to last year. Further, in international imprintable markets, where the company was forecasting growth, continued softness in Europe and China resulted in lower international sales for the quarter compared to last year.”
While overall imprintable sales were weaker than expected, the company, headquartered in Montreal, said overall retail sales were basically in line with expectations. As a result, Gildan is revising its 2019 guidance to reflect the estimate $50 million sales shortfall in the third quarter and is assuming the current demand weakness for imprintables both in North America and internationally will persist through the fourth quarter.
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In addition, given the current downturn in demand, the vertically integrated company is now projecting significantly lower year-end distributor inventory levels than previously projected. Gildan now estimates that lower demand expectations will reduce the its sales projection for the fourth quarter by about $70 million and anticipates distributor inventory destocking will negatively impact sales by around $100 million.
The company is now expecting full year 2019 sales to be down low-single digits compared to 2018. Diluted EPS is projected to be $1.50 to $1.55 and adjusted diluted EPS is now expected to be in the range of $1.65 to $1.70.
The company’s previous guidance called for mid-single-digit sales growth for 2019, diluted EPS of $1.80 to $1.85 and adjusted diluted EPS of $1.95 to $2.00. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the full year is now expected to be in the range of $545 to $555 million, compared to previous guidance of more than $615 million.
Gildan is scheduled to report its 2019 third quarter results on Oct. 31. Gildan stock closed at $26.28 on Friday, down 25.72 points on the New York Stock Exchange.