Gildan said higher activewear and underwear sales and cost controls helped boost the bottom line in the third quarter.
In a Nutshell: Gildan Activewear Inc. said Thursday that sales above pre-pandemic levels, combined with a stronger margin profile, drove record earnings for the quarter.
Compared to the third quarter of 2019, Gildan said adjusted gross margin in the third quarter of 2021 was up 400 basis points primarily due to “Back to Basics” cost efficiencies and lower raw material costs, while net selling prices were essentially in line with third quarter 2019 levels.
Gildan said it generated record third quarter free cash flow of $232 million, bringing its year-to-date total to $478 million, driven by strong earnings, improved working capital management and the timing of insurance collections related to the 2020 hurricanes. The company ended the third quarter with net debt of $287 million.
Sales: Sales in the third quarter ended Oct. 3 rose 33 percent over the prior year and 8 percent above the third quarter of 2019 to $802 million.
The increase was driven primarily by higher unit sales of activewear and underwear, favorable product mix, and lower imprintables promotional spending and accruals.
Activewear sales increased 44 percent in the period to $656 million, and sales in the hosiery and underwear category were $146 million, in line with the prior year level. Activewear shipments were up in imprintables channels in North America and internationally, as well as in North American retail channels, compared to the third quarter last year.
Year-over-year in-line hosiery and underwear sales reflected higher underwear unit sales volumes and favorable product-mix, offset by lower unit sales of socks, which were impacted by supply tightness for certain products.
Earnings: Net earnings for the quarter more than tripled to $188 million, or 95 cents per share on a diluted basis, compared to net earnings of $56 million, or 28 cents per diluted share in the third quarter last year.
Operating income came in at $201 million, or 25.1 percent of sales in the quarter compared to operating income of $69 million, or 11.4 percent of sales, last year. The increase in operating and adjusted operating income was driven by higher sales, strong gross and adjusted gross margin performance, partly offset by higher SG&A expenses.
Adjusted operating margin of 21.5 percent in the period was up 500 basis points compared to 16.5 percent in the third quarter of 2019, demonstrating Gildan’s “Back to Basics” strategy that began prior to and accelerated during the pandemic has allowed greater profitability.
Strong gross margin expansion drove operating margin of 25.1 percent and adjusted operating margin of 21.5 percent, which was up approximately 930 basis points versus last year and 500 basis points compared to the third quarter of 2019. Diluted earnings per share (EPS) was 95 cents and adjusted diluted EPS was 80 cents, up 51 percent compared to the third quarter of 2019.
CEO’s Take: Glenn J. Chamandy, Gildan president and CEO, said: “Our record performance for the third quarter was driven by the improved economics of our business, underpinned by our Back to Basics model, the operational excellence of our team and the ongoing recovery in demand, which drove sales volumes which are now above pre-pandemic levels. Further, I feel confident that our team will continue to navigate through the tight supply chain environment, manage inflationary pressures and deliver results for our shareholders as we continue to move forward.”