Gildan Activewear Inc.
) first-quarter fiscal 2014 adjusted earnings increased 9.4% year
over year to 35 cents per share and came in line with the
company's previously provided guidance and the Zacks Consensus
Estimate. This marked record first quarter earnings for the
company in any fiscal year, given its usual trend of reporting
lowest T-shirt sales in the first quarter.
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The year-over-year improvement in earnings came on the back of
strong sales recorded at both its business segments, partly
offset by increased selling, general and administrative
Including the impact of restructuring charges and expenses
related to acquisitions, earnings per share came in at 34 cents,
up 17.3% from the previous-year quarter.
Net sales of this activewear retailer climbed 7.3% to $451.4
million, marginally exceeding the company's previous forecast of
$450.0 million for first-quarter fiscal 2014. However, it fell
short of the Zacks Consensus Estimate of $453.0 million.
Gildan's gross profit witnessed an increase of 5.9% to $119.2
million whereas gross margin contracted 80 basis points (bps) to
26.4%, reflecting the effect of lower selling prices at the
company's Printwear segment, partly compensated by cheaper cotton
prices coupled with better product mix.
The company's operating profit advanced 17.2% to $44.4 million
with margins expanding 80 bps. Owing to higher marketing and
advertising costs, Gildan reported a 4.9% rise in SG&A to
$72.8 million. However, SG&A as a percentage of sales dipped
to 16.1% from 16.5% last year.
Sales at the company's Printwear segment improved 7.4% to $261.8
million, reflecting an increase in both, international and unit
sales volumes. Although seasonal destocking by wholesale
distributors was on a rise, inventories remained at decent
levels, augmenting volumes.
At the Branded Apparel segment, sales rose 7.1% to $189.6
million, primarily driven by increased customer demand for
Gildan® brand's undergarments and Gold Toe® brand's socks,
partly offset by lower sales at global lifestyle brands and at
its private labels.
Gildan ended the quarter with cash and cash equivalents of $79.1
million. Its long-term debt stood at $64.0 million. Further, to
sponsor the occasional rise in inventories in order to meet
anticipated consumer demand, the company used its free cash flow
worth $68.5 million. Finally, the company incurred $58.1 million
as capital expenditure in the first quarter of fiscal 2014.
The Canada-based company re-affirmed its previously provided
guidance for fiscal 2014 in which it envisions adjusted earnings
to lie in a band of $3.00-$3.10 per share, which is up
11.5%-15.2%, compared to fiscal 2013. The Zacks Consensus
Estimate for fiscal 2014 stands at $3.08, lying within the
company's currently predicted band.
Also, the re-affirmed guidance forecasts net sales to be $2.35
million, Printwear sales to be $1.5 million and Branded Apparel
sales to be $825 million, for fiscal 2014.
The company plans to incur capital expenditures of $300-$350
million during the year, mainly for yarn-spinning, making
upgrades to its existing facilities, continuing to invest in its
new manufacturing facility and other energy saving projects.
Moreover, it plans to generate free cash flow of $50-$100 million
during fiscal 2014.
For the second quarter of fiscal 2014, the company envisions
earnings to range from $0.61-$0.64 per share, up 3.4%-8.5% year
over year, given that sales exceeds $550.0 million in the
quarter. The forecasts made by the company are in sync with its
full-year guidance, which projects earnings per share to rise
sequentially in the following quarters throughout fiscal 2014.
Gross margins are anticipated to be pressurized in the second and
third quarters. Also, in the second quarter, Gildan expects to
ramp up production at its new ring-spun yarn-spinning
construction at Salisbury, N.C.
Finally, the company assumes cotton prices to be higher in the
second half of fiscal 2014, compared to its previous prediction
of prices staying at par with fiscal 2013 level, along with
inflationary pressures in the environment. On the contrary, the
company is positive about its selling prices and expects the
current economic conditions to prevail in fiscal 2014.
Management announced a cash dividend of 10.8 cents per share to
stockholders of record on Feb 20, 2014, payable on Mar 17, 2014.
Other Stocks to Consider
Gildan currently holds a Zacks Rank #2 (Buy). Other stocks in the
apparel-shoe space include
Christopher & Banks Corporation
Foot Locker, Inc.
Finish Line Inc.
). While Christopher & Banks holds a Zacks Rank #1 (Strong
Buy), Foot Locker and Finish Line carry a Zacks Rank #2 (Buy).