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Gildan Activewear (GIL)
Q3 2013 Earnings Call
August 01, 2013 8:30 am ET
Sophie Argiriou - Director of Investor Communications
Laurence G. Sellyn - Chief Financial & Administrative Officer and Executive Vice President
Glenn J. Chamandy - Founder, Chief Executive Officer, President and Director
Martin Landry - GMP Securities L.P., Research Division
Anthony Zicha - Scotiabank Global Banking and Markets, Research Division
Chad Sutherland - Goldman Sachs Group Inc., Research Division
Kenric S. Tyghe - Raymond James Ltd., Research Division
Stephen MacLeod - BMO Capital Markets Canada
Vishal Shreedhar - National Bank Financial, Inc., Research Division
Devin Prater - D.A. Davidson & Co., Research Division
Mark Petrie - CIBC World Markets Inc., Research Division
Chase Bethel - Desjardins Securities Inc., Research Division
David J. Glick - The Buckingham Research Group Incorporated
Tal Woolley - RBC Capital Markets, LLC, Research Division
Previous Statements by GIL
» Gildan Activewear Management Discusses Q2 2013 Results - Earnings Call Transcript
» Gildan Activewear's Management Presents at 2013 Consumer & Retail Conference (Transcript)
» Gildan Activewear Management Discusses Q1 2013 Results - Earnings Call Transcript
Thank you, Larissa. Good morning, everyone, and thank you for joining us.
Earlier this morning, we issued our press release announcing our earnings results for the third quarter of fiscal 2013 and our interim shareholder report containing management's discussion and analysis and consolidated financial statements. These documents are available on our website at www.gildan.com and will be filed with the Canadian securities regulatory authorities and the U.S. securities commission.
I'm joined here today by Glenn Chamandy, our President and Chief Executive Officer; and Laurence Sellyn, our Executive Vice President and Chief Financial and Administrative Officer. Our call today will begin with Laurence taking you through our third quarter performance and providing an update on our business outlook. After which, a Q&A session will follow.
I would like to remind everyone that certain statements included in this conference call may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve unknown and known risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. We refer you to the company's filings with the U.S. Securities and Exchange Commission and Canadian securities regulatory authorities that may affect the company's future results.
I will now turn the call over to Laurence.
Laurence G. Sellyn
Good morning. This morning, we were pleased to report adjusted EPS for our third quarter of $0.95 per share, which represented EPS growth of 44% over the third quarter of last year. EPS were at the top end of our prior guidance range and were a record for any fiscal quarter in the history of the company. Both of our operating segments reported strong results, and we believe that both segments are well positioned for continuing growth in sales and earnings as we continue to implement our growth strategies.
One of the highlights of the quarter was the initial success of our national branded underwear program with Wal-Mart. Sell-through to consumers significantly exceeded our expectations. And while we recognize that it is still early days, this reinforces our view that our Gildan brand promise of better product design and better quality features, combined with low prices, will be a winning formula and successful value proposition in retail as it has been for us in the Printwear business over the past 20 years.
We believe that we're uniquely positioned to deliver this brand promise to consumers as a result of our continuing major capital investments in our vertical manufacturing in support of our brand. In addition to continuing to invest in widening our manufacturing advantage, we are supporting our brands with continuing investments in marketing and advertising. We are continuing to raise our brand awareness and enhance the equity of the Gildan and Gold Toe brands.
We will discuss our results and outlook for Printwear and then for Branded Apparel. Our Printwear business is generating record earnings and strong free cash flows. Cotton costs are now generally in good equilibrium with Printwear selling prices, and we are continuing to achieve unit volume growth and increased manufacturing efficiencies.
Unit sales volume growth in Printwear in the third quarter was approximately 4%. However, although unit sales volumes were up from last year, growth in both the U.S. and international markets was limited by availability of inventory. As a result of which, we were unable to fully capitalize on customer demand during the peak selling season in the third fiscal quarter.
Shipments to the European market, where the Gildan brand currently has very strong momentum in spite of the macro economic situation in the region, increased by close to 10% in the quarter, but were lower than planned due to lack of product availability. Shipments in Asia Pacific region were up approximately 80% from the small base in the third quarter of last year.
Last night, we announced a restructuring of our Printwear price list. Selling prices were reduced for certain product lines, and we applied the benefits of these price reductions to distributor inventories. The ongoing margin impact of these selective reductions in selling prices will be essentially offset by the elimination of short-term promotions.
Although the selling price reductions and distributor inventory devaluation were announced this week, the proportion of the devaluation, which is applicable to inventory sold before the end of the third quarter, has been accounted for in our third quarter results. The impact of the inventory devaluation on sales and earnings in the third quarter was approximately $6 million. The impact in EPS was $0.05 per share.