In a Nutshell

*Better-than-anticipated performance led to a 6.8% sales rise and a net earnings increase during the second quarter for Top 40 supplier Gildan (asi/56842).

*While sales were up for the half-year too, net earnings declined – primarily a consequence of lower operating margin.

A second quarter performance that beat expectations helped Top 40 supplier Gildan (asi/56842) increase year-over-year sales by 2.2% to $1.41 billion through the first six months of 2018, the Montreal-based company announced early Thursday.

Even so, net earnings for the first half of the year were down, dropping from $191.2 million, or $0.84 per share on a diluted basis in 2017, to this year’s $176.9 million, or $0.82 per diluted share. Adjusted EBITDA declined too, from $304.3 million in 2017 to $290.1 million in 2018. “The decrease in net earnings…was mainly due to a lower operating margin, partly offset by the contribution from higher sales and a lower income tax expense,” Gildan said in a financial statement.

Glenn Chamandy, president and CEO of Gildan.

According to Gildan, a 10.5% increase in activewear sales helped power the overall revenue gain through 2018’s first six months. Strong shipments to the imprintable market (which includes promo) during the second quarter were among the key factors in the sales acceleration, as were higher net selling prices and increased shipments to global lifestyle brand customers and retailers. Still, activewear’s stout performance was partially offset by a 22.2% decline in hosiery and underwear sales through the year’s first half. Gildan said mass retailers are starting to sell more of their own private-label sock brands, which was a significant factor in the hosiery/underwear sales decline.

As for the second quarter, net sales increased a better-than-anticipated 6.8% to $764.2 million. Net earnings for the quarter were up too, rising to $109 million, or $0.51 per diluted share, compared to $107.7 million, or $0.48 per diluted share. Q2 adjusted EBITDA was $166 million, an uptick from the prior year’s $165.4. Higher sales and a lower share count compared to 2017 helped stimulate the quarterly earnings rise, though was partly offset by lower operating margin, Gildan said.

Buoyed by the second quarter results, Gildan now projects adjusted diluted earnings per share for the full year will be in the range of $1.85 to $1.90 – up from the previous guidance of $1.80 to $1.90. The apparel maker is projecting that 2018’s net sales growth will land in the mid-single-digit range, compared to a previous range of low to mid-single digit growth. Gildan also expects adjusted EBITDA to be in the neighborhood of $605 to $620 million; previously the company was forecasting $595 to $620 million.