The run of quarterly sales declines has ended for Top 40 supplier Gildan (asi/56842), but the firm’s total global revenue is still down for the first nine months of the year.

That’s according to a financial report the publicly traded apparel manufacturer released on Nov. 2. It showed sales for the third quarter rose 2.3% year over year to nearly $870 million – a figure that includes but isn’t limited to sales within the North American promotional products market.

The Q3 performance ended a stretch of three straight quarters in which Gildan saw revenue decline. Those decreases came amid a kind of correction that followed a rampant post-COVID stock-up on Gildan products the prior year, according to the company.

Gildan has now “moved past the impact of strong prior-year comparative periods tied to post-pandemic replenishment,” said CEO/President Glenn Chamandy.

While topline sales increased in Q3, the gain was primarily a result of a 16% rise in the hosiery and underwear category. Sales in activewear, where promo and other business channels are housed, were essentially flat, being hurt especially by a steep drop in international business.

Across the first three quarters of 2023, Gildan generated total global revenue of about $2.41 billion – down 4.3% compared to the same period in the previous year. The decline was a result of a 7% drop in activewear revenue that was partly offset by a 10% rise in hosiery/underwear business.

“The decline in activewear sales was primarily due to lower sales volumes compared to the prior year, which benefited from [customer] inventory replenishment following the pandemic, as well as the unfavorable impact of product mix stemming from current macroeconomic conditions,” said Chamandy. Still, in a positive sign, “year-over-year POS trends for the activewear category showed progressive improvement from the first to the second quarter and into the third quarter,” he added.

Earnings & Outlook

Despite the sales slump, Gildan has remained profitable for the year, though earnings are down relative to 2022.

Net earnings for the first nine months of 2023 tallied $380 million, a 17% year-over-year decline. That translated to basic earnings per share of $2.14, down from $2.87. Similarly, adjusted net earnings were $323.4 million, a 29% slip that led to adjusted diluted EPS of $1.82, down from $2.46.

“The decline in activewear sales was primarily due to lower sales volumes compared to the prior year, which benefited from (customer) inventory replenishment following the pandemic.” Glenn Chamandy, Gildan (asi/56842)

For the January through September period, Gildan generated gross profit of $644 million, representing a decline of $114 million versus the prior year. Operating income was $466 million, down from $511 million a year ago.

While Gildan predicts that sales will rise year over year again in the fourth quarter, the firm still expects that annual revenue for 2023 will likely be flat or down in the low single-digit percentage range. Accordingly, the company believes annual earnings per share will be on the lower end of a forecasted $2.55 to $2.65 range.

The predictions reflect “softer demand trends in certain markets stemming from the macro environment,” Chamandy noted.

New Board Member, New Facility

Among other developments, Gildan shared with investors that it has opened a new manufacturing complex in Bangladesh. Earlier this year, Gildan announced the closure of its San Miguel sewing facility in Choloma, Honduras, and also the shuttering of a yarn-spinning plant in North Carolina. The firm is a vertically integrated manufacturer.

Gildan Closing a Yarn-Spinning Plant in North Carolina https://t.co/RTvozsfFgb

— Chris Ruvo (@ChrisR_ASI) October 20, 2023

Meanwhile, Gildan shared that it has appointed an 11^th member to its board of directors: Sharon Driscoll, an experienced corporate leader/director who also serves on the board of Empire Company Limited and Imperial Oil Limited. Driscoll will be on the Gildan board’s audit and finance committee, as well as the compensation and human resources committee.

“Sharon is an accomplished business leader and her 15-plus years of C-suite experience across finance and strategy in publicly traded and privately held retail and distribution environments make her an ideal addition to our board,” said Gildan’s Board Chairman Donald C. Berg.

Based on estimated 2022 North American promo product industry revenue of $762.2 million, Gildan ranked fifth on Counselor’s most recent list of the largest suppliers in the industry.