Gildan Reports Lower Third-Quarter Sales Due To Weaker Demand
Supplier Gildan Activewear (PPAI 250187, S13) is expecting 2019 third-quarter sales of $740 million, down two percent over the same quarter last year, according to its preliminary third-quarter financials. The Montreal, Quebec-based company attributes the drop to weaker than expected imprintable demand in North America and ongoing softness in international imprintable markets.
Gildan also expects to report GAAP diluted earnings per share for the third quarter, which ended September 29, of approximately $0.51, and adjusted diluted EPS of approximately $0.53, both down seven percent over the third quarter of 2018.
In the U.S. imprintables channel, where the company was expecting low-single-digit growth in distributor point-of-sales (POS), it reports actual POS during the third quarter down by high-single-digits compared to last year. Further, in international imprintable markets where the company was forecasting growth, continued softness in Europe and China resulted in lower international sales for the quarter compared to last year. While overall imprintable sales were weaker than expected, overall retail sales were essentially in line with Gildan’s expectations. Consequently, the company is revising its 2019 guidance to reflect the approximate $50 million sales shortfall in the third quarter and is assuming the current demand weakness for imprintables both in North America and internationally will persist through the fourth quarter.
Given the current downturn in demand, Gildan also reports that it is now projecting significantly lower year-end distributor inventory levels than previously projected. The company estimates that lower demand expectations than previously projected will reduce its sales projection for the fourth quarter by approximately $70 million and anticipates distributor inventory destocking will negatively impact sales by approximately $100 million. Consequently, Gildan is now expecting full-year 2019 sales to be down to low-single-digits compared to 2018. Its GAAP-diluted EPS is projected to be $1.50 to $1.55 and adjusted diluted EPS is now expected to range from $1.65 to $1.70, with the GAAP-diluted EPS reflecting currently estimated after-tax restructuring and acquisition-related costs for 2019 of approximately $30 million.
Gildan’s previous guidance called for mid-single-digit sales growth for 2019, GAAP diluted EPS of $1.80 to $1.85 and adjusted diluted EPS of $1.95 to $2. Adjusted EBITDA for the full year is now expected to be in the range of $545 to $555 million, compared to previous guidance of in excess of $615 million. The company is now projecting free cash flow for 2019 of $200 to $250 million compared to its previous guidance of $300 to $350 million.