Gildan Activewear, Inc. (PPAI 250187, S13) has released results for its second quarter, which ended July 4. The Montreal, Quebec-based supplier also announced the approval by its board of directors for the reinstatement of its share buyback program to repurchase up to five percent of its issued and outstanding common shares, effective August 9.

“Our business continued to build momentum during the second quarter as economic activity in North America trended positively and the power of our Back to Basics strategy continued to drive stronger profitability,” says Gildan President and CEO Glenn J. Chamandy. “Once again, our team demonstrated exceptional operational capability by delivering on our targets while navigating through a tight supply chain environment.”

The company reports sales of $747 million in the second quarter, up 225 percent over last year and down approximately seven percent from its record second-quarter 2019 sales. Its overall margin performance in the quarter improving both sequentially and from pre-pandemic levels in the second quarter of 2019. Gross margin totaled 32.2 percent and adjusted gross margin was 30.5 percent, which, when excluding the one-time 300 basis points (bps) benefit from the USDA pandemic assistance payment in the first quarter of 2021, was up sequentially by 320 bps and 240 bps, respectively. Gross margin performance also improved significantly over the second quarter of 2019, up 440 bps and 270 bps on an adjusted basis.

Selling, general and administrative expenses in the quarter came in at 10.7 percent of sales, improving 170 bps from the first quarter of 2021 and 80 bps from 11.5 percent in the second quarter of 2019. Gildan credits this for its delivery of GAAP-diluted EPS of $0.74 and adjusted diluted EPS of $0.68, and notes that this reflects a significant recovery over the loss incurred last year due to the effects of the pandemic. Compared to the second quarter of 2019, EPS and adjusted diluted EPS in the quarter were up 51 percent and 21 percent, respectively.

Gildan reports free cash flow of $208 million, which it notes is a record for a second quarter. This brings its year-to-date total to $246 million and its available liquidity position to approximately $1.3 billion. Net debt further declined to $362.5 million and the net debt to adjusted EBITDA ratio decreased to 0.6 from 2.1 at the end of the first quarter this year and 3.5 at the end of 2020. With the company's net debt leverage ratio now below its historical target range of one to two times net debt to adjusted trailing 12 months EBITDA, driven by the strong recovery to date and the progress of Gildan’s Back to Basics strategy, and with the company's prospects for continued free cash flow generation, its board approved the resumption of the share buyback program to repurchase up to five percent of the company's outstanding shares.