Gildan’s Second Quarter Results Highlight Pandemic’s Impact, Areas of Recovery
Gildan Activewear, Inc. (PPAI 250187, S13) has released financial results for its second quarter, which ended June 28, that reflect, as the company anticipated, the effects of the widespread government-mandated closures and resulting pause in economic activity. The Montreal, Quebec-based supplier’s quarterly sales of $230 million were down 71 percent compared to the same period last year, and it reports substantial COVID-related costs and charges.
“Despite the impact of the COVID-19 pandemic, we maintained a strong focus on our key priorities, including the health and safety of our employees and the long-term positioning of our business” says Glenn J. Chamandy, president and CEO of Gildan Activewear. “Against the challenging backdrop of the pandemic and the difficult but necessary actions we have taken, we have accelerated efforts under our Back to Basics strategy to further simplify our product portfolios, remove complexity and cost from our business, better support our customers and drive long-term market share growth.”
The company did identify some signs of recovery in its financial report. Point of sales (POS) trends during the quarter performed better than it had expected across all channels. By the end of the second quarter, essentially all imprintables distributor customer warehouses and the majority of retailer brick and mortar store locations had re-opened in the U.S., although many with reduced operating hours. POS related to certain categories in the U.S. imprintables channel, including fleece and fashion basics, started to turn positive in the month of June. In international markets, although POS were down on a year-over-year basis, the pace of demand’s decline slowed down with POS in Europe and Latin America performing better than anticipated for the quarter.
In the retail channel, while sales were down overall, certain categories held up better during the quarter and total sales of Gildan’s men's underwear products were up 23.5 percent compared to last year. This was attributed to strong sell-through and market share gains. The company also saw good performance in activewear in certain retailers. While the majority of its manufacturing operations remained closed for the quarter, sell-through of products were serviced from Gildan and its customers’ inventories, particularly in the imprintables channel. In line with improving demand, Gildan has started to resume production at various operating levels across the majority of its facilities.
Despite these improving demand trends and the restart of production facilities, the company notes that uncertainty remains with respect to the impact of the virus and the pace at which global economies will recover. Consequently, during the second quarter, it took a number of actions to drive market share in this environment, further reduce its cost base and strengthen its level of financial flexibility. The company attributes a GAAP loss of $1.26 per share and an adjusted loss of $0.99 per share in the second quarter to these actions and COVID-19 related impacts. The GAAP loss reflects the decline in revenue combined with the impact of the total $224 million of charges, including $131 million of COVID-19-related charges. Despite this large loss, due to the combination of tight working capital and capex management, Gildan notes that it generated $177 million of free cash flow in the quarter.
For Gildan Activewear’s full results for the quarter, click here.