Gildan Activewear Inc. (GIL: TSX and NYSE) today announced
that it expects to report GAAP diluted EPS for the third quarter
ended September 29, 2019 of approximately $0.51 and adjusted
diluted EPS1 of approximately $0.53, both down 7% over the third
quarter of 2018. Sales for the third quarter are expected to
be approximately $740 million, down 2% over the same quarter last
year, reflecting estimated activewear sales of $620 million and
sales of $120 million in the hosiery and underwear category.
The Company’s previous guidance provided on August 1, 2019 called
for adjusted diluted EPS growth to be flat in the third quarter, on
projected sales growth in the mid-single-digit range over the third
quarter last year.
During the third quarter of 2019, we experienced
significantly weaker than expected demand for imprintables in North
America and ongoing softness in international imprintable markets.
Specifically in the U.S. imprintables channel, where the Company
was expecting low-single-digit growth in distributor point-of-sales
(POS), actual POS during the third quarter was down
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 our 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. In addition, given the current downturn
in demand, the Company 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 the Company’s sales projection for
the fourth quarter by approximately $70 million and anticipates
distributor inventory destocking will negatively impact sales by
approximately $100 million. Consequently, the Company is now
expecting full year 2019 sales to be down low-single-digits
compared to 2018. GAAP diluted EPS is projected to be $1.50 to
$1.55 and adjusted diluted EPS is now expected to be in the range
of $1.65 to $1.70. GAAP diluted EPS reflects currently estimated
after-tax restructuring and acquisition-related costs for 2019 of
approximately $30 million, as previously communicated. The
Company’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 $2.00. Adjusted EBITDA1 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 flow1 for 2019 of $200 to $250
million compared to its previous guidance of $300 to $350
million.
Conference call
informationGildan Activewear Inc. (GIL; TSX and NYSE) will
report its 2019 third quarter results on Thursday, October 31,
2019. A press release will be issued before markets open and a
conference call is scheduled at 8:30 AM ET to discuss the Company’s
results and business outlook. The conference call can be accessed
by dialing (877) 282-2924 (Canada & U.S.) or (470) 495-9480
(international) and entering passcode 1459916 #. A replay
will be available for 7 days starting at 11:30 AM ET by dialing
(855) 859-2056 (Canada & U.S.) or (404) 537-3406
(international) and entering the same passcode. A live audio
webcast of the conference call, as well as a replay, will be
available on our corporate site at
http://www.gildancorp.com/events.
Non-GAAP Financial MeasuresThis
press release includes references to certain non-GAAP financial
measures as described below. These non-GAAP measures do not have
any standardized meanings prescribed by International Financial
Reporting Standards (IFRS) and are therefore unlikely to be
comparable to similar measures presented by other companies.
Accordingly, they should not be considered in isolation. The terms
and definitions of the non-GAAP measures used in this press release
are provided below.
Adjusted net earnings and adjusted diluted
EPSAdjusted net earnings are calculated as net earnings before
restructuring and acquisition-related costs, income taxes relating
to restructuring and acquisition-related actions, and income taxes
relating to the revaluation of deferred income tax assets and
liabilities as a result of statutory income tax rate changes in the
countries in which we operate. Adjusted diluted EPS is calculated
as adjusted net earnings divided by the diluted weighted average
number of common shares outstanding. The Company uses adjusted net
earnings and adjusted diluted EPS to measure its performance from
one period to the next, without the variation caused by the impacts
of the items described above. The Company excludes these items
because they affect the comparability of its financial results and
could potentially distort the analysis of trends in its business
performance. Excluding these items does not imply they are
necessarily non-recurring.
Adjusted EBITDAAdjusted EBITDA is calculated as
earnings before financial expenses, income taxes, and depreciation
and amortization, and excludes the impact of restructuring and
acquisition-related costs. The Company uses adjusted EBITDA,
among other measures, to assess the operating performance of its
business. The Company also believes this measure is commonly used
by investors and analysts to measure a company’s ability to service
debt and to meet other payment obligations, or as a common
valuation measurement. The Company excludes depreciation and
amortization expenses, which are non-cash in nature and can vary
significantly depending upon accounting methods or non-operating
factors. Excluding these items does not imply they are necessarily
non-recurring.
Free cash flowFree cash flow is defined as cash
from operating activities less cash flow used in investing
activities excluding business acquisitions. The Company considers
free cash flow to be an important indicator of the financial
strength and liquidity of its business, and it is a key metric
which indicates how much cash is available after capital
expenditures to repay debt, to pursue business acquisitions, and/or
to redistribute to its shareholders. The Company believes this
measure is commonly used by investors and analysts when valuing a
business and its underlying assets.
Caution concerning forward-looking
statementsCertain statements included in this press
release constitute “forward-looking statements” within the meaning
of the U.S. Private Securities Litigation Reform Act of 1995 and
Canadian securities legislation and regulations, and are subject to
important risks, uncertainties, and assumptions. This
forward-looking information includes, amongst others, information
with respect to our objectives and the strategies to achieve these
objectives, as well as information with respect to our beliefs,
plans, expectations, anticipations, estimates, and intentions,
including, without limitation, our expectation with regards to net
sales, gross margin, SG&A expenses, restructuring and
acquisition-related costs, operating margin, adjusted operating
margin, adjusted EBITDA, diluted earnings per share, adjusted
diluted earnings per share, income tax rate, free cash flow,
capital expenditures, and capacity expansion plans. All figures
reported in this press release with respect to the third quarter of
2019 are preliminary and are subject to change upon the issuance of
the Company’s third quarter condensed interim consolidated
financial statements on October 31, 2019, as the Company has not
yet completed its processes and controls for the third quarter
financial statements. The preliminary estimates provided in this
press release also constitute forward-looking statements within the
meaning of applicable securities laws and are based on a number of
assumptions, and are subject to a number of risks and
uncertainties. Forward-looking statements generally can be
identified by the use of conditional or forward-looking terminology
such as “may”, “will”, “expect”, “intend”, “preliminary”,
“estimate”, “project”, “assume”, “anticipate”, “plan”, “foresee”,
“believe”, or “continue”, or the negatives of these terms or
variations of them or similar terminology. We refer you to the
Company’s filings with the Canadian securities regulatory
authorities and the U.S. Securities and Exchange Commission, as
well as the risks described under the “Financial risk management”,
“Critical accounting estimates and judgments”, and “Risks and
uncertainties” sections of the Company’s Management’s Discussion
and Analysis for the three and six months ended June 30, 2019 and
for the fiscal year ended December 30, 2018 for a discussion of the
various factors that may affect the Company’s future results.
Material factors and assumptions that were applied in drawing a
conclusion or making a forecast or projection are also set out
throughout such documents and this press release.
Forward-looking information is inherently
uncertain, and the results or events predicted in such
forward-looking information may differ materially from actual
results or events. Material factors, which could cause actual
results or events to differ materially from a conclusion, forecast,
or projection in such forward-looking information, include, but are
not limited to:
- our ability to implement our growth strategies and plans;
- our ability to successfully integrate acquisitions and realize
expected benefits and synergies;
- the intensity of competitive activity and our ability to
compete effectively;
- changes in general economic and financial conditions globally
or in one or more of the markets we serve;
- our reliance on a small number of significant customers;
- the fact that our customers do not commit to minimum quantity
purchases;
- our ability to anticipate, identify, or react to changes in
consumer preferences and trends;
- our ability to manage production and inventory levels
effectively in relation to changes in customer demand;
- fluctuations and volatility in the price of raw materials used
to manufacture our products, such as cotton, polyester fibres, dyes
and other chemicals;
- our reliance on key suppliers and our ability to maintain an
uninterrupted supply of raw materials and finished goods;
- the impact of climate, political, social, and economic risks in
the countries in which we operate or from which we source
production;
- disruption to manufacturing and distribution activities due to
such factors as operational issues, disruptions in transportation
logistic functions, labour disruptions, political or social
instability, bad weather, natural disasters, pandemics, and other
unforeseen adverse events;
- compliance with applicable trade, competition, taxation,
environmental, health and safety, product liability, employment,
patent and trademark, corporate and securities, licensing and
permits, data privacy, bankruptcy, anti-corruption, and other laws
and regulations in the jurisdictions in which we operate;
- the imposition of trade remedies, or changes to duties and
tariffs, international trade legislation, bilateral and
multilateral trade agreements and trade preference programs that
the Company is currently relying on in conducting its manufacturing
operations or the application of safeguards thereunder;
- factors or circumstances that could increase our effective
income tax rate, including the outcome of any tax audits or changes
to applicable tax laws or treaties;
- changes to and failure to comply with consumer product safety
laws and regulations;
- changes in our relationship with our employees or changes to
domestic and foreign employment laws and regulations;
- negative publicity as a result of actual, alleged, or perceived
violations of labour and environmental laws or international labour
standards, or unethical labour or other business practices by the
Company or one of its third- party contractors;
- changes in third party licensing arrangements and licensed
brands;
- our ability to protect our intellectual property rights;
- operational problems with our information systems as a result
of system failures, viruses, security and cyber security breaches,
disasters, and disruptions due to system upgrades or the
integration of systems;
- an actual or perceived breach of data security;
- our reliance on key management and our ability to attract
and/or retain key personnel;
- changes in accounting policies and estimates; and
- exposure to risks arising from financial instruments, including
credit risk on trade accounts receivables and other financial
instruments, liquidity risk, foreign currency risk, and interest
rate risk, as well as risks arising from commodity prices.
These factors may cause the Company’s actual
performance and financial results in future periods to differ
materially from any estimates or projections of future performance
or results expressed or implied by such forward-looking statements.
Forward-looking statements do not take into account the effect that
transactions or non-recurring or other special items announced or
occurring after the statements are made may have on the Company’s
business. For example, they do not include the effect of business
dispositions, acquisitions, other business transactions, asset
write-downs, asset impairment losses, or other charges announced or
occurring after forward-looking statements are made. The financial
impact of such transactions and non-recurring and other special
items can be complex and depends on the facts particular to each of
them.
There can be no assurance that the expectations
represented by our forward-looking statements will prove to be
correct. The purpose of the forward-looking statements is to
provide the reader with a description of management’s expectations
regarding the Company’s future financial performance and may not be
appropriate for other purposes. Furthermore, unless otherwise
stated, the forward-looking statements contained in this press
release are made as of the date of this press release, and we do
not undertake any obligation to update publicly or to revise any of
the included forward-looking statements, whether as a result of new
information, future events, or otherwise unless required by
applicable legislation or regulation. The forward-looking
statements contained in this press release are expressly qualified
by this cautionary statement.
About GildanGildan is a leading
manufacturer of everyday basic apparel which markets its products
in North America, Europe, Asia-Pacific, and Latin America, under a
diversified portfolio of Company-owned brands, including Gildan®,
American Apparel®, Comfort Colors®, Gildan® Hammer™, Prim &
Preux™, Gold Toe®, Anvil®, Alstyle®, Secret®, Silks®, Kushyfoot®,
Secret Silky®, Therapy Plus™, Peds® and MediPeds®, and under the
Under Armour® brand through a sock licensing agreement providing
exclusive distribution rights in the United States and Canada. Our
product offering includes activewear, underwear, socks, hosiery,
and legwear products sold to a broad range of customers, including
wholesale distributors, screenprinters or embellishers, as well as
to retailers that sell to consumers through their physical stores
and/or e-commerce platforms, and to global lifestyle brand
companies. In addition, we sell directly to consumers through our
own direct-to-consumer platforms.
Gildan owns and operates vertically-integrated,
large-scale manufacturing facilities which are primarily located in
Central America, the Caribbean Basin, North America, and
Bangladesh. With approximately 54,000 employees worldwide Gildan
operates with a strong commitment to industry-leading labour and
environmental practices throughout its supply chain in accordance
with its comprehensive Genuine Responsibility™ program embedded in
the Company's long-term business strategy. More information about
the Company and its corporate citizenship practices and initiatives
can be found at www.gildancorp.com and
www.genuineresponsibility.com, respectively.
Investor inquiries:Sophie ArgiriouVice President,
Investor Communications(514) 343-8815sargiriou@gildan.com |
Media inquiries:Genevieve GosselinDirector,
Corporate Marketing and Communications(514)
343-8814ggosselin@gildan.com |
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