Shares of Gildan Activewear Inc. dropped 35 percent Thursday after the firm said fourth-quarter profits were almost cut in half and provided gloomy assessments for earnings, revenues and margins in the new year.

This story first appeared in the December 12, 2008 issue of WWD.  Subscribe Today.

In the three months ended Oct. 5, net income fell 47.6 percent to $21.4 million, or 18 cents a diluted share, from $40.9 million, or 34 cents, in last year’s quarter. Excluding a one-time income tax charge reflecting a final agreement with the Canada Revenue Agency after an audit, EPS was 41 cents, 2 cents lower than analysts expected.

Boosted by its acquisition of hosiery manufacturer V.I. Prewett & Son Inc., a rise of 10.2 percent in activewear unit selling prices and an 8.5 percent increase in unit volume for activewear and underwear, quarterly sales were up 27.4 percent to $324.7 million from $254.9 million. Gross margin slid to 32.1 percent of sales from 32.2 percent.

Investors, however, were more alarmed by the firm’s guidance and outlook for fiscal 2009 than by the final results of 2008. The company initiated earnings guidance for the year of between $1.10 and $1.30 a share, excluding restructuring charges, well below the $1.86 consensus estimate. Analysts had expected first-quarter EPS of 27 cents, but Gildan said it now expected to finish the period with EPS between 0 cents and 5 cents. Although Gildan continued to build market share in October, its unit shipments to distributors fell.

“The company’s current planning scenario for fiscal 2009 assumes that overall industry unit shipments in the U.S. screen-print channel will decline by approximately 10 percent compared with fiscal 2008,” the firm said, “and that the ensuing unfavorable industry supply-demand balance will result in significant discounting of industry selling prices, which has already started to occur.”

Gildan’s shares closed at $9.19, down from $14.17 in New York Stock Exchange trading Thursday. Although based in Montreal, Gildan reports its results in U.S. dollars.

Capital expenditures for 2009 are now projected at $115 million versus a previous estimate of $160 million.