Gildan Activewear Inc. posted a 55.9 percent increase in third-quarter profit but delivered a subdued outlook for the remainder of the year.

Increased market share in the U.S. and a recovery in demand helped the Montreal-based vendor post net earnings of $64.7 million, or 53 cents a diluted share, for the period ended July 4. This compared with income of $41.5 million, or 34 cents, in the year-ago quarter. Before restructuring charges, the company said its net earnings amounted to $66.4 million, or 54 cents a share. Revenue rose 28.4 percent to $395.3 million, from $307.8 million. Analysts anticipated EPS of 49 cents on sales of $392.5 million, Yahoo said.

Favorable activewear net selling prices and product mix, together with slightly lower cotton costs, helped gross margin improve to 27.1 percent of sales versus a year-ago level of 24.4 percent.

Regardless of the company’s smooth ride last quarter, it forecasted a few potholes in the road ahead.

“Due to our low level of inventories, we ended the quarter with a significant backlog of open orders,” executive vice president and chief financial and administrative officer Laurence Sellyn said on the company conference call. “The tight supply-demand balance in the industry, combined with inflation in cotton, spun yarn and other purchase costs inputs such as polyester, chemicals and dyestuff, resulted in low promotional discounting.”

Even though Sellyn projected sales of $1.3 billion for the year, he said “shipments in the fourth quarter are assumed to be constrained by the current low level of finished goods inventories.”

As a result, Gildan said it would be using some of its planned production in fiscal 2011 “to rebuild activewear finished goods inventories back to more optimal levels to service demand,” but assured analysts and investors that new opportunities set in place for 2011 would help the company grow “significantly.”

For the nine months, Gildan’s net income nearly tripled to $141.5 million, or $1.16 a diluted share, from year-ago income of $52.9 million, 44 cents a share. Revenue expanded 28 percent to $942.5 million from $736.6 million.

Analysts are looking for full-year EPS of $1.60 on sales of $1.32 billion.



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