Gildan Activewear Inc. is acquiring Peds Legwear Inc. for $55 million.
Montreal-based Peds Legwear makes fashion socks and hosiery, as well as foot apparel products for medical needs. While the company is based in Canada, the product is made and mostly sold in the U.S. Peds generates annual sales of $80 million and the acquisition is expected to close at the end of August. Gildan believes that the legwear company will be a good fit with the branded apparel.
Separately, Gildan delivered its second-quarter results that missed analyst expectations and the company lowered expectations for the year.
Net income for the quarter fell to $94.7 million, or 40 cents a diluted share, down from $99.4 million, or 41 cents, a year ago. Adjusted earnings per share totaled 41 cents and was 1 cent below the 42 cents analysts projected.
Net sales for the three months ending July 3 decreased 3.5 percent to $688.9 million from $714.2 million a year earlier. Sales were affected by distributor destocking of Printwear, the exit of certain private-label brands in retail and currency headwinds. Printwear sales fell by 1.4 percent and branded apparel fell by 7.9 percent. Branded apparel was hurt by sluggish traffic trends and continued weakness in department store and national chains.
Gross margins improved in the second quarter, rising 27.4 percent versus last year’s second quarter. The bonus came from lower raw material costs and manufacturing cost savings that offset the lower net selling prices.
Gildan lowered its full-year projections for adjusted diluted earnings per share to a range of $1.50-$1.55 from its previous range of $1.50-$1.60. The projected earnings have been adjusted to a range of $545-$555 million from $545-$570 million.
Consolidated net sales are forecast to be $2.65 billion, reflecting a slight increase in printwear sales. The previous guidance was for consolidated net sales of $2.60 billion. The acquisition of Alstyle, which just recently closed and Peds are projected to contribute roughly $115 million in sales for 2016.
Gildan stock dropped over 5 percent to $29.27 on Wednesday and has declined by 10 percent over the past year.