Despite lower demand, Gildan Activewear Inc.’s fourth-quarter profits almost doubled because of reduced costs and the absence of large charges.
This story first appeared in the December 11, 2009 issue of WWD. Subscribe Today.
For the three months ended Oct. 4, the Montreal-based basics supplier said Thursday that profits climbed 94.5 percent to $42.4 million, or 35 cents a diluted share. In the comparable period, Gildan’s net income was $21.8 million, or 18 cents a share.
The year-ago figure included an income tax charge of 22 cents a share and the 2009 net included a charge of 7 cents a share related to inventory. Barring that item, Gildan’s fourth-quarter profits totaled 42 cents a share in 2009, better than the 33 cents analysts polled by Yahoo Finance had expected, on average.
Sales in the fourth quarter fell 7.1 percent to $301.7 million from $324.7 million. The company reported a 4.8 percent decline in activewear revenues in the three months, the result of lower unit prices tied to weak economic conditions. Sock sales fell 15.1 percent on the discontinuance of unprofitable programs.
Shares of Gildan advanced $2.15, or 10.7 percent, in trading Thursday to close at $22.19, hitting a new 52-week high of $22.69 in intraday trading.
“Compared with last year, the benefits of increased manufacturing efficiencies, more favorable product mix and lower selling general and administrative expenses offset the negative impact of lower activewear selling prices, lower unit sales and production downtime taken in the fourth quarter of fiscal 2009,” Laurence Sellyn, executive vice president and chief financial and administrative officer, said on a conference call.
Gildan’s cost of cotton used in the fourth quarter was 61 cents a pound, which was lower than the year-ago quarter but higher than competitors because the firm locked into its 2009 supply before price declines that began in late 2008, Sellyn said. Gildan reduced selling, general and administrative expenses by $2.6 million in the quarter. As a percentage of sales, however, SG&A stayed flat at 11.3 percent.
For fiscal 2009, Gildan’s profits fell 34.9 percent to $95.3 million, or 79 cents a share, from $146.4 million, or $1.20 a share, in 2008. Sales slid 16.9 percent to $1.04 billion from $1.25 billion in 2008.