Canada's Gildan Activewear's net sales up 11%; gross margin declines

The rise in net sales was mainly due to a 17 per cent increase in activewear sales, which generated $2.76 billion, while hosiery and underwear sales declined by 14 per cent to $478 million due to weaker demand in retail, the company said in a press release.

However, Gildan Activewear's gross margin declined to 30.6 per cent compared to 32.2 per cent in the previous year, reflecting higher raw material and manufacturing costs. Meanwhile, the company's selling, general, and administrative expenses increased by $10 million due to inflation but were offset by lower variable compensation expenses and cost containment measures.

Gildan Activewear generated operating income of $603 million or 18.6 per cent of sales, down from $652 million or 22.3 per cent of sales in the previous year. The company's GAAP net earnings for 2022 came in at $542 million, down 11 per cent compared to last year, while adjusted net earnings were up 7 per cent to $575 million.

In the fourth quarter of FY22, Gildan Activewear's net sales of $720 million were down 8 per cent compared to the same period last year, mainly due to lower activewear volumes and weak point of sales (POS) in the hosiery and underwear category. Gross margin was up 340 basis points to 32.6 per cent, mainly due to additional hurricane insurance recoveries recognized in the fourth quarter of 2022. However, adjusted gross margin was down 150 basis points due to higher raw material and manufacturing costs.

Despite the challenges faced by the company, Gildan Activewear's adjusted diluted EPS for FY22 increased by 14 per cent to $3.11 compared to $2.72 last year, reflecting the benefit of higher net selling prices and favourable product-mix.

For FY23, the company expects low single-digit revenue growth and an adjusted operating margin within its annual target range of 18 per cent to 20 per cent. However, the company anticipates margin pressure in the first quarter that may drive them 200 to 300 basis points below the low end of the target range. Finally, adjusted diluted EPS for FY23 is expected to be in line with 2022.

Fibre2Fashion News Desk (DP)