• Q1 net earnings rose 12.9% to $63.2m to $56.0m
  • Net sales slipped 6.7% to US$593.3m 
  • To acquire Ennis Inc's apparel division for US$110m

Canadian apparel maker Gildan Activewear has posted a 12.9% jump in first-quarter net profit after manufacturing cost savings helped offset lower sales.  

The business, which makes basic apparel such as T-shirts, fleece, sport shirts, underwear, socks, hosiery and shapewear, also reconfirmed its full-year guidance – and separately revealed plans to expand its manufacturing presence into Mexico with the acquisition of Ennis Inc's apparel division for US$110m.

The Montreal-based firm posted a net profit of US$63.2m in the three months to 5 April. Adjusted to exclude after-tax restructuring and acquisition-related costs of $5.8m, income was US$69m, up from US$57.5m a year ago.

Revenues, however, slipped 6.7% to US$593.3m, reflecting a 9.1% fall in sales in the Printwear segment to US$392.1m and a 1.8% drop in Branded Apparel to US$201.2m.

The company blamed the decline on lower inventory replenishment by printwear distributors and its decision to exit certain non-core retailer private label branded apparel programmes. It also said weakness in department stores and national chains weighed on sales of its Gold Toe sock brand.

In addition, net sales were hit by a $7m impact resulting from foreign currency exchange due to a stronger US dollar compared to the same period last year.

However, operating margin expanded by more than 300 basis points, and consolidated gross margins rose by 440 basis points on the previous quarter to 26.4% – reflecting the manufacturing cost savings generated by Gildan's continuous investment in vertical manufacturing, including its yarn spinning initiative, together with lower raw material and other input costs.

Looking ahead, the company reconfirmed its guidance for 2016, expecting to post US$1.50 to US$1.60 per share in adjusted earnings on more than US$2.6bn of sales – including branded apparel exceeding US$1bn.