Canadian apparel maker Gildan Activewear has lowered its guidance for the first quarter of 2019 after warning it expects to incur a US$19-$23m charge related to the wind-down of one of its distributor customers, Heritage Sportswear.
In a statement, Gildan said it expects to take the charge related to a trade receivable impairment from Heritage, a US distributor customer within the imprintables channel that bought undecorated “blank” garments from Gildan to on to screenprinters and decorators.
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Gildan said the charge will reduce adjusted diluted EPS for the first quarter of 2019 to a range of $0.14 to $0.16, compared to its previous guidance of $0.24 to $0.26. The company’s sales forecast for the first quarter remains unchanged, as does its initial full-year sales projection for 2019.
Gildan added it expects its business formerly carried out by Heritage – which represented Gildan net sales of about $60m in 2018 – will be mostly absorbed by other wholesale distributors within the channel.
The apparel maker is reaffirming its 2019 full year guidance of projected sales growth in the mid-single digit range and is updating its full-year GAAP and adjusted diluted EPS guidance to reflect the anticipated charge related to Heritage. As a result, it is now projecting GAAP diluted EPS to be in the range of $1.80 to $1.90 compared to its previous guidance of GAAP diluted EPS of $1.90 to $2.00, and adjusted diluted EPS for 2019 to be in the range of $1.90 to $2.00 compared to its previous guidance of adjusted diluted EPS of $2.00 to $2.10.
Last month, Gildan hailed a “strong finish” to a year that saw it navigate unanticipated weather impacts and supply chain disruptions, as both earnings and revenue rose in the fourth quarter.
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