• Q2 net income slipped 7.1% to US$114.4m from $123.2m
  • Sales grew 6% to $715m with rises in printwear and branded apparel
  • Alstyle and Peds Legwear integration efforts "well underway"
Gildans gross margin rate dropped 100 basis points year-on-year in the quarter to 30.4%

Gildan's gross margin rate dropped 100 basis points year-on-year in the quarter to 30.4%

Apparel maker Gildan Activewear has lowered its guidance for the full year after booking a decline in third quarter profit, hampered by weak traffic and unseasonably warm weather in its branded apparel sales.

For the three months to 2 October, the Montreal, Canada-based company said net income slipped 7.1% to US$114.4m from $123.2m a year earlier. Excluding restructuring and acquisition-related costs, its adjusted net earnings were $116.4m.

Net sales, meanwhile, grew 6% to $715m from $674.5m in the year ago period, reflecting a 4.9% increase in Printwear sales and an 8.2% rise in branded apparel sales.

Results in the Printwear segment were in-line with the company's expectations, while continued softness in the retail environment, including weak traffic trends and unseasonably warm weather, contributed to slightly lower than expected branded apparel sales, it said.

While market conditions in retail continued to be challenging, the company said it was pleased with the sales performance of its Gildan branded products during the quarter, with Gildan branded underwear in particular driving double-digit point of sales and revenue growth.

During the third-quarter the company made "solid progress" on the integration of the operations of T-shirt maker Alstyle Apparel, which is starting to benefit from efficiencies in textile and sewing production costs, and higher production levels.

In addition, Gildan added that integration efforts related to the Peds acquisition in the sales and marketing and supply chain areas are "well underway." The company bought Peds Legwear for $55m earlier this year.

Gildan Activewear to acquire Peds Legwear for $55m

Meanwhile, gross margin in the third-quarter was 30.4%, down 100 basis points compared to the same period last year, as the benefit of lower raw material and other input costs, and manufacturing cost savings related to the company's capital investments, was more than offset by lower net selling prices, unfavourable product-mix and foreign currency exchange. 

Looking ahead to the full year, Gildan lowered the top end of its adjusted earnings guidance to a range of $1.48-$1.50 per share, compared to its previous projection of $1.50-$1.55. Sales are lowered to $2.6bn from $2.65bn, while the company continues to project printwear sales of approximately $1.65bn. Additionally, branded apparel sales have also been lowered to $960m compared to prior guidance of $1bn.

The company adds its updated 2016 full year guidance primarily reflects the lower than anticipated results in the third-quarter and tempered branded apparel sales expectations in the fourth quarter, in light of current retail market conditions.