Canadian T-shirt, fleece and sock maker Gildan Activewear Inc is to phase out its sock finishing operations in the US by the middle of next year, after its fourth quarter profit nearly halved and negative market conditions look set to hit its first quarter results.

The Montreal, Quebec-based manufacturer said as well as being hit by a one-time tax charge, higher cotton and energy costs and an unfavourable product-mix offset gains from higher selling prices, sales volumes and manufacturing efficiencies.

Economic conditions are also being blamed for the decision to shutter its US sock finishing operations by the end of June and consolidate operations in Honduras, in order to remain globally competitive.

Closing the plants in Hillsville, Virginia and Fort Payne, Alabama will result in the loss of around 430 jobs.

News of the closures came as Gildan said its net earnings for the three months to 5 October plunged 47.7% to US$21.4m, or US$0.18 per share, compared to $40.9m, or $0.34 per share, a year earlier.

Excluding a one-time income tax charge of US$26.9m, or US$0.22 per share, Gildan said its quarterly profit was $49.3m, or $0.41 per share.

Sales in the quarter rose 27.4% to $324.7m, up from $254.9m a year ago, helped by higher prices and sales volumes for its activewear and underwear products.

However, "inventory constraints" meant Gildan struggled to meet demand in the US screenprint channel and in Europe.

Quarterly gross margins of 32.1% were essentially flat with last year, while the acquisition of sock maker VI Prewett & Son for $125m at the end of last year, coupled with higher distribution costs, pushed up selling, general and administrative expenses to $39.1m, or 12.1% of sales.

For its full year, Gildan's net earnings were up 11.2% to $144.6m, or $1.19 per share, from $130.0m, or $1.07 per share, a year earlier.

Sales for fiscal 2008 rose 29.6% to $1,249.7m from $964.4m.

In its outlook, the firm said it expects "current negative market conditions" to significantly impact its results in the first quarter of fiscal 2009.

But it also sees opportunities to grow in the US screenprint channel, in international markets, and in the US mass-market retail channel - helped by its large-scale, vertically-integrated, strategically-located manufacturing facilities.

As a result, Gildan expects first quarter earnings per share of $0.00- $0.05, compared with $0.23 per share a year earlier.

It also sees full-year earnings per share in the range of $1.10- $1.30 before restructuring charges.

Capital expenditures next year will also be cut to $115m, down from earlier estimates of $160m.

This will include expansion of its Dominican Republic textile facility and its Rio Nance I textile operations in Honduras to increase annual production capacity by 7-8m dozens.