According to the company, the growth in the net earnings was due to lower cotton costs, higher unit sales volumes, more favourable branded product-mix in Branded Apparel, increased supply chain and manufacturing efficiencies, and lower financial expenses, partially offset by lower net selling prices for Printwear.

The lower Printwear sales volumes are seen as a result of the production capacity constraints which limited the company’s ability to fully capitalise on seasonal peak demand for activewear during the third quarter. On 31 July the company announced selling price reductions for certain printwear products, and applied the benefit of these selling price reductions to distributor inventories.

Net sales

Net sales in the third quarter were slightly below the company’s expectations of approximately US $630 million and amounted to US $614.3 million, up 2.3%, compared to the same period last year.

Net sales for the Printwear segment amounted to US $433 million, down 3.6%. In spite of capacity constraints, unit sales volumes increased by 4.1%. However, the positive impact on net sales of higher unit sales volumes was more than offset by the reduction in net selling prices compared to last year.

Net sales for Branded Apparel increased by 20.1% compared to the third quarter of last year, which, according to the company, was due to the impact of new Gildan branded underwear and activewear programmes for retail customers, increased sales to global athletic and lifestyle brands, and slightly higher sock sales compared to the third quarter of last year.

Gildan branded programmes

During the third quarter of fiscal 2013, the company began shipment of its first major Gildan branded underwear programme to a national mass-market retailer. Initial retailer sales of the Gildan underwear products are very strong. In addition, men’s Gold Toe branded sock programmes also achieved increased market share penetration. The new Gold Toe G underwear and activewear programmes targeting young consumers are achieving good penetration.

Although the company is primarily focused on the development of its Gildan and Gold Toe brands, it has also secured important new programmes for fiscal 2014 as a supply chain partner for global athletic and lifestyle brands. The acquisition of New Buffalo Shirt Factory this June provides Gildan Activewear  with screenprinting and decorating capabilities which will position it to further enhance its sourcing solutions for these brands.

The company achieved consolidated gross margins of 31.5% in the third quarter, compared to 23.9% of last year. This growth, according to the company, reflected the impact of lower-cost cotton, increased supply chain and manufacturing efficiencies due primarily to the ramp-up of Rio Nance V and cost reduction projects including the biomass project at Rio Nance.

Outlook

Gildan Activewear is continuing to implement all of the capital expenditure projects for capacity expansion, new product technology and manufacturing cost reductions which it has previously announced, including completion of the ramp-up of Rio Nance V, refurbishment of Rio Nance I and the upgrading of equipment at the former Anvil facility, significant investments in vertical integration in yarn-spinning, further biomass projects and the expansion of distribution capacity.

The company is currently analysing options for the further expansion of vertically-integrated textile production capacity, in order to support its planned sales growth. The company is projecting full year capital expenditures in fiscal 2013 of approximately US $175 million, compared to its prior forecast of approximately US $200 million. Free cash flow for fiscal 2013 is projected to be approximately US $225 million.

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