Canadian underwear, socks and T-shirt manufacturer Gildan Activewear yesterday announced its financial results for the first quarter of its 2010 fiscal year. The company reconfirmed its outlook for the year after recording a five-fold lift in first quarter profits helped by strong activewear sales and more favourable manufacturing and energy costs.

Gildan reported net earnings of U.S. $28.0 million and diluted EPS of U.S. $0.23 for its first fiscal quarter ended January 3, 2010, after reflecting a restructuring charge of U.S. $0.01 per share related to the consolidation of its U.S. distribution activities announced on December 10, 2009.

Net earnings were U.S. $4.4 million in the first quarter of fiscal 2009. Before reflecting restructuring charges in both fiscal years, adjusted net earnings amounted to U.S. $29.2 million in the first quarter of fiscal 2010, compared to U.S. $5.3 million in the first quarter of fiscal 2009.

Strong growth in activewear

The significant increase in net earnings in the first quarter compared to last year was the company said, due to strong growth in activewear unit sales volumes, more favourable manufacturing, cotton and energy costs, and more favourable activewear product-mix, partially offset by lower activewear selling prices.

EPS for the first quarter was slightly higher than the company's internal forecast as the impact of lower than anticipated promotional activity in the U.S. wholesale distributor channel and more favourable product-mix more than offset the impact of the timing of replenishment of the U.S. wholesale distributor channel, which is benefitting activewear shipments early in the second quarter of the fiscal year.

Net sales up 19.8%

Net sales in the first quarter of fiscal 2010 amounted to U.S. $220.4 million, up 19.8% from U.S. $184.0 million in the first quarter of last year. Sales of activewear and underwear were U.S. $152.9 million, up 32.0% from U.S. $115.8 million last year, and sales of socks were U.S. $67.5 million, compared to U.S. $68.2 million last year. The first quarter is seasonally the lowest quarter in the fiscal year for Gildan's activewear sales.

The strong recovery in sales of activewear and underwear compared to fiscal 2009 primarily reflected a 31.5% increase in activewear unit sales volumes, due to higher market share in the U.S. wholesale distributor channel, lower seasonal inventory destocking by distributors than in the first quarter of fiscal 2009, and increased penetration of international and other screen print markets.

 Gildan said these positive factors, together with more favourable activewear product-mix, were partially offset by an 8.9% decline in overall industry unit shipments from U.S. distributors to U.S. screen printers, and an approximate 3.5% reduction in net selling prices for activewear, compared to the first quarter of fiscal 2009.