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The Montreal, Canada-based company reported third-quarter net earnings of $41.5 million or $0.34 per share, lower than net earnings of $54.5 million or $0.45 per share reported in the same period of fiscal 2008. The previous year's results have been recast.
Results in both years included after-tax restructuring charges, totalling $3.4 million and $2.3 million, respectively. Adjusted for restructuring charges and income tax recovery, quarterly net earnings dropped to $44.9 million or $0.37 per share from $56.8 million or $0.47 per share in the previous year.
On average, 13 analysts polled by Thomson Reuters expected the company to report earnings of $0.29 per share for the quarter. Analysts' estimates typically exclude special items.
The company attributed the reduction in net earnings and earnings per share before restructuring charges to lower unit sales volumes, as a result of weak economic conditions, and lower gross margins, primarily as a result of unfavourable product-mix and lower activewear net selling prices.
Net sales for the third quarter dropped to $307.8 million from $380.8 million in the third quarter of last year. Analysts expected revenues of $337.03 million for the quarter.
The third quarter of fiscal 2008 included an extra week to align the company's 52-week reporting cycle with the calendar year.
Sales of activewear and underwear were $258.1 million, down from $305.9 million last year. Sales of socks dropped to $49.7 million from $74.9 million in the third quarter of fiscal 2008. According to the company, the drop in sales of activewear and underwear was due to more unfavourable product-mix, primarily as a result of a lower proportion of sales of higher-valued fleece and long-sleeve T-shirts, a 2.6% decline in net selling prices for activewear, due to increased promotional activity, the impact of the stronger U.S. dollar on Canadian and international sales, and a 3.5% decline in unit sales volumes.
The reduction in unit sales volumes mainly stemmed from a 16.6% decline in overall industry shipments to screen-printers in the U.S. wholesale distributor channel, as well as the non-recurrence of the extra week of sales included in the third quarter of fiscal 2008.
Gross margin dropped to 24.4% to 26.6%, while operating margin dropped to 11.2% from 15.6%.
For the first three quarters of the year, net earnings plunged to $52.9 million or $0.44 per share from $124.5 million or $1.02 per share in the previous year. Net sales declined to $736.6 million from $925.0 million in the prior year.
The company also announced that the Canada Revenue Agency or CRA had completed its audit of the company's tax returns for 2004-2006, with no significant adjustments to the returns as filed. The CRA has continued to accept Gildan's transfer pricing methodology for the years subject to audit.
In May, the company reported a sharp decline in second-quarter profit, hurt mainly by lower unit sales volumes, consumption of higher-cost inventories produced in previous quarters and unfavorable product mix. Net income fell to $7.1 million, or $0.06 per share, from $42.1 million, or $0.35 per share, in the year-ago quarter. Quarterly net sales decreased 16.7% to $244.8 million from $293.8 million a year earlier.
GIL closed Wednesday's regular trade at $16.93, down from the previous close of $17.32, on 1.24 million shares.
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