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Gildan Activewear's CEO Discusses Q2 2011 Results - Earnings Call Transcript

Stocks in this article: GIL

Although we were able to sequentially increase our market share to approximately 63% compared to approximately 58% in the first quarter according to the CREST report. Replenishment of Gildan inventories in the distributor channel was lower than in the second quarter of fiscal 2010. At the end of the quarter, our share of distributor inventory was 52% compared to our market share of 63%, and we currently continue to have a significant open order position.

We continue to achieve good growth in international and other screenprint market despite of our low inventory levels and capacity constraints. Sales of socks were down by 24% due to lower retailer inventory replenishment, the discontinuation of a large uneconomic soft program in the third quarter of fiscal 2010 and a lower valued more basic product mix.

In the third quarter last year, we completed the rationalization of unprofitable sock programs that we had acquired from Kentucky Derby and Prewett and are now positioned to build from our base of private label and branded Gildan sock programs. Our new Gildan branded sock programs are selling through strongly to consumers.

We expect to have a strong back-to-school season this year and to be able to service demand from our retail customers.

Sales of activewear and underwear to retailers increased by over 50% compared to the second quarter of fiscal 2010. Selling price increases averaging approximately 5% were implemented in the quarter in the retail market and further increases are being implemented in the second half of the fiscal year.

Gross margins were slightly higher than the second quarter of last year at 28.1% versus 27.8% a year ago. The increase in activewear selling prices offset the impact of higher cotton, energy and other purchase input costs, start-up manufacturing inefficiencies, which impacted margins for socks and underwear and more favorable activewear product mix due to a higher proportion of basic T-shirts and a higher proportion of sales of the regulars.

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