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Gildan Activewear's CEO Discusses Q3 2011 Results - Earnings Call Transcript

The cadence of industry demand appear to deteriorate in successive months during the third quarter with demand in June being down by 12%. However, it should be noted that June of 2010 was a very strong month which benefited from pre-buying in advance of a selling price increase, which was announced 2 months in advance and which was not applicable to back orders, so that the true magnitude of the decline in June is overstated.

We believe that the decline in screenprint market demand in the third quarter is due to a combination of factors, including overall uncertainty about macro economic conditions, the possible impact and demand elasticity of successive selling price increases and delay in the timing of shipments from distributors to screenprinters, as screenprinters seek to benefit from declining cotton costs.

In addition, Gildan shipments in the third quarter were constrained by lack of capacity and low inventory availability, which limited our ability to fully service distributor demand and resulted in a slight decline in the market share from 62% to 61%.

Sales revenues in international and other screenprint markets in the quarter increased by approximately 45% due to higher selling prices and currency fluctuations combined with an approximate 12.5% increase in unit sales volumes, which was achieved in spite of capacity constraints.

Shipments of activewear and underwear to retailers grew by in excess of 80%. Sales of socks increased by 139%. Although the increase in sock sales was primarily due to the impact of the Gold Toe acquisition, organic sock sales also increased. Excluding the acquisition impact, unit sales volumes of socks increased by approximately 15% over the third quarter last year, and we are also continuing to successfully implement increases in selling prices in socks and other retail products.

The organic growth in unit sales volumes in socks was primarily attributable to earlier timing of back-to-school shipments and to the more efficient operations in our new retail distribution center in Charleston, South Carolina.

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