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Gildan reports after the close today and looks poised for another beat with upside likely to continue over the next 1-2 quarters. Interestingly, this synchs fairly well with HBI. Though they are both perceived to be fairly similar from a business standpoint, their earnings trajectories over the past 3 years have been on different paths. For the next 2 quarters, they are both setting up to post solid results, but sustained intermediate-term outperformance will require the consumer to show up 3 quarters out as an offset to elevated commodity prices. As a reminder, GIL is far more exposed to cotton than HBI (~33% of COGS for GIL vs. ~6% for HBI).

Here’s a detailed look at the puts and takes for the quarter along with management’s prior outlook for 2010 from their Q4 conference call:

GIL: Poised for Another Good Quarter - GIL Q1Table2 2 10

GIL: Poised for Another Good Quarter - GIL Q1Table 2 10

 

 

F10 Outlook from 4Q Call:

Revs in excess of $1.2Bn (17%+)

  • Activewear unit growth ~25%
    • Will bring sales volume close to existing capacity
    • Assuming no industry growth
    • Continued penetration in Int'l mkts
    • Incl. new programs for underwear $70mm
      • mgmt commented could be conservative (is the minimum required sales for space they attained)
  • Sock unit growth ~5%
  • Approx. 5% decline in ASPs
  • Have several other programs in the hopper that could drive upside to topline

GMs: ~26% (impacted by promos & discounting)

  • cotton and energy costs for the first half of fiscal 2010 are expected to be materially lower than the first half of fiscal 2009 but are expected to increase in the second half of the fiscal year and to be higher than the second half of fiscal 2009

SG&A: ~11%-11.5% going forward (closer to 11.5% in F10)

CapEx ~$130mm (up from $45mm in F09)

  • Supporting retail strategy
  • Completion of Rio Nance 4 sock facility
  • Purchase of new office building in Barbados