Gildan Activewear ( NYSE: GIL ) shares edged lower on Wednesday after the company missed on top and bottom lines for Q4 and forecast further margin compression amid elevated inventories.
The Canadian apparel manufacturer reported $0.65 in earnings per share, missing consensus estimates by $0.03, while an 8.2% decline in revenue from the prior year quarter to $720M came in $41.2M lighter than anticipated. Management noted that quarterly sales were impacted in part by the “absence of inventory replenishment versus a year ago, partly offset by higher net selling prices and the favorable impact of mix.”
“I am extremely proud of our team’s record performance in 2022 with revenue up 11% over 2021 and strong margin delivery in every fiscal quarter,” CEO Glenn J. Chamandy commented. “And despite near term headwinds related to the economic environment, which impacted our performance in the fourth quarter and which may persist through the first part of 2023, we remain excited about the Gildan Sustainable Growth strategy, as well as our strong competitive positioning and ability to support our customers, as we work towards delivering on our long-term growth aspirations”.
Inventories grew to $1.23B at the start of 2023, up from $774.4M at the start of 2022. Given the bloated metric, management expects “increased margin pressure in early 2023” as promotions are forwarded to control merchandise levels. Higher raw material and input costs are also expected to squeeze margins in 2023.
“We are well positioned to continue benefiting from favorable industry trends that are playing out such as the casualization of apparel, the interest for private label products, the impact of the creator economy and ongoing developments in digital printing, as well as the appeal of nearshoring and sustainable practices, all of which are creating long-term growth opportunities for Gildan given our competitive advantages,” the company said. “Notwithstanding these strong fundamentals, in the first part of 2023 we expect continued headwinds tied to the demand environment and to strong comparative periods, particularly as we cycle post pandemic inventory replenishment in the first quarter.”
The apparel manufacturer forecast low single-digit revenue growth and adjusted diluted EPS essentially flat year over year for 2023. Analysts had expected EPS to step back approximately 2.8% year over year while revenue growth was expected to be flat.
Shares of the Montreal-based apparel company slid 4.06% shortly before Wednesday's market open.
Read more on the company’s dividend hike announced on Wednesday .
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Gildan stock slips as inventory issues persist