December 11, 2008 / 12:24 PM / 10 years ago

UPDATE 2-Gildan's profit halved, shares drop on outlook

* Q4 adjusted EPS misses estimates

* Q4 net profit nearly halves

* Sees Q1, full-year 2009 profit below estimates

* Shares fall 32.1 percent (Adds details. Updates share price. In U.S. dollars unless noted)

TORONTO, Dec 11 (Reuters) - Gildan Activewear’s (GIL.TO) shares dived on Thursday as its quarterly profit nearly halved, and the T-shirt maker warned of a bleak start to the new year.

The shares were off C$5.70 at C$12.05 on the Toronto Stock Exchange. Rival Hanesbrands Inc (HBI.N) dropped 21.4 percent in New York to $11.36.

U.S. demand for the company’s T-shirts, used for logos and other designs, during the first two months of the first quarter has been extremely weak, mirroring the rapid economic and financial market downturn, resulting in a dramatic curtailment of consumer and corporate spending, the company said.

Montreal-based Gildan, which sells T-shirts, sports shirts and fleeces, reported net earnings of $21.4 million, or 18 cents a share, down from $40.9 million, or 34 cents a share a year earlier.

The company also took a one-time income tax charge of $26.9 million, or 22 cents a share, as part of its settlement of a Canadian tax audit.

Sales rose 27 percent to $324.7 million, helped by Gildan’s acquisition of Prewett.

Analysts were expecting an average of 44 cents a share profit and revenue of $340.6 million.

Gildan also revised its first-quarter and 2009 fiscal outlook, noting weak market conditions. It sees first-quarter fiscal 2009 adjusted earnings per share of nil to 5 cents, compared with 23 cents in the first quarter of fiscal 2008.

“I think their guidance historically has been optimistic,” said Paul Hand, managing director at RBC Capital Markets. “This is a big change in guidance for Gildan so I think it’s caught a lot of people off guard.”

It also set a wide range for fiscal 2009 earnings of between $1.10 and $1.30 a share.

“While the first quarter is seasonally the lowest sales quarter of the fiscal year and as such may not be indicative of full year trends, the company is currently planning for the balance of fiscal 2009 on the basis of assuming a continuing negative outlook for industry demand in the U.S. screenprint channel throughout the year” Gildan said in a release.

In a separate statement, Gildan said it agreed to a one-time tax assessment related to the restructuring of its international wholesale business and the related transfer of assets to its Barbados subsidiary in fiscal 1999. (Reporting by Scott Anderson, Jennifer Kwan and Dhanya Skariachan) ($1=$1.23 Canadian) (Editing by Jeffrey Jones)

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