* Gildan reports bleak results, does not offer forecast
* Brokerages downgrade stock
* Shares drop 25.9 percent on TSX (Updates share price. In U.S. dollars unless noted)
TORONTO, Feb 12 (Reuters) - Gildan Activewear’s (GIL.TO) (GIL.N) shares dived more than 25 percent on Thursday and analysts downgraded the T-shirt maker after it posted an 85 percent fall in quarterly profit and said it would not provide financial forecasts for 2009.
Shares of the Montreal-based company were down 25.9 percent at C$9.30 shortly after the open on the Toronto Stock Exchange. In New York, the shares were down 26.1 percent at $7.54.
RBC Capital Markets downgraded the stock to “sector perform” from “outperform,” saying it sees no real positive catalyst in the short term.
“With reorders down (wholesalers and retailers de-stocking) and Gildan willing to take shutdown time versus build for inventory, we expect gross margin will be impacted,” analyst Sara O‘Brien said in a report.
On Wednesday, Montreal-based Gildan, which sells blank T-shirts, sport shirts and fleece to wholesale distributors to be decorated by screen printers, said continuing weak end-use demand and tighter credit markets may affect the financial condition and liquidity of wholesale customers.
“We believe Gildan is cautious regarding financial health in the wholesale distribution channel, and this can impact both Gildan’s bad debt write-offs and inventory reorder in the channel in the event of some distributors collapsing,” O‘Brien said.
Separately, brokerage Raymond James downgraded Gildan stock to “outperform” from “strong buy”, and cut its target for the share price by $3 to $12.
However, both brokerages said they were confident in the long-term prospects for Gildan.
Raymond James said it expects the company to achieve more than $2.00 in normalized earnings per share within the next few years and that the current stock price represents an attractive entry point for long-term investors.
$1=$1.25 Canadian Reporting by Scott Anderson in Toronto and Mary Meyase in Bangalore; Editing by Peter Galloway