August 13, 2009 / 11:14 AM / 9 years ago

UPDATE 2-Gildan profit drops, shares up on rosy outlook

* Adjusted EPS $0.32 vs forecast $0.29

* Sales drop 19.2 pct to $307.8 million

* Gross margins 24.4 pct vs 26.6 pct

* Shares up 9.5 percent at C$20.17 (Adds background, analyst comments; in U.S. dollars unless noted)

By Scott Anderson

TORONTO, Aug 13 (Reuters) - T-shirt maker Gildan Activewear Inc (GIL.TO) reported a 24 percent decline in quarterly profit on Thursday, hurt by a drop in demand and lower gross margins.

But its shares climbed nearly 10 percent as investors were heartened by company comments for a better outlook in 2010.

The Montreal-based company, which manufactures T-shirts, socks and underwear, said during a conference call with analysts that it saw improved sales next year as it secures new customers for bulk purchases, and it sees lower commodity prices.

“The tone on the call suggested that they were very confident that a new, large retail program would add a significant contribution to 2010,” said Candice Williams, a retail analyst at Genuity Capital Markets in Vancouver, British Columbia.

“We can’t quantify it, but up is up and big is big.”

Gildan, whose market share for all its products combined sits at about 57 percent, aims to boost that to above 60 percent in the months ahead.

The company plans to do this by pushing into new territories including the screenprint market in Europe, Mexico and the Asia-Pacific region.

The company’s shares, which have fallen 32.7 percent in the past year, were up 9.5 percent at C$20.17 on the Toronto Stock Exchange.

Earlier on Thursday, the company said it earned $41.5 million, or 34 cents a share, in its third quarter, down from $54.5 million, or 45 cents a share, a year earlier.

Excluding restructuring charges, the company earned $44.9 million, or 37 cents a share, compared with $56.8 million, or 47 cents per share, a year earlier.

Adjusted EPS, which excludes income tax recoveries, was 32 cents a share. Analysts, on average, had expected an adjusted profit of 29 cents a share, according to Reuters Estimates.

Sales fell 19.2 percent to $307.8 million, with sales in activewear and underwear down 15.6 percent and sales of socks down 33.6 percent.

The average Reuters estimate was $335.8 million.

Gross margins for the quarter were 24.4 percent, compared with 26.6 percent a year earlier.

$1=$1.09 Canadian Reporting by Scott Anderson; editing by Rob Wilson

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