Net sales for the fourth quarter ended December 29, 2019, were $658.7 mn, down 11.3 per cent mainly as a result of lower unit sales volumes and the negative impact of the $19 mn sales return allowance recorded in the fourth quarter. Before accounting for the sales return allowance, total net sales in the fourth quarter were essentially in line with expectations as the positive benefit on sales from lower than anticipated levels of U.S. distributor inventory de-stocking of imprintables was offset by the negative impact of weaker than expected market demand in retail, particularly in hosiery.
In activewear, Gildan generated sales of $483.5 mn in the fourth quarter, down $85.8 mn compared to the fourth quarter last year, due primarily to lower unit sales volumes stemming from the combined impact of lower POS from distributors to screenprinters and distributor inventory de-stocking, as well as the impact of the sales return allowance.
Sales in the hosiery and underwear category for the quarter totaled $175.1 mn, up $1.7 mn over the fourth quarter in 2018, as strong double-digit sales volume growth of underwear, which also drove more favourable product-mix, was largely offset by lower socks sales. The decline in sock sales during the quarter reflected overall weaker industry demand and stemmed mainly from declines in mass and other channels
Operating income for the fourth quarter of 2019 totaled $24.3 mn, or 3.7 per cent of sales, down from $78.2 mn, or 10.5 per cent of sales in the fourth quarter of 2018. The $16.0 mn of restructuring and acquisition-related costs in the fourth quarter primarily related to previously announced manufacturing optimization initiatives, in connection with the consolidation of textile, hosiery, sewing, and yarn operations, including estimated costs related to the decision Gildan made at the end of October to relocate its Mexican operations to Central America and the Caribbean Basin. Net earnings for the quarter were $32.5 mn compared with net earnings of $59.6 mn the previous year mainly due to lower sales and a lower operating margin.
Gildan Activewear is looking to expand its capacity at its existing manufacturing facilities in Central America and Bangladesh. Reporting an 11 per cent drop in fourth quarter sales compared to the fourth quarter of 2018 due primarily to a 15.1 per cent decline in activewear sales, slightly offset by a one per cent sales increase in the hosiery and underwear category, Gildan said expanding capacity at its sites would support top-line growth opportunities and help deliver sales and earnings growth for 2020.
