Shares of Gildan Activewear (GIL 1.75%) plummeted 28.4% in October, according to data from S&P Global Market Intelligence, after the clothing company announced disappointing third-quarter 2019 results and significantly reduced its full-year outlook.
To be clear, Gildan's formal third-quarter report didn't hit the wires until Oct. 31. But the stock tanked nearly 26% on Oct. 18 alone, the first trading day after the company released a preliminary update in advance of its final results.
In its preliminary release, Gildan told investors its third-quarter sales were expected to fall roughly 2% to $740 million, translating to a 7% decline in adjusted earnings to $0.53 per share. Both figures were spot-on when Gildan finalized its results at the end of the month, but they were well below its previous outlook for adjusted earnings to be roughly flat on a year-over-year basis, with sales growth in the mid-single-digit percent range.
Gildan primarily blamed "sales weakness for imprintables both in North America and internationally" during the quarter, and told investors this weakness is expected to continue into Q4. Coupled with lower-than-planned distributor inventory levels, Gildan Activewear now expects full-year 2019 sales to decline in the low-single-digit range (a steep reduction from its old target for mid-single-digit growth), with adjusted earnings per share of $1.65 to $1.70 (down from previous guidance for $1.95 to $2.00).
In spite of imprintables headwinds hindering its growth, management insisted, "[W]e do not believe this reflects a structural change to our business as a leading supplier of basic replenishment apparel driven by our large-scale, low-cost vertically integrated manufacturing system."
Rather, the company believes by remaining focused on efficiency initiatives across its supply chain, it should see gross margins begin to improve as it heads into 2020.
Until Gildan shows more tangible signs of such improvement, however, I suspect the stock will have a hard time recovering from last month's losses.