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Gildan Activewear Inc. is introducing a quarterly dividend on its common stock and preparing to buy back up to one million of its shares following a record fourth-quarter profit that beat expectations.

The Montreal-based clothing manufacturer best known for its T-shirts, socks and activewear reported a $56.8-million (U.S.) profit before adjustments, or $58.3-million after excluding the cost of restructuring its U.S. operations.

The profit amounted to 47 cents per share before adjustments and 48 cents per share on an adjusted basis.

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Gildan said the profit was a company record whichever way it was measured.

"Our growth in sales was due to overall demand recovery and higher market share in the U.S. screenprint markets, as well as, increased penetration in international screenprint markets," Laurence Sellyn, chief financial and administrative officer, said in a conference call.

The adjusted net income beat analyst estimates by three cents per share, according to figures compiled by Thomson Reuters.

Gildan's revenue was up 23 per cent in the quarter from a year earlier, rising to $368.9-million from $301.7-million.

The company, which has its head office in Canada but all of its manufacturing in other countries, said the sales improvement over the fourth quarter of fiscal 2009 was due primarily to a 21.3 per cent higher volume in the United States.

However, margins in the current quarter are expected to drop to 25 per cent of net sales from 29.8 per cent in the year-earlier period due primarily to higher cost of cotton used in many of Gildan's products.

Gildan introduced an annual 30-cent dividend, which yields about one per cent at current share prices.

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Industry shipments to the U.S. T-shirt wholesalers increased by 2.7 per cent and its market share grew to 64 per cent from 57 per cent a year earlier.

"We maintained the further significant market share increase which we achieved during fiscal 2010 in spite of having low activewear finished goods inventories, which resulted in a continuing large back order position," Mr. Sellyn told analysts.

Gildan also released a forecast for the first quarter of fiscal 2011, which began in October of this year, that showed year-to-year improvements in net sales but shrinking profit margins in part due to higher cotton costs.

The company said it expects first-quarter net sales to be $300-million, which would be down from the fourth quarter ended Oct. 3 but a 40 per cent increase over the year-earlier period.

International volume sales increased by about 50 per cent and sock sales volume was up by nine per cent, but only by one per cent in revenues.

Gildan's focus for next year is a major capital expenditure to increase production capacity. The cost will exceed $150 million, not including spending to increase its yarn spinning.

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Although Gildan's results were strong, Martin Landry of Desjardins Securities said he was disappointed by the low dividend and tepid guidance for fiscal 2011.

The company expects fiscal 2011 revenues of $1.6-billion, a gross margin of 25 per cent and expenses at 10.5 per cent of sales. It also projects that its cotton costs for the full year will be about $1 per pound.

Mr. Landry said his disappointment is tempered by the fact that Gildan has historically been conservative with its full-year guidance.

"While we are pleased with the stronger-than-expected fourth-quarter results, the small size of the announced share buy back program and the tepid fiscal 2011 guidance may weigh on the stock - hence, we expect a flat to slightly negative bias on the shares today," he wrote in a report.

On the Toronto Stock Exchange, Gildan's shares fell more than eight per cent, or $2.54, at $28.90 in morning trading.

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