Gildan Activewear Inc T.GIL

Alternate Symbol(s): GIL

Consumer Cyclical Luxury Goods

Gildan Activewear Inc. is a vertically integrated manufacturer of everyday basic apparel, including activewear, underwear, and hosiery products. Its primary product categories include activewear tops and bottoms (activewear), socks (hosiery), and underwear tops and bottoms (underwear). Its activewear product lines include T-shirts, fleece tops and bottoms, and sports shirts. Its hosiery product lines include athletic, dress, casual and workwear socks, liner socks and socks for therapeutic purposes. Its underwear product lines include men's and boy's underwear (tops and bottoms) and ladies’ panties. It markets its products in North America, Europe, Asia Pacific, and Latin America, under a diversified portfolio of Company-owned brands, including Gildan, American Apparel, Comfort Colors, GOLDTOE and Peds. It also sells socks under the Under Armour brand in the United States and Canada. It has manufacturing facilities in Central America, the Caribbean, North America, and Bangladesh.

TSX:GIL - Post by User

Gildan Activewear Inc

<< Previous

Bullboard Posts

Next >>

Post by retiredcfon Aug 04, 2022 11:37am

83 Views

Post# 34871190

TD

Currently have a US$43.00 target. GLTA

Gildan Activewear Inc.

(GIL-N, GIL-T) US$29.49 | $37.88

Q2/22 Earnings Beat - Cautiously Optimistic on Outlook Event

This morning, Gildan reported Q2/22 Adjusted EPS of $0.86, above our forecast and consensus of $0.80/$0.77.
Management renewed its NCIB and maintained its 3-year guidance metrics.

Impact: SLIGHTLY POSITIVE

Q2/22 Results (Exhibit 1)

Sales: Total sales (~$896mm) increased ~20% y/y driven by higher activewear sales, partially offset by lower H/U sales. Consolidated sales were 8% above our forecast driving the earnings beat. The outperformance/growth in activewear sales were due to y/y mid-teen price increases, volume growth, and product mix.
Operating Margin: The operating margin of 19.6% was right in line with our forecast and remains toward the high end of Gildan's annual guidance of 18%- to-20%. The gross margin was slightly below our forecast due to the impact of inflationary input costs, offset by leverage in SG&A due to the sales beat.
Financial Position: Gildan generated positive FCF of ~$159mm, that was allocated toward its NCIB that repurchased 3.6mm shares in Q2/22. This translated into leverage of 1.1x, below its target of ~1.5x. Gildan did renew its NCIB (5% of outstanding) that we forecast to remain active.
Outlook: As anticipated, management did note they are seeing a degree of "slowing" in POS in both the distributor and retail channels. That stated, they anticipate a tailwind to emerge in H2/22 from returning travel/corporate events. The details of this commentary will be a focal point of the call but we anticipate positive sales growth to be the message in H2/22. Management maintain their 3-year guidance targets for sales growth of 7%-10% annually and an operating margin of 18%-20% (implied 2024 EPS mid-point ~$3.70).
Conclusion: In our view, we summarize the quarter as slightly positive with an earnings beat and outlook that implies much higher earnings performance than what we believe the current share price implies. This translates into a P/E multiple that is well below the low-end of its historical range. While we view Gildan's valuation as attractive, and anticipate a favourable response to this morning's release, we believe near-term catalysts may not be immediate to return Gildan to a growth multiple at this time.