CIBCHave a US40.00 target. GLTA
EQUITY RESEARCH
August 4, 2022 Flash Research
GILDAN ACTIVEWEAR INC.
Q2 First Look: Strong Beat, Demand Showing Signs Of Slowing
Gildan reported strong Q2 results with adjusted EPS of $0.86 well ahead of
our estimate/consensus of $0.78/$0.76 driven by strong sales and healthy
gross margins, partially offset by higher-than-expected SG&A.
Revenues came in 6% ahead of expectations, driven by strong activewear
sales, which benefited from pricing, favourable mix, and higher shipments in
North America, partially offset by weaker demand in Asia. Hosiery and
underwear sales were negatively impacted by lower volumes and lapping
government stimulus last year. Below the top line, gross margins were ahead
of expectations despite higher fibre costs and inflationary pressures, while
SG&A dollars were higher than expected due to elevated costs and higher
distribution expenses.
Looking ahead, management noted it has seen some slowing in demand, but
large events and travel/tourism both remain tailwinds. The company also
noted a softening retail environment mostly impacting national account
customer sales, though this represents a smaller part of the overall business.
We expect the outlook for demand and distributor inventory levels, as well as
pricing and promotions, to be key topics on the call.
Gildan also renewed its NCIB program, which will allow it to repurchase
9.1MM shares. Management will host a conference call at 8:30 a.m. ET;
dial-in number is (800) 715-9871; passcode: 9879499.