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. The Company’s 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, sports shirts, polos and tank tops. 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. The Company 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, Gildan Hammer, GoldToe, and Peds. Its manufacturing operations are situated in the United States, Central America, the Caribbean, and Bangladesh.

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Gildan Activewear Inc

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Post by retiredcfon Aug 05, 2021 12:58pm

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Post# 33655333

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This is a flash report so there's good potential for them to increase their current US$42.00 target. GLTA

Gildan Activewear Inc.

(GIL-N, GIL-T) US$35.16 | $44.17

Q2/21 Results: Providing Insight to Long-Term Earnings Power Event

This morning Gildan reported Q2/21 Adjusted EPS of $0.68, above our forecast/ consensus of $0.50/$0.52.
The NCIB was reinstated for up to 5% of shares outstanding.

Impact: POSITIVE

Q2/21 Results (Exhibit 1)

Activewear Sales: Increased ~350% y/y to $597mm, modestly ahead of our forecast ($590mm). This reflected higher unit sales volumes in all markets, particularly imprintables, driven by the strong recovery in POS, the non-recurrence of distributor destocking in Q2/20, and higher unit sales from National accounts (Retail). Compared to Q2/19, imprintables POS trends in North America improved in Q2/21, down 8%, with North America down single-digits and international POS remaining weak (-30%). Retail POS increased above Q2/19.
Hosiery/Underwear ("H/U") Sales: Increased ~53% y/y to $150mm, well above our forecast ($118mm). This was driven by double-digit POS growth in socks and underwear, the non-recurrence of retailer inventory destocking, and favourable product mix.
Operating Margin: The operating margin of 19.9% handily exceeded our 16.2% forecast. This was driven by leverage on higher sales, favourable product mix, lower raw material costs and benefits from its Back to Basics cost saving initiative.
FCF/Liquidity: Record Q2/21 FCF of ~$208mm reduced leverage to just 0.6x, from 2.1x at the end of Q1/21. With leverage well below its target range the NCIB was renewed.
Market Outlook: Management is encouraged by the recovery in North America, although international markets remain weak. The company continues to monitor labour availability in the U.S. that has been impacting yarn production and the ability to rebuild inventories. In light of global supply chain issues, Gildan is seeing tightness in raw material inputs and transportation related factors creating inflationary pressure. These factors are in line with our preview note. Overall, management remains cautiously optimistic as the recovery progresses.
Conclusion: We summarize the Q2/21 results as positive. Volumes appear to be returning, cost savings are driving margin improvement and the balance sheet is in a position to resume returning capital to shareholders. Despite near- term headwinds, we expect Gildan to exhibit attractive earnings growth over our forecast horizon leading investors to reassess the long-term EPS potential of Gildan.