TDAs with CIBC, this is a flash report so there's potential for them to raise their current US$50.00 target. GLTA
Gildan Activewear Inc.
(GIL-N, GIL-T) US$38.39 | $49.04
Strong Q4/21 Beat - 3-Year Guidance Highlights Growth Plan Event
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This morning, Gildan reported Q4/21 Adjusted EPS of $0.76, well above our forecast of $0.62 and consensus of $0.60.
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Gildan increased the size of their NCIB and annual dividend.
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Management provided three-year guidance metrics that infer double digit EPS growth.
Impact: POSITIVE
Q4/21 Results (Exhibit 1)
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Sales: Total sales ($784mm) increased ~14% y/y driven by higher activewear POS volumes and price increases, in addition to a modest benefit from inventory restocking in the channel. We will look for colour on the call but we believe distributor inventory levels remain below-average.
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Operating Margin: The operating margin of 20.4% once again exceeded the company's 18% annual target. Gross margin at >30% increased ~480bps y/y due to a combination of pricing power and realized benefits from its Back-to-Basics cost efficiency strategy.
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Summary: Strong results were a function of both a top-line and margin beat. This capped a record financial year including FCF and is supportive of their 10% dividend increase and an increase in their NCIB to 10% (from 5%) of their float. The company is currently pressing against their 5% limit having repurchased 2.7mm shares subsequent to quarter-end.
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Guidance: Gildan introduced three-year high level guidance. They target sales growth of 7%-10% annually and an operating margin of 18%-20% (prior 18%). This implies 2024 EPS in the range of $3.70-$3.90, that is well above the consensus forecast.
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Conclusion: The impressive Q4/21 results and guidance, in our view, illustrate that Gildan's Back-to-Basics strategy is delivering targeted results. The focus on lowering their industry leading low-cost vertically integrated operations position Gildan to gain market share in its key target verticals of fashion basics/private label/national accounts. With capacity expansion coming on line in 2022/2023, we believe the company's three-year guidance is reasonable/potentially achievable. We believe this release should encourage investors to place a heightened focus on the longer-term earnings power that guidance implies is materially higher than the current results. We will update our outlook post the conference call this morning, but believe the results/outlook should have a positive impact on the share price today.