Gildan Activewear Inc T.GIL

RBC

[retiredcf]

August 4, 2022

Gildan Activewear Inc.
Q2 Sales and EPS ahead of RBC/consensus forecasts

NYSE: GIL | USD 29.49 | Outperform | Price Target USD 52.00

Sentiment: Positive

First impression: Gildan reported Q2 Sales and EPS ahead of RBC and consensus expectations. Q2 Sales of $895.6MM were ahead of RBC/consensus forecasts of $784.4MM/$820.1MM and reflected better-than-expected contribution from the Activewear segment partially offset by a lower-than-expected contribution from the Hosiery & Underwear segment. Adjusted Diluted EPS of $0.86 was ahead of RBC/consensus expectations of $0.70/$0.77. Relative to our forecasts, better-than-expected Sales and SG&A as a % of Sales, partially offset by modestly lower-than-expected Gross Margin %, drove Adjusted EPS ahead of our forecasts.

Renewal of NCIB: Gildan repurchased 3.6MM shares in Q2 and the company's board approved the implementation of a new NCIB to repurchase 5% of the company's issued/outstanding shares (existing NCIB expires soon in early August).

Calling out some softness in the market; overall outlook remains supportive for H2 and reiterated 3-year targets: Despite seeing some "slowing", Gildan believes a recovery in events/travel/tourism remains a demand tailwind for H2/22. Additionally, despite a "softening retail environment", the company noted this will primarily impact its national account customer sales which represents a smaller part of the overall business. On this basis, Gildan reiterated its three-year targets (i.e., Net Sales CAGR of 7%-10%, an Adjusted Operating margin of 18%-20%, and a RONA of >20%).

Q2 2022 results details (see Exhibit 1 for full results details):

• Consolidated Sales: $895.6MM (+19.9% YoY) vs. RBC/consensus forecasts of $784.4MM/$820.1MM  Activewear: $757.8MM (+26.9% YoY) vs. RBC forecast of $632.9MM
 Hosiery & Underwear: $151.5MM (-8.2% YoY) vs. RBC forecast of $151.5MM

• Adjusted EPS: $0.86 vs. RBC/consensus at $0.70/$0.77