In the latest turn of events, Browning West, a long-term shareholder of Gildan, released a presentation reiterating calls for support for its eight board nominees, including the reinstatement of former CEO Glenn Chamandy.

The shareholder is advocating for the election of eight “highly qualified and independent” director candidates–Michael Kneeland, Glenn J. Chamandy, Michener Chandlee, Ghislain Houle, Mélanie Kau, Peter Lee, Karen Stuckey, and J.P. Towner–to Gildan’s Board of Directors at the upcoming annual and special meeting on 28 May 2024.

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Browning West explained that these director candidates possess strong track records of value creation, expertise in successful succession planning, relevant industry and governance experience, as well as proven management and board service in both Canada and the US.

Earlier in April, Browning West proposed a five-pillar plan to enhance shareholder value, focusing on reducing operating costs, increasing market share, and enhancing capital allocation and structure.

Shortly after, Gildan CEO Tyra presented the company’s strategic priorities at an investor meeting, emphasising leveraging Gildan’s strengths and accelerating value creation for all stakeholders, just 90 days into his new role.

However, this announcement received backlash from investors. Browning West criticised Tyra’s plan as a “second-rate version” of the strategy developed by former founder and CEO Chamandy, citing “underwhelming margin guidance, speculative spending, weak capital allocation and no long-term earnings per share or stock price targets.”

According to GlobalData’s retail analyst Neil Saunders, a lot of this communication between Gildan and its stakeholders should have been handled behind the scenes rather than exploding into the open.

He believes this situation underlines the importance of engaging with stakeholders and major investors to understand their positions and explain decisions in advance of them happening.

The Gildan-Browning West saga and how it began

Gildan’s bottom line took a hit according to its full year results announcement, which eventually led to it taking steps to close its Honduras factory and a US plant, resulting in 258 job losses.

Then in December 2023, Gildan announced replacing its outgoing CEO Glenn Chamandy with Vince Tyra, a move deemed “hasty, inexplicable and value destructive” by its major shareholders, who had not been informed of the move ahead of time.

Despite protests, Gildan fast-tracked the appointment of Tyra as the new CEO starting 15 January instead of the initial start date of 12 February. The company offered no explanation for Chamandy’s exit at that time but thanked him for leading the business to over $3bn in revenue.

Long-term shareholders Turtle Creek Asset Management and Browning West issued separate letters urging Gildan to reconsider, emphasising that the company’s success was largely due to Chamandy’s vision and leadership.

Turtle Creek criticised Gildan’s succession planning, arguing that it is an important duty of the board and should be conducted thoughtfully and with the involvement of existing leadership and shareholders.

In a separate letter, Browning West highlighted Gildan board’s disregard for the feedback of nine shareholders representing over 35% of outstanding shares who opposed the CEO succession decision.

Demands for reinstatement, special meeting to resolve issues urgently

Gildan’s stakeholders are concerned with the board’s “destructive actions”, particularly the abrupt termination of Chamandy.

Browning West claimed that Gildan’s shares underperformed the relevant index by 19%, translating to over $1bn in value destruction following Tyra’s appointment as CEO.

Backed by Turtle Creek and other investors, Browning West called for the replacement of a majority of Gildan’s board of directors and requested a special meeting with stakeholders as soon as possible.

Browning West told Just Style: “The Board cannot run from the fact that holders of 35% of the company’s outstanding shares publicly support meaningful boardroom change and the reinstatement of Glenn Chamandy. We intend to keep the focus on the Board, which bears responsibility for the disruptions, reputational harm and value destruction that has ensued following its irresponsible termination of Mr. Chamandy.”

In response, Gildan’s board argued that retaining Chamandy would have “destroyed shareholder value,” claiming he had “no credible long-term strategy and no vision for the future.” They also accused Chamandy of failing to disclose investments in funds managed by a Gildan shareholder supporting his reinstatement.

In a separate statement published on 17 January, former CEO Chamandy was keen to defend himself and said: “It is with regret that I observe the board’s current focus on a strategy seemingly aimed at undermining my reputation and my record through insinuation and distortion of the truth.”

Latest update

In the latter half of March, Gildan’s board confirmed receiving a “confidential non-binding expression of interest to acquire Gildan” and formed a Special Committee of independent directors to review the proposal and any alternative transactions.

Turtle Creek claimed the recent initiation of a sales process was the board’s “latest attempt to avoid the judgement of its shareholders” at the annual meeting coming up on 28 May.

They called for an expeditious special meeting to allow all shareholder voices to be heard and pave the way for a reconstituted board to make important decisions for course correction.

Browning West also filed a lawsuit against Gildan to preserve its shareholder rights ahead of the annual meeting, criticising the decision to delay the special meeting and combine it with the annual one as a “slap in the face” to investors.

More recently, Tyra remained upbeat about Gildan’s Q1 financial performance despite sales falling 1% to $696m.

Key industry takeaways from the Gildan-shareholder feud

Saunders said: “Within the investment community the feud does not look good for Gildan. It presents the company as being in a state of turmoil and not being in control of its future direction. Although, among consumers, I don’t think there is all that much impact – corporate scuffles do not affect purchasing decisions around a brand. While the business can continue to operate, the unhelpful background noise is a major distraction from the day-to-day running of the business, and it leaves Gildan’s strategy in limbo.”

He recommends Gildan fully engage with stakeholders and negotiate to resolve the situation.

There have been similar feuds in the fashion apparel industry where stakeholder conflicts and leadership changes have led to significant tension and impacts on company performance.

In 2017, apparel retailer J.Crew experienced a leadership crisis when its longtime CEO, Mickey Drexler, stepped down amidst declining sales and strategic disagreements. The transition to a new CEO, Jim Brett, was initially welcomed, but disputes over strategic direction soon emerged.

Brett’s sudden departure in 2018, after just over a year in the role, was attributed to clashes with the board over the company’s direction. This turmoil exacerbated J.Crew’s financial struggles and led to significant organisational instability.

In a statement shared by Quartz magazine, Brett said that despite J. Crew’s recent signs of life, “the board and I were unable to bridge our beliefs on how to continue to evolve all aspects of the company.”

Later, J.Crew Group filed for Chapter 11 bankruptcy protection as part of an agreement to hand over control to its top lenders.