The strategic priorities plan which was revealed at Gildan Activewear’s investor meeting is claimed by the company to focus on leveraging the company’s strengths and accelerating value creation for all stakeholders 90 days into Tyra’s role as the CEO of the company.
Among the priorities aimed at unlocking further growth potential while amplifying the Company’s commercial capabilities, are:
- Successfully execute supply chain initiatives to maintain availability, cost leadership and industry leading margins;
- Leverage Gildan’s unique brands and develop distinct commercial capabilities to accelerate growth and strengthen the Company’s market position;
- Deepen Gildan’s relationships with existing and prospective retail partners, strengthening the Company’s position as the supplier of choice;
- Complement Gildan’s strong North American market position with renewed focus on select international markets to drive growth; and
- Empower and build world-class talent and leadership to ensure long term resilience of Gildan’s business.
Tyra explained: “As we continue to execute on the key components of the Gildan Sustainable Growth strategy, my first few months as CEO have confirmed my belief that Gildan’s core fundamentals are strong and that we are in a great position to unlock further potential and launch the next phase of our growth.”
Gildan’s medium-term targets
Gildan expressed confidence that, assuming no deterioration in the current macroeconomic environment, its targeted priorities will position the company to continue to drive market share gains in key product categories, unlock further opportunities in targeted markets and deliver on key financial metrics over the 2025-2028 period.
These objectives include:
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- Net sales growth at a compound annual growth rate in the mid-single digits range
- Annual adjusted operating margin in the range of 18% to 21%
- Capital expenditures (capex) as a percentage of sales of about 5% per year, on average, to support long-term growth and vertical integration
- Adjusted diluted EPS growth per annum in the high-single to low double-digit range
Gildan expects to maintain its capital allocation priorities which, beyond planned capex deployment, focus on annual dividend growth, continued share repurchases now in line with a leverage framework of 1.5x to 2x, and value accretive M&A. The combination of the above is expected to drive strong shareholder returns.
2024 outlook and preliminary Q1 2024 revenue
Gildan also reconfirmed its 2024 full year guidance as well as the assumptions underpinning this guidance:
- Revenue growth for the full year to be flat to up low-single digits;
- Adjusted operating margin slightly above the high end of the 18% to 20% annual target range. This compares to fiscal 2023 adjusted operating margin of 17.3%; fiscal 2023 operating margin was 20.1%.
- Free cash flow above 2023 levels driven by increased profitability, lower working capital investments and lower capital expenditures than in 2023.
- Net sales are expected to come in at approximately $695m, or down about 1% year over year.
The company explained that the outlook and medium-term targets are based on market conditions remaining the same, including the pricing and inflationary environment, and no further deterioration in geopolitical environments.
According to Gildan, it reflects “reasonable industry growth and expected market share gains.”
Gildan further added that even though the timing of the potential enactment of legislation remain uncertain, it has incorporated the estimated impact of the implementation of draft Global Minimum Tax legislation in Canada and Barbados on its effective tax rate, retroactive to 1 January 2024, as well as certain refundable tax credits expected.
Announcement met with investor backlash
But Gildan’s long-term shareholder Browning West was less than impressed by the announcement branding it a “second-rate version” of the strategy developed by former founder and CEO Glenn Chamandy and adding it contains “underwhelming margin guidance, speculative spending, weak capital allocation and no long-term earnings per share or stock price targets.”
Browning West cautioned shareholders: “Browning West believes that Vince Tyra’s ‘new plan’ raises troubling questions about the current Board’s stewardship of the Company and confirms our fears that Tyra may lead Gildan down a similar destructive path as the ones he did at the helm of Fruit of the Loom Inc. and Broder Brothers Co.”
The shareholder highlighted that it is seeking to elect eight highly qualified and independent director candidates to Gildan’s Board of Directors at the Annual Meeting of Shareholders on 28 May 2024.
Browning West argued that its 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 pedigrees in Canada and the US.
Additionally, Browning West’s slate of directors released their own Five-Pillar plan earlier this month that they believe will create superior value for shareholders.
Gildan’s ongoing feud with its shareholders began with the announcement of Vince Tyra as its new CEO.
