June 16th, 2024

Gildan Activewear optimistic on long-term outlook despite current economic headwinds

By The Canadian Press on February 22, 2023.

Gildan Activewear Inc. president and CEO Glenn Chamandy poses for a photograph following the apparel manufacturer's annual meeting Thursday, February 5, 2015 in Montreal. THE CANADIAN PRESS/Paul Chiasson

MONTREAL – Gildan Activewear Inc. is predicting single-digit revenue growth for this year as it faces short-term economic challenges, but is optimistic about its longer-term outlook.

“We feel cautiously optimistic despite ongoing uncertainty,” said executive vice-president Rhodri J. Harries on a call with analysts.

“In the first part of 2023 we expect continued headwinds … nonetheless, we believe we are well positioned to gain share even in a softer demand environment.”

The Montreal-based company raised its dividend Wednesday and said that it is poised to benefit from clothing industry trends over the long term includingthe “casualization of apparel,” the interest in private-label products and the creator economy.

The clothing maker said it will now pay a quarterly dividend of 18.6 cents US per share, up from 16.9 cents US.

The increased payout to shareholders comes as the company, which keeps its books in U.S. dollars, reported its profit and sales fell compared with a year earlier.

The company said it earned US$83.9 million or 47 cents per diluted share for the quarter ended Jan. 1, down from a profit of US$173.9 million or 89 cents per diluted share a year earlier.

RBC analyst Sabahat Khan said in a note Wednesday that Gildan’s results were below consensus and RBC forecasts.

Net sales in the quarter totalled US$720.0 million, down from US$784.3 million in the fourth quarter of 2021. Adjusted earnings per share were 65 cents in the latest quarter, down from 76 cents a year earlier.

The company faced economic challenges impacting its performance in the fourth quarter which it expects will continue into the first part of 2023, said president and CEO Glenn J. Chamandy in a news release Wednesday.

“In the first part of the year, we’re expecting increased margin pressure due to higher raw material and input costs,” said Harries.

“As we move past the first quarter, we expect these headwinds to start to abate, and to deliver strong margin performance during the remainder of the year.”

Net sales for the full financial year were US$3.24 billion, up 11 per cent from 2021, which Gildan attributed to a 17 per cent increase in activewear driven in part by higher prices.

That was partly offset by a 14 per cent decline in hosiery and underwear due to weaker demand and tight inventory management at the retail level, the company said.

Net earnings for the year were down almost 11 per cent at US$541.5 million.

Harries said the company is one year into its sustainable growth strategy and proud of its progress.

Capital investments have led to more manufacturing capacity and more flexibility, said Harries.

“This has allowed us to invest in inventory and improve product availability, which together with leadership and pricing and ESG is enabling us to adapt to the current environment and take market share in key product categories,” said Harries.

He said the company is preparing the launch production at its new manufacturing facility in Bangladesh in late March, which will ramp up as the year progresses.

In its outlook for 2023, the company said it expects revenue growth for the full year to be in the low single-digit range, while its adjusted earnings per share are expected to be in line with 2022.

Internationally, the Asian markets have been more challenging, but the company is seeing more optimism from distributors in the European and U.K. market, said president of sales Chuck Ward on a call with analysts.

This report by The Canadian Press was first published Feb. 22, 2023.

Companies in this story: (TSX:GIL)

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