Gildan CEO presents more conservative view than Browning West

Two weeks after an activist Gildan shareholder revealed his strategy to double the Montreal clothing maker’s profits per share within five years, it was the turn of Gildan’s new CEO on Monday to present his vision for the future of the company.

To stimulate growth, Vince Tyra intends to optimize the supply chain, pay particular attention to certain international markets, Western Europe for example, and leverage Gildan’s own brands (such as American Apparel and Comfort Colors).

Its strategy also includes share buybacks and dividend growth.

Vince Tyra concedes in an interview that the American investment firm Browning West presented a more ambitious share buyback plan at the beginning of April.

“We are taking a more conservative approach with our financial leverage. I am not comfortable with the idea of ​​increasing the level of debt for the sole purpose of stimulating share buybacks in order to potentially impact the valuation multiple,” he says.

Vince Tyra also promises to present a more comprehensive strategic plan in the fall.

The unveiling of the new Gildan boss’s strategic priorities comes just weeks before the shareholders’ meeting scheduled for the end of May and after the company revealed last month that it was in talks with potential buyers.

To this end, Vince Tyra simply indicates that a special committee takes care of the process and that he is not part of it. It was therefore not possible to know whether proposals deemed interesting have been received as of today.

Vince Tyra maintains guidance for the current fiscal year, including adjusted diluted earnings per share of US$2.92 to US$3.07.

Over a medium-term horizon, i.e. 2025-2028, it anticipates a compound annual sales growth rate in the mid-single digit range.

For this period, it expects adjusted operating margins in a target range of 18% to 21%, with annual growth in adjusted diluted earnings per share between the high single-digit range and the low end of a range. in double digits, and foresees capital expenditure as a percentage of sales around 5% per year on average.

His presentation marks his 90 days at the helm of the company. He was named CEO on December 11 and took office on January 15.

Earlier in April, Browning West – which has a roughly 5% stake in Gildan – indicated that its approach could push Gildan’s stock above US$100 within five years, a level 175% higher. higher than today.

Browning West unveiled the plan to convince shareholders to support its campaign to reconstitute Gildan’s board and bring former CEO Glenn Chamandy back in charge.

Gildan’s board fired Glenn Chamandy in December over succession and strategy issues. He was replaced by Vince Tyra, a former Fruit of the Loom executive.

In the days following Glenn Chamandy’s firing, Browning West launched a cabal aimed at overturning the decision. Several institutional shareholders holding together approximately 35% of the company’s shares, including Montreal asset manager Jarislowsky Fraser, have in turn publicly spoken out in favor of the return of Glenn Chamandy.

Browning West’s plan includes a focus on moving manufacturing of certain products like T-shirts, for example, from Honduras to Bangladesh, where costs are lower, and would use Honduras’ excess capacity for fleece clothing. An increase in share buybacks and the use of leverage to increase shareholder returns are also among the initiatives being considered.

The approach also includes the introduction of a compensation plan that sets targets tailored to the company’s specific opportunity set and the allocation of shares to all employees.

Scotia analyst George Doumet noted earlier this month that regardless of the noise emanating from the proxy fight, a consensus appears to be forming on the path forward for Gildan’s future: focus on being the lowest cost operator, focusing on organic growth by gaining market share, and improving margins.

Now that Browning West and Vince Tyra have outlined their vision for Gildan’s future, shareholders have a choice between these two options and perhaps also a purchase proposal, should such an eventuality materialize by the end of the year. holding of the shareholders’ meeting scheduled for the end of May.

In the meantime, Gildan will present the 1er May its financial performance at the start of the year. The company said Monday that its sales for the first three months of the year are expected to be around US$695 million, down approximately 1% year-over-year.

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