Record results for Gildan | Press

Shareholders in Montreal-based Gildan Sportswear had their best day on the stock market in a year and a half following its announcement of much stronger-than-expected third-quarter results.

Martin Vallieres
Press

Gildan generated US $ 802 million in sales for the quarter ended October 3, up 33% year-on-year and 8% higher from the third quarter of 2019, before the pandemic.

But even more comforting to its shareholders, Gildan’s growth in revenue and profit margins to higher pre-pandemic levels led it to a record profit in a third quarter.

It reached 95 cents per share in net income, and 80 cents per share in adjusted earnings for one-time factors, up 51% from the third quarter of 2019.

Also, among other figures closely followed by investors and analysts, Gildan managed to increase its cash flow (free cash flow, in financial jargon) to US $ 232 million, also a record third quarter for this major manufacturer of underwear, socks and t-shirts.

In announcing these results on Thursday, Gildan President and CEO Glenn J. Chamandy said: “Our record performance for the third quarter is mainly attributable to the improvement in the economics of our business, supported by the continuous recovery in demand and excellence [de gestion] of our team. These factors have caused Gildan’s sales volumes to now exceed pre-pandemic levels. ”

On the stock market, investors reacted strongly to the announcement of these record quarterly results at Gildan.

They pushed its share price up more than 8% during the session to $ 51.74, a dollar apart before catching up to the record price set in mid-July 2019.

At the end of the session, on the Toronto Stock Exchange, Gildan shares were up 6.8% to $ 50.74, a new high in two years.

For its shareholders, it is also the consolidation of a long recovery from the low of $ 14 per share reached in the midst of the stock market shock of March 2020, at the start of the pandemic.

Analysts

On the analyst side, like stock market investors, Gildan is given very good marks for its business performance in the context of the post-pandemic economic shock in the clothing market.

“Gildan reported third quarter earnings per share well above consensus estimates among analysts; the result of better than expected income and profit margin, ”notes analyst Stephen MacLeod at BMO Capital Markets in Toronto in an investor note obtained by Press.

“Quarterly sales increased 33% year on year, reflecting improved sales of sportswear, hosiery and underwear. In addition, Gildan’s total sales are now 8% above pre-pandemic levels two years ago, in the third quarter of 2019. ”

At Desjardins Securities, Toronto analyst Chris Li points out in a note to investors that “the adjusted quarterly earnings announced at 80 cents US per share is well above the consensus of analysts’ estimates at 57 cents US per share.”

Also, notes Chris Li, “For a second consecutive quarter, the (adjusted) operating profit margin at Gildan is well above the target stated by its senior executives. ”

Having said that, what to expect in the coming quarters at Gildan?

“Gildan’s business outlook remains positive as the recovery in apparel sales continues in North America,” said Stephen MacLeod, analyst at BMO Capital Markets.

“Meanwhile, tensions in supply chains and inflationary pressures are creating headwinds. But Gildan is well positioned to deal with it thanks to its vertically integrated manufacturing platform, notes the BMO analyst.

“In addition, Gildan has already implemented pricing measures in the fourth quarter to offset rising costs. The company thus remains in a good position to reach its objective of an operating profit margin increased to 18%. [des revenus] by the end of the year. ”

At Desjardins Securities, analyst Chris Li notes that “the favorable outlook at Gildan is based on the resumption of sales after the pandemic which continues to progress well in North America, and [est] even reached levels higher than those reached at the end of 2019, before the pandemic. ”

The Desjardins analyst also notes that despite “headwinds generated by tensions in supply chains and growing inflationary pressures, Gildan’s business positioning remains advantageous thanks to its integrated manufacturing platform” .

Finally, notes analyst Chris Li, “the recent price adjustment measures implemented by Gildan at the start of the fourth quarter strengthen its ability to manage inflationary pressures, so that it can meet its profit margin target and earn market shares “.