Gildan Earnings: Profitability Pressured as Buyers Cut Back; Shares Fairly Valued

A mix shift toward lower-margin activewear led no-moat Gildan to cut its guidance for 2023. The firm now expects adjusted EPS of $2.55-$2.65 for the year, below our $3.05 estimate and down from $3.11 in 2022, on flat to slightly negative sales growth. We view this change as disappointing, especially since Gildan had claimed in May that a downturn in its fleece sales was due to timing. Even so, the outlook does not change our long-term view (including 2% annual sales growth and 18% operating margins), so we do not expect to make any material changes to our fair value estimates of $31.50/CAD 43, leaving shares fully valued.