Analyst Note
| David Swartz |No-moat Gildan exhibited resilience in the third quarter of 2020 as its sales and earnings rebounded nicely from the virus-related 71% sales decline and nearly $200 million adjusted loss that it recorded in the second quarter. Although third-quarter sales fell 19%, this was considerably better than our forecast of a 36% drop, as demand for its branded and Walmart private-label underwear picked up nicely. Gildan’s hosiery and underwear segment recorded 21% sales growth versus our forecast of a 22% decline despite ongoing weakness in socks. As for activewear, it continues to suffer from low demand for event-dependent imprintables, but its sales decline of 26% was better than our forecast of a 39% drop. Given the improving demand, we expect to raise our fair value estimates of $17.20/CAD 23 by mid-single-digit percentages. However, we view shares as somewhat expensive and remain concerned that a resurgence of the virus could again force temporary store closures and weaken the market for imprintables.