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Gildan Activewear Inc GIL

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No-Moat Gildan’s Q3 Sales and Earnings Rise From the Extreme Lows of Q2; Shares Slightly Overvalued

David Swartz Equity Analyst

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.

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Company Profile

Business Description

Gildan is a vertically integrated designer and manufacturer of basic apparel, including T-shirts, underwear, socks, and hosiery. Its primary market is the sale of blank T-shirts to wholesalers and printers (printwear). Gildan also sells branded clothing through retail and direct-to-consumer channels. Brands include Gildan, American Apparel, Comfort Colors, and Gold Toe. Gildan produces most of its clothing at factories in Latin America. The Montreal-based company generates most of its sales in the U.S. and was incorporated in 1984.

600 de Maisonneuve Boulevard West, 33rd Floor
Montreal, QC, H3A 3J2, Canada
T +1 514 735-2023
Sector Consumer Cyclical
Industry Apparel Manufacturing
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 29, 2020
Stock Type
Employees 45,000