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News April 16, 2024

Amid Corporate Fight, Gildan CEO Outlines Strategic Priorities

Activist investors have criticized the plan. The Top 40 firm also released preliminary first-quarter sales results.

By  Christopher Ruvo

With activist investors campaigning to oust him and the company reportedly up for sale, Top 40 supplier Gildan’s (asi/56842) new CEO Vince Tyra outlined strategic priorities on Monday, April 15; these call for expanding sales internationally, revitalizing the American Apparel brand and undertaking other measures to increase revenue and profitability in the years ahead.

Vince Tyra

Vince Tyra, Gildan (asi/56842)

Just over 90 days into his tumultuous tenure, Tyra said his plan would enable the publicly traded manufacturer of apparel basics to achieve net sales growth at a compound annual rate in the mid single-digit percentage range between 2025 and 2028. It would also lead to adjusted diluted earnings per share growth in the high-single to low double-digit percentage range and annual adjusted operating margin of 18% to 21% over the same time span, he maintained.

“I believe we are starting a new and exciting era at Gildan,” said Tyra.

Beyond revamping what Tyra described as “dormant” American Apparel (which Gildan acquired in 2017), the CEO aims to build brand awareness, improve the company’s market position, strengthen partnerships with retailers, and execute supply chain initiatives that will allow the firm to offer deep inventory and quick fulfillment of cost-competitive apparel. International sales expansion efforts would focus on select key markets, such as Germany.

Activist Investor Reaction

Browning West, a Los Angeles-based investment firm that holds about 5% of Gildan’s outstanding shares, panned Tyra’s plan.

Browing West feels the strategy is a “second-rate version” of initiatives developed by Gildan founder/former CEO Glenn Chamandy. The plan contains underwhelming “margin guidance, speculative spending, weak capital allocation and no long-term earnings per share or stock price targets,” Browning West said.

“Browning West believes that Vince Tyra’s ‘new plan’ raises troubling questions about the current board’s stewardship of the company and confirms our fears that Mr. Tyra may lead Gildan down a similar destructive path as the ones he did at the helm of Fruit of the Loom, Inc. and Broder Brothers Co.,” said the firm. Among other roles, Tyra is a past CEO of Broder, which has evolved into Top 40 supplier alphabroder (asi/34063). The Gildan board has lauded Tyra as being a value-creator.

Browning West is spearheading a charge to return Chamandy as CEO and reappoint him to the Montreal-headquartered company’s board of directors. The board fired Chamandy in December and appointed Tyra, sparking what’s been a months-long corporate fight for control of the company.

Browning West also wants to replace a total of eight current Gildan board members with business leaders it has put forward – a plan investors could vote on at the May 28 annual shareholders meeting. Roughly a third of shareholders, including Gildan’s biggest in Jarislowsky Fraser, which reportedly holds about 7% of outstanding shares, have expressed support for the return of Chamandy and the board overhaul.

The eight executives who are aiming to take seats on the board recently put forward a five-pillared plan that they say, if executed correctly, could increase Gildan’s share price to more than $100 within five years. Share price is currently around $35.

The board candidates would achieve that, in part, through initiatives that include taking on more debt to fund growth and increasing market share in the fashion-basics category by lowering unit costs. The plan says the fashion-basics gain can be achieved by relocating production of such products from Honduras to Bangladesh.

Q1 Revenue, Outlook & the Possible Sale of Gildan

Gildan’s board announced in March that it is considering proposals from buyers interested in acquiring the company.

Browning West has asked a judge to prevent the board from entering into a sale agreement prior to the May 28 shareholder meeting.

The board set April 10 as the deadline for receiving initial offers from interested parties, which are said to include private equity (PE) firms that own other Top 40 promotional products companies. Tyra provided no update on any potential bids received or where matters stand in the possible sales process.

Interested bidders for Gildan reportedly include PE firm Sycamore Partners, which owns Staples, parent company of Top 40 distributor Staples Promotional Products (asi/120601).

Clayton, Dubilier & Rice, a PE firm with a reported $57 billion in assets under management and owner of Top 40 supplier S&S Activewear (asi/84358), is also said to be interested. Bain Capital, a Boston-headquartered private investment firm with a stated $180 billion in assets under management, is another Gildan suitor, according to various reports.

In conjunction with Tyra’s talk this week, Gildan revealed that its first-quarter 2024 sales are expected to tally $695 million, a 1% year-over-year decline. The quarter ended with March. For the full year, Gildan expects total company revenue to be flat or up low single-digits in percentage terms. The firm believes adjusted diluted earnings per share will rise from $2.57 in 2023 to a range of $2.92 to $3.07 this year.

Based on estimated 2022 North American promotional product revenue of $762.2 million, Gildan ranked fifth on Counselor’s most recent list of the largest suppliers in the industry. Total global full-year sales across all of Gildan’s business divisions fell 1.4% year over year in 2023 to about $3.19 billion.