Top 40 supplier Gildan (asi/56842) increased sales and earnings in the fourth quarter of 2023, but revenue was still down for the year.

The publicly traded manufacturer of apparel basics reported that total global full-year sales across all its business divisions fell 1.4% year over year in 2023 to about $3.19 billion. While Gildan’s innerwear and hosiery business rose 10%, revenue from activewear – which includes sales to the promotional products market – declined 3% to about $2.66 billion.

The drop in activewear business was largely a result of customers, including other promo suppliers that carry Gildan products, not restocking the Montreal-headquartered corporation’s apparel as heavily as they did in 2022 when such buyers were making up for inventory shortfalls experienced during the COVID-era supply chain crisis, according to Gildan executives.

In a statement, Gildan noted that it saw “trends for [activewear] improve sequentially through the first three quarters of the year before stabilizing in the fourth quarter.”

‘Strength in Key Product Categories’

Indeed, Gildan’s total global fourth-quarter sales rose 8.7% on an annual basis to $782.7 million, a gain driven primarily by an 8% rise in activewear sales ($644 million). Stronger restocking by customers in Q4 helped propel the activewear acceleration. Activewear business “reflected strength in key product categories, including fleece and ring spun products, which also drove favorable mix.”

For the whole of 2023, Gildan’s total net earnings were $533.6 million, down 1.5% from 2022. Still, due to a number of factors, basic and diluted earnings per share (EPS) improved about 3% year over year to $3.03. The story wasn’t as good on adjusted diluted net income and earnings, which were down 21% and 17% annually, tallying $452.6 million and $2.57 per share.

Meanwhile, gross margins in 2023 fell by 310 basis points to 27.5%. Operating income was $644 million, or 20.1% of sales, which “included the benefit of a $77 million net insurance gain, a $41 million non-cash reversal of a portion of a prior-year hosiery-related impairment charge, and a $25 million gain from the sale and leaseback of one of our U.S. distribution facilities, partly offset by higher restructuring costs of $46 million,” according to Gildan.

As for the fourth quarter, operating income of $178 million was up from $93 million in Q4 2022. Higher sales and margins compared to the prior year’s fourth quarter helped spur the increase. After accounting for financial expenses and other factors, fourth-quarter net earnings were $153.3 million, or $0.89 per basic and diluted earnings share – year-over-year increases of more than 80%. Adjusted diluted EPS was up 10% compared to the previous year’s fourth quarter, hitting $129.2 million, or $0.75 per share.

“Outstanding operational execution by our highly skilled team of employees across our global footprint delivered strong Q4 results,” said Vince Tyra, Gildan’s president and CEO. “As the company celebrates its 40^th anniversary this year, I see a bright future ahead, where we can leverage our strengths and continue to enhance value for all stakeholders.”

Activist investors calling for the return of ousted Gildan CEO Glenn Chamandy met with new CEO Vince Tyra. They were not impressed. That led this:

Activist Investor Goes on Offensive Against New Gildan CEO, Board of Directors https://t.co/dgidyYE9Fb

— Chris Ruvo (@ChrisR_ASI) February 10, 2024

2024 Outlook

Tyra took over as Gildan’s top executive in January after the company’s board of directors removed co-founder and longtime CEO Glenn Chamandy in December. An epic corporate battle has since ensued, with activist investors led by Los Angeles-based firm Browning West calling for Tyra to be fired, Chamandy reinstated as CEO and a board member, and for eight current directors to be replaced.

A vote on Browning West’s plan could take place among stockholders at Gildan’s annual shareholder’s meeting on May 28.

Gildan anticipates that Q1 2024 sales will be down compared to last year’s first quarter, as higher-than-expected customer restocking in Q4 2023 will “result in lower levels of replenishment in Q1 2024,” the company said. For full-year 2024, Gildan executives believe sales will be flat or up low single digits in percentage terms.

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.