Gildan Spots Potential in Apparel Market
Rewritten Article:
Gildan, with its global manufacturing setup, is confident it's sailing through the current turbulent waters. "We're gearing up for a shakeup in retail supply chains," offers Glenn Chamandy, extolling the company's potential advantages during Gildan's fiscal first-quarter presentation.
The company boasts manufacturing facilities across nations, including Bangladesh and Honduras. With an eye on increased production capacity, Gildan appears prepared to seize any market opportunities that might arise.
Chamandy highlights that while over 20% of US clothing sales are sourced from China, Central America contributes only 9%. He adds, "Things are moving fast with tariffs, and there's a heap of possibilities."
Gildan's strength lies in its vertical integration and low-cost manufacturing, giving it a competitive edge. "That's our secret sauce. It offers us flexibility and swiftness," says the executive.
Gildan's strategy involves sourcing cotton in the US and transforming it into yarn locally. This allows the company to refrain from tariffs on reintroduced US products, potentially saving a significant chunk as the base reciprocal duty of 10% does not apply to the value of imported products containing US cotton.
While most of Gildan's rivals manufacture in Asia, the situation is different for them, remarks analyst Martin Landry of Stifel. "This circumstance is being overlooked by investors, and it could benefit Gildan in the short and medium term," adds Landry.
Retailers seeking alternatives are turning their heads towards Gildan, suggests Landry. He notes that Chinese exports to the US have slowed substantially due to tariff uncertainties, possibly leading to stock shortages and bare shelves at some retail establishments. Gildan, with its quick turnaround and unaffected supply lines, is well-positioned to capitalize on this trend.
While other firms are taking a defensive stance amid uncertainty, Gildan is staying the course, displaying a measured optimism for the future.
7% Uptick in Stock Price
A mid-digit sales growth rate is anticipated for the 2025 fiscal year, with adjusted earnings per share expected to range between $3.38 US and $3.58 US; a 13–19% jump compared to the previous year.
For the fiscal first quarter, adjusted earnings per share of 59 cents US surpassed analyst expectations by 2 cents US, while revenues of 712 million US approximately met market expectations.
Upon these results, Gildan's stock increased 7% to $63.53 in Toronto on Wednesday. However, the stock is still 20% lower than the peak of $79.11 it hit at the end of February.
According to analyst Brian Morrison of TD, the stock's decline this year is due to investor concerns about tariff impacts and potential economic downturns affecting consumer demand. "Gildan seems ready to snatch market share and expand capacity in Central America to cater to offshoring demands, which should boost investor confidence in maintaining projections," he said.
Glenn Chamandy returned to the helm of Gildan last spring. His reinstatement concluded one of the most significant proxy battles in the nation's history. The tumultuous saga began in December 2023 following Chamandy's dismissal for strategic and succession reasons. The American investment firm Browning West eventually consolidated enough support to persuade the outgoing board members of Gildan to step down and annul the termination.
"A year has flown by. It's hard to believe how swiftly time has passed," Chamandy remarked as he took the stage at Wednesday's annual shareholders meeting.
- Gildan, with its manufacturing facilities in countries like Bangladesh and Honduras, is preparing to take advantage of any market opportunities that may arise due to shifts in retail supply chains, notably with tariffs being imposed on Chinese imports.
- Glenn Chamandy, CEO of Gildan, highlighted that while China accounts for over 20% of US clothing sales, Central America contributes only 9%, indicating a potential growth area for the company.
- To avoid tariffs on reintroduced US products, Gildan sources cotton in the US and transforms it into yarn locally, a strategy that could save a significant amount.
- Analyst Martin Landry of Stifel suggests that Gildan, with its quick turnaround and unaffected supply lines, is well-positioned to capitalize on potential stock shortages due to slowing Chinese exports and tariff uncertainties affecting US retailers.
