(all amounts are in U.S. dollars except where otherwise indicated) (1) Please refer to “Definition and reconciliation of non-GAAP financial measures” in this press release
Record third quarter net sales of $891 million, up 2.4% vs. the prior yearOperating margin of 21.7%, adjusted operating margin1 of 22.4%GAAP diluted EPS of $0.82 and record third quarter adjusted diluted EPS1 of $0.85Cash flow from operations of $178 million and free cash flow1 of $149 millionRecord quarterly return of $404 million to shareholders through dividends and share repurchasesCompany updates its full year 2024 guidance MONTREAL, Oct. 31, 2024 (GLOBE NEWSWIRE) — Gildan Activewear Inc. (GIL: TSX and NYSE) today announced results for the third quarter ended September 29, 2024. The Company also updated its Fiscal 2024 guidance.
“Gildan’s Sustainable Growth Strategy (GSG) is clearly driving results, underscored by our record third quarter sales, including strong net sales growth of 6% in Activewear. Through the continued successful execution of our three strategic pillars- capacity expansion, innovation and ESG -we are not only further strengthening our competitive position but also driving top line growth and enhancing profitability. We remain deeply committed to delivering long-term value for our stakeholders and are excited about the opportunities that lie ahead,” said Glenn J. Chamandy, Gildan’s President and CEO.
Q3 2024 Operating Results
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Net sales were $891 million, up 2.4% over the prior year, at the high end of previously provided guidance of flat to low single-digit growth. Activewear sales of $788 million, were up 6% driven by higher sales volumes reflecting positive POS in the Activewear category across channels in North America. We continue to see market share gains in key growth categories and a positive market response to our recently introduced new products which feature key innovations, including our new soft cotton technology. Furthermore, we observed continued momentum with National account customers, driven by our strong overall competitive positioning and as we further benefit from recent changes in the industry landscape. These factors were partially offset by unfavorable product mix, partly due to lower fleece sales compared to last year’s strong performance, which was largely due to timing differences and which we had anticipated. International sales increased by 20% year over year. In addition to higher year over year sell-through in certain international markets, distributors replenished inventory from suboptimal levels aided by our ability to better service this market as we ramp up our Bangladesh facility. Separately, Hosiery and underwear sales were $103 million, down 18% versus the prior year, as expected, mainly owing to the phase out of the Under Armour business and to a lesser extent, due to unfavourable mix and continued broader market weakness in underwear. Excluding the impact of the Under Armour phase-out, sales for the Hosiery and underwear category would have been up low double digits year over year, while consolidated sales would have been up high single digits in the third quarter.
The Company generated gross profit of $278 million, or 31.2% of net sales, versus $239 million, or 27.5% of net sales, in the same period last year representing a 370 basis point improvement which was primarily driven by lower raw material and manufacturing input costs.
SG&A expenses of $84 million included $6 million in carry-over charges related to the proxy contest, leadership changes and related matters. Excluding these charges, adjusted SG&A expenses1 were down 5% to $78 million, or 8.8% of net sales, compared to SG&A expenses of $82 million, or 9.5% of net sales for the same period last year. The year over year reduction reflected the positive benefit of the jobs credit introduced by Barbados.
The Company generated operating income of $193 million, or 21.7% of net sales including the negative impact of the expenses for the proxy contest, leadership changes and related matters. This compares to $155 million, or 17.8% of net sales last year. Adjusted operating income1 was $200 million or 22.4% of net sales, in line with guidance provided, and up $43 million or 430 basis points compared to the prior year.
Net financial expenses of $30 million, were up $10 million over the prior year due to higher interest rates and higher borrowing levels. Reflecting the impact of the enactment of Global Minimum Tax (GMT) in Canada and Barbados, the Company’s adjusted effective income tax rate1 for the quarter was 18.7% versus 5.1% last year, bringing the year to date adjusted effective income tax rate to approximately 18.5%. Reflecting the positive benefit of a lower outstanding share base, GAAP diluted EPS were $0.82, up 12% versus the prior year, while adjusted diluted EPS1 were $0.85 compared to $0.74 last year, up 15% year over year.
Cash flows from operating activities totaled $178 million and, after accounting for capital expenditures totaling $30 million, the Company generated $149 million of free cash flow1. The Company continued to execute on its capital allocation priorities during the quarter returning a quarterly record of $404 million to shareholders, including dividends and repurchasing 8.8 million shares under our normal course issuer bid (NCIB). We ended the third quarter with net debt1 of $1,507 million and a leverage ratio of 1.9 times net debt to trailing twelve months adjusted EBITDA1, well within our targeted debt levels.
Year-to-date Operating Results
Net sales for the first nine months ended September 29, 2024 were $2,449 million, up 1.5% versus the same period last year. In Activewear, we generated sales of $2,117 million, up $93 million or 5%, driven by increased shipments, reflecting positive POS trends in North America and strong momentum observed at National accounts, slightly offset by lower net selling prices. International sales of $188 million were up 9% versus the same period last year, reflecting demand stabilization and some recovery in POS. In the Hosiery and underwear category, sales were down 15% versus the prior year mainly reflecting the phase out of the Under Armour business, less favourable mix and broader market weakness in the underwear category. Excluding the impact of the Under Armour phase-out, sales for the Hosiery and underwear category, as well as consolidated sales, would have increased by mid-single digits year over year.
The Company generated gross profit of $751 million, up $107 million versus the prior year, driven by the increase in sales and gross margin. Gross margin of 30.7% was up by 400 basis points year over year mainly a result of lower raw material and manufacturing input costs, partly offset by slightly lower net selling prices.
SG&A expenses were $312 million, $70 million above prior year levels. The increase is mainly attributable to expenses for the proxy contest, leadership changes and related matters, totaling $82 million. Excluding these charges, adjusted SG&A expenses1 were $230 million, or 9.4% of net sales, compared to 10.0% of net sales last year, reflecting the benefit of the jobs credit introduced by Barbados during the second quarter.
The Company generated operating income of $439 million, or 17.9% of net sales, reflecting the negative impact of the expenses for the proxy contest, leadership changes and other related matters. This compares to operating income of $466 million or 19.3% of net sales last year which included the benefit of a $77 million net insurance gain and a $25 million gain from the sale and leaseback of one of our U.S. distribution facilities, partly offset by restructuring costs of $35 million. Excluding these items as well as the expenses for the proxy contest, leadership changes and other related matters, adjusted operating income1 was $521 million or 21.3% of net sales, up $122 million or 480 basis points compared to the prior year.
Net financial expenses of $77 million were up $19 million over the prior year due to higher interest rates and higher borrowing levels. As communicated in the second quarter, income tax expenses were significantly higher than the prior year, due to the enactment of GMT in Canada and Barbados. Cash flows from operating activities totaled $291 million, compared to $308 million in the prior year. After accounting for capital expenditures totaling $110 million, the Company generated approximately $182 million of free cash flow1 compared to $188 million in the prior year. Executing on capital allocation priorities, capital returned to shareholders totaled $643 million including dividends and share repurchases. Reflecting the benefit of a lower outstanding share base, GAAP diluted EPS and adjusted diluted EPS1 were $1.62 and $2.18 respectively, compared to GAAP diluted EPS and adjusted diluted EPS1 of $2.14 and $1.82 respectively, in the prior year.
2024 Outlook
The strength of our vertically integrated model, our proven operational excellence and our unwavering focus on executing our Gildan Sustainable Growth (GSG) strategy give us confidence in our ability to deliver our full year 2024 guidance and more broadly, our three-year targets outlined earlier this year. More specifically, we remain pleased with our performance thus far this year despite a somewhat mixed macroeconomic backdrop as reflected by weakness in certain retail end markets. As we move into the final quarter of the year, we are further narrowing our full year 2024 outlook range.
Consequently, for 2024, we expect the following:
Revenue growth for the full year to be up low-single digits, compared to our previous guidance of flat to up low-single digits. Our revenue guidance reflects the expiration of the Under Armour sock license agreement on March 31, 2024, which has had minimal impact on our profitability. Excluding the impact of this agreement, full year revenue growth in 2024 would be in the mid-single digit range;Adjusted operating margin1 to be slightly above 21%, compared to our previous guidance of slightly above the high end of our 18% to 20% target range for 2024;Capex to come in at approximately 5% of net sales, maintaining previous guidance;Adjusted diluted EPS1 in the range of $2.97 to $3.02, up significantly between 15.5% and 17.5% year over year, compared to our previous guidance of $2.92 to $3.07; andFree cash flow1 still expected to be above 2023 levels, driven by increased profitability, lower working capital investments and lower capital expenditures than in 2023. The assumptions underpinning our 2024 guidance include the following:Ongoing improvement in POS through the final quarter of 2024 as well as growth opportunities in all our channels.The continued benefit of the refundable jobs credit recently introduced by Barbados, where our Sales and Marketing operations are headquartered. This credit, which became applicable in the second quarter, was retroactive to January 1, 2024, and flows through SG&A.
The estimated impact of the recently enacted GMT legislation in Canada and Barbados on our effective tax rate, retroactive to January 1, 2024. The Company’s adjusted effective income tax1 rate is expected to be approximately 18% for the full year.Continued share repurchases under our NCIB program, given the strength of our balance sheet, our expected strong free cash flow and our leverage framework target of 1.5x to 2.5x net debt to adjusted EBITDA1. ESG
The Company was recently recognized as one of Canada’s Most Responsible Companies by Newsweek. In its inaugural year, Newsweek, in partnership with Statista, recognized 150 companies selected from Canada’s 700 largest private and public companies, and across 13 industries, for their commitment to responsible practices. Gildan ranked 14th overall and secured the top spot in the Retail and Consumer Goods industry, an achievement which is a testament to our fundamental commitment to ESG.
Declaration of Quarterly Dividend
The Board of Directors has declared a cash dividend of $0.205 per share, payable on December 16, 2024 to shareholders of record as of November 21, 2024. This dividend is an “eligible dividend” for the purposes of the Income Tax Act (Canada) and any other applicable provincial legislation pertaining to eligible dividends.
Renewal of Normal Course Issuer Bid (NCIB)
During the third quarter, the Company completed share repurchases under its NCIB ending August 8, 2024 and following the renewal of the Company’s NCIB, effective August 9, 2024, the Company continued to repurchase shares under the NCIB. A total of 8,830,265 common shares were repurchased for cancellation during the third quarter at a total cost of approximately $372 million.
Gildan’s management and the Board of Directors believe the repurchase of common shares represents an appropriate use of Gildan’s financial resources and that share repurchases under the NCIB will not preclude Gildan from continuing to pursue organic growth and complementary acquisitions.
Disclosure of Outstanding Share Data
As at October 25, 2024, there were 154,422,137 common shares issued and outstanding along with 282,737 stock options and 42,289 dilutive restricted share units (Treasury RSUs) outstanding. Each stock option entitles the holder to purchase one common share at the end of the vesting period at a predetermined exercise price. Each Treasury RSU entitles the holder to receive one common share from treasury at the end of the vesting period, without any monetary consideration being paid to the Company.
Conference Call Information
Gildan Activewear will hold a conference call to discuss the Company’s third quarter 2024 results today at 8:30 AM ET. The conference call can be accessed by dialing (800) 715-9871 (Canada & U.S.) or (646) 307-1963 (international) and entering passcode 7966565#. A replay will be available for 7 days starting at 12:30 PM EST by dialing (800) 770-2030 (Canada & U.S.) or (609) 800-9909 (international) and entering the same passcode. A live audio webcast of the conference call, as well as the replay, will be available at the following link: Gildan Q3 2024 audio webcast.
This release should be read in conjunction with Gildan’s Management’s Discussion and Analysis and its unaudited condensed interim consolidated financial statements as at and for the three and nine months ended September 29, 2024, which will be filed by Gildan with the Canadian securities regulatory authorities and with the U.S. Securities and Exchange Commission and which will be available on Gildan’s corporate website.
Certain minor rounding variances may exist between the condensed consolidated financial statements and the table summaries contained in this press release.
Supplemental Financial Data
CONSOLIDATED FINANCIAL DATA (UNAUDITED)
(in $ millions, except per share amounts or otherwise indicated)Q3 2024 Q3 2023 Variation
(%)
YTD 2024 YTD 2023 Variation
(%)
Net sales891.1 869.9 2.4 % 2,449.1 2,413.2 1.5 % Gross profit277.6 239.2 16.1 % 750.7 643.5 16.7 % Adjusted gross profit(1)277.6 239.2 16.1 % 750.7 640.4 17.2 % SG&A expenses83.6 82.2 1.7 % 312.5 242.1 29.1 % Adjusted SG&A expenses(1)78.1 82.2 (5.0) % 230.2 242.1 (4.9)% Gain on sale and leaseback- – n.m. – (25.0)n.m. Net insurance gains- – n.m. – (74.2)n.m. Restructuring and acquisition-related costs (recovery)1.1 2.0 (45.0) % (1.0)34.9 n.m. Operating income192.9 155.0 24.5 % 439.3 465.7 (5.7)% Adjusted operating income(1)199.5 157.0 27.1 % 520.6 398.3 30.7 % Adjusted EBITDA(1)236.1 188.3 25.4 % 625.4 489.2 27.8 % Financial expenses30.2 20.7 45.6 % 77.2 58.4 32.1 % Income tax expense31.3 6.9 n.m. 93.5 27.0 n.m. Adjusted income tax expense(1)31.6 6.9 n.m. 81.8 16.5 n.m. Net earnings131.5 127.4 3.2 % 268.5 380.3 (29.4)% Adjusted net earnings(1)137.8 129.4 6.5 % 361.5 323.4 11.8% Basic EPS0.82 0.73 12.3 % 1.62 2.14 (24.3)% Diluted EPS0.82 0.73 12.3 % 1.62 2.14 (24.3)% Adjusted diluted EPS(1)0.85 0.74 14.9 % 2.18 1.82 19.8 % Gross margin(2)31.2 % 27.5 % 3.7 pp 30.7 % 26.7 % 4.0 pp Adjusted gross margin(1)31.2 % 27.5 % 3.7 pp 30.7 % 26.5 % 4.2 pp SG&A expenses as a percentage of net sales(3)9.4 % 9.5 % (0.1) pp 12.8 % 10.0 % 2.8 pp Adjusted SG&A expenses as a percentage of net sales(1)8.8 % 9.5 % (0.7) pp 9.4 % 10.0 % (0.6) pp Operating margin(4)21.7 % 17.8 % 3.9 pp 17.9 % 19.3 % (1.4) pp Adjusted operating margin(1)22.4 % 18.1 % 4.3 pp 21.3 % 16.5 % 4.8 pp Cash flows from (used in) operating activities178.2 305.1 (41.6) % 290.9 307.5 (5.4)% Capital expenditures(29.5)(42.5)(30.5) % (109.8)(172.4)(36.3)% Free cash flow(1)148.9 264.6 (43.7) % 181.6 188.4 (3.6)% As at
(in $ millions, or otherwise indicated)
Sep 29,
2024
Dec 31,
2023
Inventories1,096.71,089.4Trade accounts receivable612.9412.5Net debt(1)1,506.9993.5Net debt leverage ratio(1)1.91.5 (1) This is a non-GAAP financial measure or ratio. Please refer to “Non-GAAP Financial Measures” in this press release.
(2) Gross margin is defined as gross profit divided by net sales.
(3) SG&A expenses as a percentage of net sales is defined as SG&A expenses divided by net sales.
(4) Operating margin is defined as operating income divided by net sales.
n.m. = not meaningful
DISAGGR
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Publish date : 2024-10-30 23:49:00
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