Gildan Activewear Reports Record Third Quarter Sales and Earnings Per Share Growth

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Gildan Activewear Reports Record Third Quarter Sales and Earnings Per Share Growth

Gildan Activewear (NYSE: GIL) recently reported its 2024 third-quarter earnings, showcasing a 2.4% year-over-year increase in sales to $891 million, a 22.4% adjusted operating margin, and a 15% rise in adjusted diluted earnings per share (EPS) to $0.85. Despite a challenging macroeconomic environment, the company remains confident in its financial performance and strategic direction, forecasting continued growth and improved profitability through 2025.

Key Highlights:

  • Gildan Activewear reported sales of $891 million, marking a 2.4% year-over-year increase for the third quarter.
  • Adjusted operating margins improved significantly to 22.4%, while adjusted diluted EPS rose 15% to $0.85.
  • The company returned $404 million to shareholders in the third quarter, totaling $643 million for the year.
  • Gildan's outlook includes mid-single-digit sales growth and improved operating margins through 2025.
  • Guidance for full-year 2024 adjusted diluted EPS was raised to a range of $2.97 to $3.02.
  • Capital expenditures are projected to be approximately 5% of net sales, with free cash flow expected to exceed 2023 levels.
  • Despite the gradual phasing out of Under Armour, the company recorded a 6% sales increase in Activewear during the third quarter.
  • Growth trajectory for polar products is expected to continue, showing high single-digit growth over the next three years.

Company Outlook:

  • Mid-single-digit sales growth is anticipated through 2025.
  • Improved annual adjusted operating margins are expected through 2024 and 2025.
  • Full-year 2024 adjusted diluted EPS guidance was raised to $2.97 - $3.02, reflecting a 15.5% to 17.5% year-over-year increase.

Negative Points:

  • The gradual phasing out of Under Armour is anticipated to impact sock sales in the fourth quarter.
  • The overall market is expected to show flat to low single-digit growth in 2025.

Positive Points:

  • Significant progress has been made in the Bangladesh facility and new product technologies.
  • Market share gains in ring-spun and polar products are noted.
  • Positive trends in sales channels across all categories, with innovative soft cotton technology contributing to growth.

Shortcomings:

  • A decline in fleet sales was observed in the third quarter, but a recovery is expected in the fourth quarter.

Q&A Highlights:

  • Management does not believe that upcoming U.S. customs duty changes will significantly disadvantage the company.
  • Cotton prices are expected to remain stable, with cost initiatives in place to alleviate inflationary pressures.
  • The second phase of operations in Bangladesh is planned to be developed by the end of 2025, with operations expected to reach 75% capacity by year-end.

Gildan Activewear's recent earnings report reflects a company on a strong growth trajectory, aided by record sales and EPS in the third quarter of 2024. The company’s focus on innovation, expansion, and ESG initiatives under its Sustainable Growth strategy appears to be yielding results while navigating a complex macroeconomic environment.

Strategic investments, particularly in Bangladesh and new product technologies, are laying the groundwork for sustained success and shareholder returns. While certain segments may be impacted by negative factors such as the phased-out relationship with Under Armour, Gildan’s overall outlook remains positive, with a focus on vertical integration and market share expansion to drive future growth.

InvestingPro Insights: Gildan Activewear's robust performance in the third quarter of 2024 is supported by data from InvestingPro. The company's market capitalization stands at $7.81 billion, reflecting its significant presence in the apparel sector. With a P/E ratio of 19.62, Gildan is trading at a reasonable valuation relative to its earnings, consistent with reported growth and positive outlook.

InvestingPro Tips emphasize several strong directions that complement Gildan's recent earnings report. Notably, the management’s aggressive share buyback approach aligns with the $404 million returned to shareholders in the third quarter, showcasing confidence in Gildan’s financial health and future prospects.

Additionally, Gildan has increased its dividend for four consecutive years, with a current dividend yield of 1.68%. This aligns with the company's commitment to generating strong cash flow and shareholder returns. The 10.22% dividend growth rate over the last twelve months further highlights Gildan's capability to enhance shareholder value.

The company’s profitability is evident in its impressive financial metrics, with a 29.65% gross profit margin and a 17.21% operating income margin over the last twelve months, demonstrating efficient operations and cost management. This focus on improved operating margins mentioned in the earnings call is particularly significant.

Gildan’s stock performance has been striking, with a total one-year return of 78.87% and a year-to-date return of 50.39%. This strong performance is reflected in the stock trading near its 52-week high, confirming the positive sentiments expressed during the earnings call and the raised guidance for full-year 2024 adjusted diluted EPS.

It is worth noting that InvestingPro has listed 16 additional tips for Gildan Activewear, providing investors with a comprehensive analysis of the company's financial health and market position. These insights may be especially valuable for those looking to delve deeper into Gildan's investment potential.