Gildan Activewear Inc

Gildan Activewear Inc (TSX: GIL) is an apparel manufacturer, which sells its products in North America, Asia-Pacific, Latin America, and Europe.  The Company was established in 1984.

Financial Highlights for Q1 FY20

In Q1 FY20, sales decreased significantly by 26.4 per cent to $459.1 million as against the last year comparatives. Adjusted diluted EPS stood at $0.06 per share and GAAP diluted loss per share reported at $0.50. Led by lower market valuations, the impairment of goodwill and intangibles GAAP charge stood at $0.47 per share. The Group has decent liquidity position with over $950 million. It includes cash on hand of over $650 million and available lines of credit of around $300 million. The Company has suspended its share repurchases and quarterly dividend. In the first quarter of 2020, the Group consumed a free cash flow of $235 million, an increase of 83.88 per cent as compared with the corresponding period of the last year (Q1 2019: $127.8 million). The Company ended the first quarter of 2020 with net debt of $1,133.2 million and net debt to trailing twelve months adjusted EBITDA ratio of 2.2 times.

Share Price Commentary

1-Year Chart as at June-03-2020, before the market close (Source: Refinitiv, Thomson Reuters)

On 3^rd June 2020, before the market close, Gildan Activewear Inc shares were trading at CAD 21.36 and were up by 3.14 per cent versus the previous day closing price. Stock 52 weeks High and Low are CAD 53.33/CAD 13.64.

Conclusion

In the financial year 2019, the Group reported a decline in bottom-line items of the income statement from FY2018. Coming to the first quarter of 2020, the Company faced unprecedented challenges presented by the COVID-19 pandemic, which resulted in a 26.4 per cent decline in sales of Q1 FY20 period as compared to the last year same period data. Consequently, the Group has withdrawn its guidance for the financial year 2020. However, the Group has a substantial amount of liquidity and inventory level to manage the short-term disruption. Moreover, the management looks confident to deal with a volatile environment for an extended period and hence, emerge strongly to growth.

Based on the above rationale, we have given a “Watch” recommendation at the current market price of CAD 21.36 (as on 3^rd June 2020, before the market close), while we look for any upcoming catalysts in the near term.

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