Gildan CEO Vince Tyra is photographed in Toronto on Feb. 1, 2024.Christopher Katsarov/The Globe and Mail
Gildan Activewear Inc. GIL-T hiked its dividend 10 per cent and generated earnings for its latest quarter that slightly beat analyst forecasts as new chief executive Vince Tyra tries to win over investors unsure about his leadership.
The Montreal-based maker of T-shirts and fleeces, which reports in U.S. dollars, tallied a profit of 89 US cents per share for the quarter ended Dec. 31 on sales of US$783-million. Net profit adjusted for one-time gains and costs was 75 US cents per share. On that basis, analysts had expected earnings of 73 US cents on revenue of US$761-million.
The company said it will now pay a quarterly dividend of 20.5 US cents per share, up from 18.6 US cents. It also introduced a new forecast for its financial results this year, saying it will continue to benefit from market share gains in key product categories. It expects to boost adjusted earnings per share to a range of US$2.92 to US$3.07 while revenue growth will be up by low single digits at best and flat at worst.
“Outstanding operational execution by our highly skilled team of employees across our global footprint delivered strong Q4 results,” Mr. Tyra said in a statement. “I see a bright future ahead, where we can leverage our strengths and continue to enhance value for all stakeholders.”
Gildan named Mr. Tyra – a former executive at Fruit of the Loom – as its CEO in December, replacing co-founder Glenn Chamandy. In a presentation to analysts on Wednesday, Mr. Tyra said Gildan remains committed to a growth strategy focused on opportunities to “enhance and re-energize” its major brands, including American Apparel, acquired out of bankruptcy in 2017.
Gildan outlined plans to improve profit margins and reduce capital spending after making significant investments in its factories, including facilities in Bangladesh. Mr. Tyra said Gildan was unlikely to do any acquisitions in the foreseeable future.
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In a report, analyst George Doumet at Scotiabank said: “While we acknowledge that there’s lots of noise in the interim, we like the valuation (trading at a 20 per cent discount to historical average) and continue to see a robust runway for earnings growth.”
Gildan’s share price dropped sharply in December when the company dismissed Mr. Chamandy after a 40-year tenure, the past 20 years as CEO.
The company has since become engulfed in an intense power struggle pitting Gildan’s board, which insists it was entirely justified in sacking Mr. Chamandy, and several major shareholders pushing for his return. Those shareholders say the board failed in its duties because it abruptly terminated a proven CEO and installed a replacement who is not qualified for the job.
Led by U.S. investment firm Browning West, nine dissident investors holding an estimated 35 per cent of Gildan’s stock have called publicly for Mr. Chamandy’s reinstatement. They say the executive has delivered solid returns for them and should have been heavily involved in the succession process.
The board said the current situation could have been avoided, but Mr. Chamandy refused to co-operate in a smooth transfer of leadership. The current and former CEOs know each other and were friends, adding an extra dimension to the battle playing out for control of the company.
Browning West, which holds a roughly 5-per-cent stake in Gildan, had been seeking the special meeting of shareholders as a quick way to remove eight of Gildan’s 11 sitting directors and replace them with its own nominees. It filed a formal request to Gildan on Jan. 9 for that meeting but the company has challenged its legal validity.
The investment firm, which calls the legal challenge a waste of Gildan’s money, now intends to present its board slate at the annual general meeting instead, which Gildan has scheduled for May 28. Its two founders recently met with Mr. Tyra but were not satisfied with his answers to the questions they asked about his past performance.
“We came into it with an open mind,” Browning West co-founder Peter Lee said of their meeting with Mr. Tyra. “It was very scary as a shareholder considering we have a lot of our personal money invested in Gildan, and I came out of that meeting more worried than I was before.”
Montreal-based Gildan was founded by Mr. Chamandy’s family, and he delivered significant returns for investors over much of that time as CEO.
Gildan said the businessman sought to entrench himself and that the board gradually lost faith in his ability to lead the company, in part because he had become distracted by personal pursuits. As one example, directors cited the former CEO’s development of a golf course in Barbados. Gildan’s board also alleged Mr. Chamandy proposed takeovers that did not fit with the clothing company’s growth strategy.
Gildan produces most of its clothing at factories in Latin America and recently began operating a new plant in Bangladesh. Incorporated in 1984, the Montreal-based company operates internationally but generates nearly 90 per cent of its sales in the United States, and has an $8-billion market capitalization, making it one of Canada’s largest consumer product businesses.
On Wednesday, Gildan stock rose more than 3 per cent after the company announced its financial results.