By
Bloomberg
Published
Feb 22, 2024
Clothing maker Gildan Activewear Inc., embroiled in a fight with shareholders over the firing of its longtime CEO, increased its dividend 10% and reported earnings that beat analysts’ forecasts.
The Montreal-based company, which owns the American Apparel brand, reported earnings of 75 cents per share on an adjusted basis for the fourth quarter, beating the average estimate by 2 cents. The shares rose as much as 8.1% in Toronto.
For the full year in 2023, Gildan’s earnings per share fell 17%, partly because it saw a drop in activewear sales, its most important segment.
Gildan’s board is involved in a nasty dispute with several institutional shareholders and former Chief Executive Officer Glenn Chamandy, who was sacked in December over disagreements about the company’s succession plan and strategy. Some of its largest investors, led by Browning West LP, are trying to vote out the board and reinstate Chamandy. The matter may be decided at a shareholder meeting scheduled for May 28.
The company warned analysts at the start of Wednesday’s conference call that executives would only answer questions about the financial results.
Last year was “a year of strong progress on Gildan’s sustainable growth strategy despite an overall challenging macroeconomic backdrop,” Vince Tyra, the new CEO, said on the call. “This foundation, together with a solid balance sheet, puts us in an enviable position.”
Gildan is projecting revenue growth will be “flat to up low-single digits” in 2024 as the industry is impacted by soft demand, Chief Financial Officer Rhodri Harries told analysts. Its corporate tax rate might jump because of regulatory changes, the company said, but earnings per share should increase more than 13% and free cash flow should rise over last year’s levels.
“Gildan is at an inflection point with its earnings profile, and should see attractive upside to the share price should the CEO succession resolution come to fruition in a manner in the best interest of all stakeholders,” TD Cowen analyst Brian Morrison said in a note to investors.
Read more on the Gildan governance battle
The dismissal of Chamandy in December led to $6.3 million in expenses, including termination costs and advisory and legal fees for “shareholder matters.”
When asked about long-term growth opportunities, Tyra said a strategy would come this year, and would be focused on “tweaks and enhancement” — such as leveraging the American Apparel brand — and organic growth.
Gildan was up nearly 4% to C$47.59 as of 10:48 a.m. in Toronto, the highest since Dec. 8 — the last trading day before Chamandy was ousted.