Gildan Activewear Inc. (GIL: TSX and NYSE) today provided an update
in response to the impact of the coronavirus pandemic (COVID-19) on
its business and operations.
The spread of COVID-19 continues to heighten and is having a
significant impact on global economic activity. As it relates
to areas of Gildan’s business, our first priority is the health and
welfare of our employees, customers, suppliers and other partners
which we have been working to address. We have also started
to see a meaningful deceleration in demand in the imprintables
channel given measures that governments, companies and individuals
are taking to limit the spread of COVID-19, including the
limitation of social gatherings, travel restrictions and the
cancellation of various sporting, entertainment, promotional, and
cultural events, amongst others. Additionally, although we have not
yet seen as significant a deceleration of demand for our products
in all the retail channels that we serve, we expect the multitude
of recently announced temporary store closures and social
distancing measures being recommended by governments and health
protection agencies will also continue to slow retail demand.
Effective March 17, the government of Honduras mandated a 7-day
closure of all private enterprises operating in the country which
has now been extended to March 29. Governments of some of the
other countries in which we operate are also issuing similar
directives to combat the spread of COVID-19. Accordingly,
given the impact of all these factors, the Company announced today
that it is temporarily suspending production at all of its
manufacturing facilities until mid-April. This will allow us
to respect government recommendations and align production and
inventory levels with current demand requirements. All other
areas of our business, including our distribution centres which
service the various regions where we sell our products will remain
open for the time being with good inventory availability levels to
service our customers, operating with appropriate measures in place
to protect our employees, including remote working arrangements for
many of our office staff.
Given the unprecedented nature of the COVID-19 situation which
is changing rapidly, the Company will continue to monitor and
adjust its plans for its business as the situation evolves.
At the end of the fourth quarter of 2019 Gildan had a net
debt to adjusted EBITDA leverage ratio1 of 1.6 times. As a
precautionary measure on March 17, we elected to draw down on the
remaining available portion of our revolving long-term bank credit
facility, positioning us with close to $600 million of liquidity.
Accordingly, we have a high degree of financial flexibility
as we move forward to deal with COVID-19 challenges given our fixed
cost structure and focus on expense, capex and working capital
management, as well as our balance sheet and access to liquidity.
The Company issued its first quarter and full year 2020 guidance
on February 20, 2020, which did not include the impact of COVID-19
disruptions. Due to the heightened uncertainty relating to the
impacts of COVID-19, the Company is withdrawing its first quarter
and full year 2020 financial guidance. The Company expects to
provide a further update when it releases its first quarter 2020
earnings results.
Gildan is working diligently across all areas of our business to
safeguard our people and the continuity of our business, while
maintaining support to all our customers. We have been able to
successfully navigate through difficult times over the years and
adapt to changing environments, which gives us confidence that our
strong business model, financial position and resilience will
continue to position us well for long-term success as we emerge
from the COVID-19 crisis.
Non-GAAP Financial MeasuresThis press release
includes references to certain non-GAAP financial measures as
described below. These non-GAAP measures do not have any
standardized meanings prescribed by International Financial
Reporting Standards (IFRS) and are therefore unlikely to be
comparable to similar measures presented by other companies.
Accordingly, they should not be considered in isolation. The terms
and definitions of the non-GAAP measures used in this press release
are provided below.
Net debt leverage ratioThe net debt leverage ratio is defined as
the ratio of net indebtedness to pro-forma adjusted EBITDA for the
trailing twelve months. The pro-forma adjusted EBITDA for the
trailing twelve months reflects business acquisitions made during
the period, as if they had occurred at the beginning of the
trailing twelve-month period. The Company has set a fiscal year end
net debt leverage target ratio of one to two times pro-forma
adjusted EBITDA. The Company uses and believes that certain
investors and analysts use the net debt leverage ratio to measure
the financial leverage of the Company. Please refer to “Definition
and reconciliation of non-GAAP financial measures” in the Company’s
2019 Management’s Discussion and Analysis for the reconciliation of
net debt leverage ratio to its most directly comparable IFRS
measure.
Conference Call InformationGildan Activewear
Inc. will hold a conference call to discuss its update in response
to the impact of COVID-19 on its business and operations today at
8:30 AM ET. A live audio webcast of the conference call, as well as
a replay, will be available at the following link:
https://gildancorp.com/en/investors/events-and-presentations/. The
conference call can be accessed by dialing toll-free (877) 282-2924
(Canada & U.S.) or (470) 495-9480 (international) and entering
passcode 9786513#. A replay will be available for 7 days starting
at 11:30 AM ET by dialing toll-free (855) 859-2056 (Canada &
U.S.) or (404) 537-3406 (international) and entering the same
passcode.
Caution Concerning Forward-Looking
StatementsCertain statements included in this press
release constitute “forward-looking statements” within the meaning
of the U.S. Private Securities Litigation Reform Act of 1995 and
Canadian securities legislation and regulations and are subject to
important risks, uncertainties, and assumptions. This
forward-looking information includes, amongst others, information
with respect to our objectives and the strategies to achieve these
objectives, as well as information with respect to our beliefs,
plans, expectations, anticipations, estimates, and intentions.
Forward-looking statements generally can be identified by the use
of conditional or forward-looking terminology such as “may”,
“will”, “expect”, “intend”, “estimate”, “project”, “assume”,
“anticipate”, “plan”, “foresee”, “believe”, or “continue”, or the
negatives of these terms or variations of them or similar
terminology. We refer you to the Company’s filings with the
Canadian securities regulatory authorities and the U.S. Securities
and Exchange Commission, as well as the risks described under the
“Financial risk management”, “Critical accounting estimates and
judgments”, and “Risks and uncertainties” sections of our most
recent Management’s Discussion and Analysis for a discussion of the
various factors that may affect the Company’s future results.
Material factors and assumptions that were applied in drawing a
conclusion or making a forecast or projection are also set out
throughout such document and this press release.
Forward-looking information is inherently uncertain and the
results or events predicted in such forward-looking information may
differ materially from actual results or events. Material factors,
which could cause actual results or events to differ materially
from a conclusion, forecast, or projection in such forward-looking
information, include, but are not limited to:
- the magnitude and length of economic disruption as a result of
the worldwide coronavirus (COVID-19) outbreak;
- our ability to implement our growth strategies and plans;
- our ability to successfully integrate acquisitions and realize
expected benefits and synergies;
- the intensity of competitive activity and our ability to
compete effectively;
- changes in general economic and financial conditions globally
or in one or more of the markets we serve;
- our reliance on a small number of significant customers;
- the fact that our customers do not commit to minimum quantity
purchases;
- our ability to anticipate, identify, or react to changes in
consumer preferences and trends;
- our ability to manage production and inventory levels
effectively in relation to changes in customer demand;
- fluctuations and volatility in the price of raw materials used
to manufacture our products, such as cotton, polyester fibres, dyes
and other chemicals;
- our reliance on key suppliers and our ability to maintain an
uninterrupted supply of raw materials and finished goods;
- the impact of climate, political, social, and economic risks,
natural disasters, and pandemics, such as the COVID-19 outbreak, in
the countries in which we operate or sell to, or from which we
source production;
- disruption to manufacturing and distribution activities due to
such factors as operational issues, disruptions in transportation
logistic functions, labour disruptions, political or social
instability, bad weather, natural disasters, pandemics, such as the
COVID-19 outbreak, and other unforeseen adverse events;
- compliance with applicable trade, competition, taxation,
environmental, health and safety, product liability, employment,
patent and trademark, corporate and securities, licensing and
permits, data privacy, bankruptcy, anti-corruption and other laws
and regulations in the jurisdictions in which we operate;
- the imposition of trade remedies, or changes to duties and
tariffs, international trade legislation, bilateral and
multilateral trade agreements and trade preference programs that
the Company is currently relying on in conducting its manufacturing
operations or the application of safeguards thereunder;
- factors or circumstances that could increase our effective
income tax rate, including the outcome of any tax audits or changes
to applicable tax laws or treaties;
- changes to and failure to comply with consumer product safety
laws and regulations;
- changes in our relationship with our employees or changes to
domestic and foreign employment laws and regulations;
- negative publicity as a result of actual, alleged, or perceived
violations of labour and environmental laws or international labour
standards, or unethical labour or other business practices by the
Company or one of its third-party contractors;
- changes in third-party licensing arrangements and licensed
brands;
- our ability to protect our intellectual property rights;
- operational problems with our information systems as a result
of system failures, viruses, security and cyber security breaches,
disasters, and disruptions due to system upgrades or the
integration of systems;
- an actual or perceived breach of data security;
- our reliance on key management and our ability to attract
and/or retain key personnel;
- changes in accounting policies and estimates; and
- exposure to risks arising from financial instruments, including
credit risk on trade accounts receivables and other financial
instruments, liquidity risk, foreign currency risk, and interest
rate risk, as well as risks arising from commodity prices.
These factors may cause the Company’s actual performance and
financial results in future periods to differ materially from any
estimates or projections of future performance or results expressed
or implied by such forward-looking statements. Forward-looking
statements do not take into account the effect that transactions or
non-recurring or other special items announced or occurring after
the statements are made may have on the Company’s business. For
example, they do not include the effect of business dispositions,
acquisitions, other business transactions, asset write-downs, asset
impairment losses, or other charges announced or occurring after
forward-looking statements are made. The financial impact of such
transactions and non-recurring and other special items can be
complex and depends on the facts particular to each of them.
There can be no assurance that the expectations represented by
our forward-looking statements will prove to be correct. The
purpose of the forward-looking statements is to provide the reader
with a description of management’s expectations regarding the
Company’s future financial performance and may not be appropriate
for other purposes. Furthermore, unless otherwise stated, the
forward-looking statements contained in this press release are made
as of the date of this press release, and we do not undertake any
obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information,
future events, or otherwise unless required by applicable
legislation or regulation. The forward-looking statements contained
in this press release are expressly qualified by this cautionary
statement.
About GildanGildan is a leading manufacturer of
everyday basic apparel which markets its products in North America,
Europe, Asia-Pacific, and Latin America, under a diversified
portfolio of Company-owned brands, including Gildan®, American
Apparel®, Comfort Colors®, Gildan® Hammer™, Prim + Preux®,
GoldToe®, Anvil® by Gildan®, Alstyle®, Secret®, Silks®, Kushyfoot®,
Secret Silky®, Therapy Plus®, Peds® and MediPeds®, and under the
Under Armour® brand through a sock licensing agreement providing
exclusive distribution rights in the United States and Canada. Our
product offering includes activewear, underwear, socks, hosiery,
and legwear products sold to a broad range of customers, including
wholesale distributors, screenprinters or embellishers, as well as
to retailers that sell to consumers through their physical stores
and/or e-commerce platforms, and to global lifestyle brand
companies.
Gildan owns and operates vertically-integrated, large-scale
manufacturing facilities which are primarily located in Central
America, the Caribbean Basin, North America, and Bangladesh. With
approximately 53,000 employees worldwide, Gildan operates with a
strong commitment to industry-leading labour and environmental
practices throughout its supply chain in accordance with its
comprehensive Genuine Responsibility® program embedded in the
Company's long-term business strategy. More information about the
Company and its corporate citizenship practices and initiatives can
be found at www.gildancorp.com and
www.genuineresponsibility.com, respectively.
Investor inquiries:Sophie ArgiriouVice
President, Investor Communications(514)
343-8815sargiriou@gildan.com
Media inquiries:Genevieve GosselinDirector,
Corporate Communications and Marketing(514)
343-8814ggosselin@gildan.com
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