Gildan Activewear Inc. (GIL: TSX and NYSE) today announced its
results for the second quarter ended July 4, 2021. The Company
also announced the approval by its Board of Directors for the
reinstatement of its share buyback program to repurchase up to 5%
of its issued and outstanding common shares.
“Our business continued to build momentum during the second
quarter as economic activity in North America trended positively
and the power of our Back to Basics strategy continued to drive
stronger profitability,” said Gildan President and CEO, Glenn J.
Chamandy. “Once again, our team demonstrated exceptional
operational capability by delivering on our targets while
navigating through a tight supply chain environment.”
We generated sales of $747 million in the second quarter, up
225% over last year and down approximately 7% from record second
quarter 2019 sales. Our overall margin performance in the quarter
was strong, improving both sequentially and from pre-pandemic
levels in the second quarter of 2019. Gross margin totaled 32.2%
and adjusted gross margin1 was 30.5%, which, when excluding the
one-time 300 basis points (bps) benefit from the USDA pandemic
assistance payment in the first quarter of 2021, was up
sequentially by 320 bps and 240 bps, respectively. Gross margin
performance also improved significantly over the second quarter of
2019, up 440 bps and 270 bps on an adjusted basis. Selling, general
and administrative (SG&A) expenses in the quarter came in at
10.7% of sales, improving 170 bps from the first quarter of 2021
and 80 bps from 11.5% in the second quarter of 2019. Consequently,
we delivered GAAP diluted EPS of $0.74 and adjusted diluted EPS of
$0.68, reflecting a significant recovery over the loss incurred
last year due to the effects of the onset of the pandemic. Compared
to the second quarter of 2019, EPS and adjusted diluted EPS in the
quarter were up 51% and 21%, respectively.
Free cash flow of $208 million was a record for a second
quarter, bringing our year-to-date total to $246 million and our
available liquidity position to approximately $1.3 billion. Net
debt1 further declined to $362.5 million and our net debt to
adjusted EBITDA1 ratio decreased to 0.6 from 2.1 at the end of the
first quarter this year and 3.5 at the end of 2020. With the
Company's net debt leverage ratio1 now below its historical target
range of one to two times net debt to adjusted trailing twelve
months EBITDA1, driven by the strong recovery to date and the
progress of our Back to Basics strategy, and with the Company's
prospects for continued free cash flow generation, our Board
approved the resumption of our share buyback program to repurchase
up to 5% of the Company's outstanding shares effective August 9,
2021.
Q2 2021 Operating Results Net sales for the
second quarter ending July 4, 2021, totaled $747.2 million, up
225.3% over the prior year, driven primarily by higher sales
volumes and favourable product-mix. Activewear sales in the second
quarter of 2021 totaled $597.1 million, up 353.7% over the prior
year. The increase reflected significantly higher unit sales
volumes in all markets, particularly in imprintables, driven by the
strong recovery in point-of-sales (POS) and the non-recurrence of
significant distributor inventory destocking which occurred in the
second quarter last year. The recovery in demand also drove higher
unit sales for our activewear products sold in retail channels.
Sales in the hosiery and underwear category of $150.0 million in
the quarter were up 52.9% over the prior year driven by double
digit POS growth in both socks and underwear, the non-recurrence of
retailer inventory destocking and favourable product-mix.
Sales in the quarter compared to pre-COVID levels in the second
quarter of 2019 were down 6.8%, due primarily to lower activewear
sales volumes, unfavourable mix and lower net selling prices in
imprintables, offset in part by higher underwear sales volumes.
While imprintables demand levels have not fully recovered to
pre-pandemic levels, we were pleased to see improving POS trends in
the quarter, in particular in North America. Our overall
imprintables POS was down approximately 8% compared to the same
period in 2019, with POS in North America down in the single-digit
range, while POS in international imprintables markets remained
weak, down close to 30% compared to the same period in 2019. In
retail, overall POS was up during the quarter compared to the
second quarter of 2019.
In the second quarter of 2021, we generated gross profit of
$240.8 million, or 32.2% of sales, and adjusted gross profit1 of
$228.1 million, or 30.5% of sales, after excluding a net insurance
gain of $12.7 million in the quarter. This compared to a gross loss
of $148.5 million and $122.5 million on an adjusted basis1 in the
second quarter last year. The significant improvement over 2020 was
mainly due to the strong recovery in sales, the non-recurrence of
COVID and Back to Basics-related charges incurred in the prior year
quarter, favourable product-mix, lower raw material costs, as well
as cost benefits stemming from our Back to Basics initiatives.
Compared to the second quarter of 2019, gross margin and
adjusted gross margin in the second quarter of 2021 were up 440 bps
and 270 bps, respectively, from gross margin and adjusted gross
margin of 27.8%, mainly driven by lower cotton costs and Back to
Basics cost savings, which more than offset lower imprintables
selling prices compared to 2019.
SG&A expenses for the second quarter of $79.7 million were
up $14.8 million compared to SG&A expenses of $64.9 million
last year. The year-over-year increase was primarily due to higher
variable compensation expenses and higher volume-driven
distribution costs, partially offset by cost savings stemming from
our Back to Basics initiatives. SG&A expenses as a percentage
of sales improved to 10.7% compared to 28.3% of sales last year
driven by SG&A leverage from higher sales and Back to Basics
cost benefits.
Compared to the second quarter of 2019, SG&A expenses were
down approximately $12 million, largely attributable to cost
benefits stemming from our SG&A rationalization efforts in
connection with our Back to Basics strategy. As a percentage of
sales, SG&A expenses of 10.7% in the quarter improved by 80 bps
compared to 11.5% of sales in the second quarter of 2019.
We generated operating income of $159.7 million, or 21.4% of
sales and adjusted operating income1 of $148.6 million, or 19.9% of
sales, in the second quarter of 2021 compared to an operating loss
of $236.1 million and $181.1 million on an adjusted basis1 last
year. The significant recovery was driven by higher sales, strong
gross margin performance and SG&A leverage. Net financial
expenses were down $9.6 million over the prior year mainly due
to lower average debt levels and the non-recurrence of fees
incurred in connection with the amendments made to our long-term
debt facilities last year, which offset higher income taxes.
Consequently, we reported net earnings of $146.4 million, or $0.74
per share on a diluted basis, for the three months ended
July 4, 2021 and adjusted net earnings1 of $135.3 million, or
$0.68 per share on a diluted basis, compared to a net loss of
$249.7 million, or $1.26 per diluted share, and an adjusted net
loss1 of $196.6 million, or $0.99 per diluted share, respectively,
in the second quarter last year.
Compared to the second quarter of 2019, adjusted operating
margin of 19.9% in the second quarter of 2021 was up 360 bps from
16.3%, driven by stronger gross margin and SG&A performance.
While sales levels have not fully recovered to pre-pandemic levels,
the strength of our operating margin performance delivered in the
quarter is a testament that our Back to Basics strategy is working
and is driving more profitable growth. Consequently, we delivered
adjusted diluted EPS growth of 21% in the quarter compared to
adjusted diluted EPS of $0.56 in the second quarter of 2019.
We generated free cash flow of $208 million, a record for a
second quarter, compared to $177 million last year and $26 million
in 2019. The year-over-year increase in free cash flow was
primarily due to higher operating earnings and an $18 million net
cash impact from insurance proceeds, partly offset by higher
accounts receivable balances driven by the sales recovery, a lower
inventory drawdown compared to last year when we serviced sales
with existing inventory levels while facilities were closed, as
well as higher capital expenditures relating to manufacturing
capacity. The Company ended the second quarter of 2021 with net
debt of $362.5 million and a net debt leverage ratio of 0.6 times
net debt to trailing twelve months adjusted EBITDA, below the
Company's historical target leverage range and down from 2.1 at the
end of the first quarter of 2021.
Year-to-date Operating ResultsNet sales for the
six months ended July 4, 2021, of $1,336.7 million were up
94.1% over the same period last year, reflecting increases of
114.5% in activewear sales and 38.1% in the hosiery and underwear
category. The year-over-year increase in activewear sales where we
generated sales of $1,081.7 million was primarily driven by volume
increases in all channels and favourable product-mix. Higher
imprintables sales volumes were driven by positive POS and the
impact of the non-recurrence of destocking by distributors which
occurred in the same period last year. The increase in the hosiery
and underwear category where we generated sales of $255.0 million
in the first half of 2021 reflected strong growth both in underwear
and in sales of sock products, as well as favourable product
mix.
We generated gross profit of $429.3 million, or 32.1% of sales,
and adjusted gross profit of $411.5 million, or 30.8% of sales for
the first half of the year compared to a gross loss of $41.9
million and an adjusted gross loss of $7.9 million for the same
periods last year. The significant year-over-year improvement in
adjusted gross margin was mainly due to the non-recurrence of COVID
and certain Back to Basics related charges incurred in the first
half of 2020, cost benefits from our Back to Basics initiatives,
favourable product mix and lower raw material costs.
SG&A expenses in the first six months of 2021 totaled $153.1
million, or 11.5% of sales, up $14.2 million from
$138.9 million, or 20.2% of sales, in the same period last
year reflecting increases in variable compensation expenses and
volume-driven distribution costs, partly offset by cost savings
stemming from our Back to Basics initiatives.
On a year-to-date basis, we generated operating income of $273.5
million, or 20.5% of sales compared to an operating loss of $328.4
million last year. Adjusted operating income totaled $258.8
million, or 19.4% of sales, compared to an adjusted operating loss
of $161.2 million last year, driven by the significant
year-over-year sales recovery, strong adjusted gross margin
performance and SG&A leverage. The increase in operating income
also reflected the non-recurrence of the goodwill impairment charge
of $94.0 million incurred in the first quarter of 2020 and lower
year-over-year restructuring and acquisition related costs
primarily related to our Back to Basics initiatives. Consequently,
we reported net earnings of $245.0 million, or $1.23 per share on a
diluted basis and adjusted net earnings of $230.3 million or
$1.16 per diluted share, for the first half of 2021, compared to a
net loss of $349.0 million, or $1.76 per diluted share, and an
adjusted net loss of $185.4 million, or $0.93 per diluted share,
respectively, in the same period last year.
Current Market EnvironmentWe are encouraged by
the recovery we have seen in our business in North America,
although the recovery outside of North America remains weak.
Further, on the supply chain side, we continue to monitor U.S.
labour shortages which have been affecting yarn production and our
ability to rebuild higher inventory levels. We are also seeing
tightness in raw material inputs and transportation-related factors
globally which are creating inflationary pressure. Consequently, we
remain cautiously optimistic as the recovery progresses. We are
also pleased on how our Back to Basics strategy is unfolding and
delivering results, and we remain confident that it is positioning
us well to capitalize on market share opportunities and create
value for our shareholders over the long-term, as we continue to
move forward.
Declaration of Quarterly DividendThe Board of
Directors has declared a cash dividend of $0.154 per share, payable
on September 20, 2021 to shareholders of record as of August 26,
2021. This dividend is an “eligible dividend” for the purposes of
the Income Tax Act (Canada) and any other applicable provincial
legislation pertaining to eligible dividends.
Normal Course Issuer BidGildan received
approval from the Toronto Stock Exchange (TSX) to renew its normal
course issuer bid (NCIB) commencing on August 9, 2021 to purchase
for cancellation up to 9,926,177 common shares, representing 5% of
Gildan’s issued and outstanding common shares. As of July 31, 2021,
Gildan had 198,523,552 common shares issued and outstanding.
Gildan is authorized to make purchases under the NCIB until
August 8, 2022, in accordance with the requirements of the TSX.
Purchases will be made by means of open market transactions on both
the TSX and the New York Stock Exchange (NYSE), or alternative
trading systems, if eligible, or by such other means as may be
permitted by securities regulatory authorities, including
pre-arranged crosses, exempt offers, private agreements under an
issuer bid exemption order issued by securities regulatory
authorities and block purchases of common shares. The average daily
trading volume of common shares (ADTV) on the TSX for the six-month
period ended July 31, 2021 was 359,928. Consequently, and in
accordance with the requirements of the TSX, Gildan may purchase up
to a maximum of 89,982 common shares daily through TSX facilities,
which represents 25% of the ADTV for the most recently completed
six calendar months.
The price to be paid by Gildan for any common shares will be the
market price at the time of the acquisition, plus brokerage fees,
and purchases made under an issuer bid exemption order will be at a
discount to the prevailing market price in accordance with the
terms of the order. The actual number of common shares purchased
under the NCIB and the timing of such purchases will be at Gildan's
discretion and shall be subject to the limitations set out in the
TSX Company Manual.
Under its previous NCIB, which entered into effect on February
27, 2020 and which expired on February 26 2021, Gildan was
authorized to repurchase for cancellation up to 9,939,154 common
shares. No shares were repurchased during the previous NCIB.
Gildan will enter into an automatic securities purchase plan
(ASPP) with a designated broker in relation to the NCIB on or about
the commencement date of the NCIB. The ASPP will allow for the
purchase of common shares under the NCIB, subject to certain
trading parameters, at times when Gildan ordinarily would not be
permitted to purchase its common shares due to applicable
regulatory restrictions or self-imposed trading black-out periods.
Outside of the pre-determined black-out periods, common shares may
be purchased under the NCIB based on the discretion of the
Company’s management, in compliance with TSX rules and applicable
securities laws.
Gildan’s management and the Board of Directors believe the
repurchase of common shares represents an appropriate use of
Gildan’s financial resources and that share repurchases under the
NCIB will not preclude Gildan from continuing to pursue organic
growth and complementary acquisitions.
Disclosure of Outstanding Share DataAs at
July 31, 2021, there were 198,523,552 common shares issued and
outstanding along with 3,435,683 stock options and 17,898 dilutive
restricted share units (Treasury RSUs) outstanding. Each stock
option entitles the holder to purchase one common share at the end
of the vesting period at a pre-determined option price. Each
Treasury RSU entitles the holder to receive one common share from
treasury at the end of the vesting period, without any monetary
consideration being paid to the Company.
Conference Call InformationGildan Activewear
Inc. will hold a conference call to discuss the Company's second
quarter 2021 results today at 8:30 AM ET. A live audio webcast
of the conference call, as well as a replay, will be available on
its corporate site or on the following link:
https://gildancorp.com/en/investors/events-and-presentations/. The
conference call can be accessed by dialing (877) 282-2924 (Canada
& U.S.) or (470) 495-9480 (international) and entering passcode
8268405#. A replay will be available for 7 days starting at 11:30
AM ET by dialing (855) 859-2056 (Canada & U.S.) or
(404) 537-3406 (international) and entering the same
passcode.
This release should be read in conjunction with Gildan’s
Management’s Discussion and Analysis and its unaudited condensed
interim consolidated financial statements as at and for the three
and six months ended July 4, 2021, which will be filed by Gildan
with the Canadian securities regulatory authorities and with the
U.S. Securities and Exchange Commission and which will be available
on Gildan’s corporate website.
Certain minor rounding variances may exist between the unaudited
condensed interim consolidated financial statements and the table
summaries contained in this press release.
Supplemental Financial Data
CONSOLIDATED FINANCIAL DATA (UNAUDITED)
(in $ millions, except per share amounts or otherwise
indicated) |
Q2 2021 |
|
|
Q2 2020 |
|
|
Variation (%) |
|
YTD 2021 |
|
|
YTD 2020 |
|
|
Variation (%) |
Net sales |
747.2 |
|
|
229.7 |
|
|
225.3 |
|
% |
|
1,336.7 |
|
|
688.8 |
|
|
94.1 |
|
% |
Gross profit (loss) |
240.8 |
|
|
(148.5 |
) |
|
n.m. |
|
429.3 |
|
|
(41.9 |
) |
|
n.m. |
Adjusted gross profit
(loss)(1) |
228.1 |
|
|
(122.5 |
) |
|
n.m. |
|
411.5 |
|
|
(7.9 |
) |
|
n.m. |
SG&A expenses |
79.7 |
|
|
64.9 |
|
|
22.8 |
|
% |
|
153.1 |
|
|
138.9 |
|
|
10.2 |
|
% |
(Reversal of impairment)
Impairment of trade accounts receivable |
(0.2 |
) |
|
(6.3 |
) |
|
(96.8 |
) |
% |
|
(0.3 |
) |
|
14.5 |
|
|
n.m. |
Restructuring and
acquisition-related costs |
1.6 |
|
|
29.0 |
|
|
(94.5 |
) |
% |
|
3.1 |
|
|
39.2 |
|
|
(92.1 |
) |
% |
Impairment of goodwill and
intangible assets |
— |
|
|
— |
|
|
— |
|
— |
|
|
94.0 |
|
|
n.m. |
Operating income (loss) |
159.7 |
|
|
(236.1 |
) |
|
n.m. |
|
273.5 |
|
|
(328.4 |
) |
|
n.m. |
Adjusted operating income
(loss)(1) |
148.6 |
|
|
(181.1 |
) |
|
n.m. |
|
258.8 |
|
|
(161.2 |
) |
|
n.m. |
Adjusted EBITDA(1) |
184.4 |
|
|
(137.2 |
) |
|
n.m. |
|
330.2 |
|
|
(87.0 |
) |
|
n.m. |
Financial expenses |
6.5 |
|
|
16.1 |
|
|
(59.6 |
) |
% |
|
17.3 |
|
|
24.0 |
|
|
(27.9 |
) |
% |
Income tax expense
(recovery) |
6.7 |
|
|
(2.5 |
) |
|
n.m. |
|
11.1 |
|
|
(3.4 |
) |
|
n.m. |
Net earnings (loss) |
146.4 |
|
|
(249.7 |
) |
|
n.m. |
|
245.0 |
|
|
(349.0 |
) |
|
n.m. |
Adjusted net earnings
(loss)(1) |
135.3 |
|
|
(196.6 |
) |
|
n.m. |
|
230.3 |
|
|
(185.4 |
) |
|
n.m. |
|
|
|
|
|
|
|
|
Basic EPS |
0.74 |
|
|
(1.26 |
) |
|
n.m. |
|
1.23 |
|
|
(1.76 |
) |
|
n.m. |
Diluted EPS |
0.74 |
|
|
(1.26 |
) |
|
n.m. |
|
1.23 |
|
|
(1.76 |
) |
|
n.m. |
Adjusted diluted EPS(1) |
0.68 |
|
|
(0.99 |
) |
|
n.m. |
|
1.16 |
|
|
(0.93 |
) |
|
n.m. |
|
|
|
|
|
|
|
|
Gross margin |
32.2 |
|
% |
(64.6 |
) |
% |
96.8 pp |
|
32.1 |
|
% |
(6.1 |
) |
% |
38.2 pp |
Adjusted gross margin(1) |
30.5 |
|
% |
(52.2 |
) |
% |
82.7 pp |
|
30.8 |
|
% |
(1.1 |
) |
% |
31.9 pp |
SG&A expenses as a
percentage of sales |
10.7 |
|
% |
28.3 |
|
% |
(17.6) pp |
|
11.5 |
|
% |
20.2 |
|
% |
(8.7) pp |
Operating margin |
21.4 |
|
% |
(102.8 |
) |
% |
124.2 pp |
|
20.5 |
|
% |
(47.7 |
) |
% |
68.2 pp |
Adjusted operating
margin(1) |
19.9 |
|
% |
(77.2 |
) |
% |
97.1 pp |
|
19.4 |
|
% |
(23.0 |
) |
% |
42.4 pp |
|
|
|
|
|
|
|
|
Cash flows from (used in)
operating activities |
200.3 |
|
|
181.8 |
|
|
10.2 |
|
% |
|
220.9 |
|
|
(27.6 |
) |
|
n.m. |
Capital expenditures |
(28.6 |
) |
|
(5.2 |
) |
|
n.m. |
|
(41.6 |
) |
|
(30.8 |
) |
|
35.1 |
|
% |
Free
cash flow(1) |
208.3 |
|
|
177.1 |
|
|
17.6 |
|
% |
|
245.9 |
|
|
(57.9 |
) |
|
n.m. |
n.m. = not
meaningful |
As at |
Jul 4, 2021 |
Jan 3, 2021 |
Inventories |
720.7 |
728.0 |
Trade accounts receivable |
343.2 |
196.5 |
Net debt(1) |
362.5 |
577.2 |
Net
debt leverage ratio(1)(2) |
0.6 |
3.5 |
|
(1) Please refer
to "Definition and reconciliation of non-GAAP financial measures"
in this press release. |
(2) The Company's
net debt to EBITDA ratio for purposes of its loan and note
agreements was 0.7 at July 4, 2021. |
DISAGGREGATION OF REVENUE
Net sales by major product group were as follows:
(in $ millions, or otherwise indicated) |
Q2 2021 |
Q2 2020 |
Variation (%) |
YTD 2021 |
YTD 2020 |
Variation (%) |
Activewear |
597.1 |
131.6 |
353.7 |
% |
1,081.7 |
504.2 |
114.5 |
% |
Hosiery and underwear |
150.0 |
98.1 |
52.9 |
% |
255.0 |
184.6 |
38.1 |
% |
|
747.1 |
229.7 |
225.3 |
% |
1,336.7 |
688.8 |
94.1 |
% |
Net sales were derived from customers located in the following
geographic areas:
(in $ millions, or otherwise indicated) |
Q2 2021 |
Q2 2020 |
Variation (%) |
YTD 2021 |
YTD 2020 |
Variation (%) |
United States |
643.0 |
185.7 |
246.3 |
% |
1,151.7 |
575.1 |
100.3 |
% |
Canada |
25.1 |
8.6 |
191.9 |
% |
47.7 |
24.9 |
91.6 |
% |
International |
79.0 |
35.4 |
123.2 |
% |
137.3 |
88.8 |
54.6 |
% |
|
747.1 |
229.7 |
225.3 |
% |
1,336.7 |
688.8 |
94.1 |
% |
Definition and Reconciliation of 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 and a reconciliation of each non-GAAP measure
to the most directly comparable IFRS measure are provided below.
The non-GAAP measures are presented on a consistent basis for all
periods presented in this press release, except as otherwise
discussed below.
Adjusted net earnings and adjusted diluted EPSAdjusted net
earnings are calculated as net earnings before restructuring and
acquisition-related costs, income taxes relating to restructuring
and acquisition-related actions, income taxes related to the
re-assessment of the probability of realization of previously
recognized or de-recognized deferred income tax assets, and income
taxes relating to the revaluation of deferred income tax assets and
liabilities as a result of statutory income tax rate changes in the
countries in which we operate. Adjusted net earnings also excludes
impairment of goodwill and intangible assets, net insurance gains
related to the two hurricanes which impacted the Company’s
operations in Central America, the discontinuance of personal
protective equipment (PPE) stock-keeping unit (SKUs), the impact of
the Company's strategic initiative to significantly reduce its
retail product line SKU count which the Company began implementing
in the fourth quarter of fiscal 2020, and the impact of adjustments
related to the Company’s decision in the fourth quarter of fiscal
2019 to implement a strategic initiative to significantly reduce
its imprintables product line SKU count, by exiting all ship
to-the-piece activities and discontinuing overlapping and less
productive styles and SKUs between brands. These product line
initiatives are aimed at simplifying the Company's product
portfolio and reducing complexity in its manufacturing and
warehouse distribution activities. The impact of the strategic
initiatives includes inventory write-downs and a sales return
allowance for anticipated product returns related to discontinued
SKUs. Adjusted diluted EPS is calculated as adjusted net earnings
divided by the diluted weighted average number of common shares
outstanding. The Company uses adjusted net earnings and adjusted
diluted EPS to measure its performance from one period to the next,
without the variation caused by the impacts of the items described
above. The Company excludes these items because they affect the
comparability of its financial results and could potentially
distort the analysis of trends in its business performance.
Excluding these items does not imply they are necessarily
non-recurring.
(in $ millions, except per share amounts) |
Q2 2021 |
|
Q2 2020 |
|
YTD 2021 |
|
YTD 2020 |
|
Net earnings (loss) |
146.4 |
|
(249.7 |
) |
245.0 |
|
(349.0 |
) |
Adjustments for: |
|
|
|
|
Restructuring and acquisition-related costs |
1.6 |
|
29.0 |
|
3.1 |
|
39.2 |
|
Impairment of goodwill and intangible assets |
— |
|
— |
|
— |
|
94.0 |
|
Impact of strategic product line initiatives(1) |
— |
|
26.0 |
|
1.2 |
|
34.0 |
|
Net insurance gains(2) |
(12.7 |
) |
— |
|
(19.0 |
) |
— |
|
Income tax recovery relating to the above-noted adjustments |
— |
|
(1.9 |
) |
— |
|
(3.6 |
) |
Adjusted net earnings (loss) |
135.3 |
|
(196.6 |
) |
230.3 |
|
(185.4 |
) |
Basic EPS |
0.74 |
|
(1.26 |
) |
1.23 |
|
(1.76 |
) |
Diluted EPS |
0.74 |
|
(1.26 |
) |
1.23 |
|
(1.76 |
) |
Adjusted diluted EPS |
0.68 |
|
(0.99 |
) |
1.16 |
|
(0.93 |
) |
(1) Includes nil
and $1.2 million (2020 - $26.0 million and $34.0 million),
respectively, for three and six months ended July 4, 2021, of
charges related to the Company’s strategic initiatives to
significantly reduce its product line SKU counts. For the three
months ended June 28, 2020, includes $24.0 million of inventory
write-downs included in cost of sales and the $2.0 million gross
profit impact of a sales return allowance for anticipated product
returns related to discontinued SKUs (which reduced net sales by
$5.0 million and cost of sales by $3.0 million). For the six months
ended June 28, 2020, includes $29.2 million of inventory
write-downs included in cost of sales and the $4.8 million gross
profit impact of a sales return allowance for anticipated product
returns related to discontinued SKUs (which reduced net sales by
$11.2 million and cost of sales by $6.4 million). |
(2) Net insurance
gains are related to the two hurricanes that occurred in Central
America in November 2020, consisting of the following costs which
were more than offset by related accrued insurance recoveries to
date: losses on disposal of unrepairable equipment, equipment
repairs, salary and benefits continuation for idle employees, and
other costs, and unabsorbed salary, benefits, and overhead costs,
that resulted from related production interruptions. |
Adjusted gross profit and adjusted gross marginAdjusted gross
profit is calculated as gross profit excluding the impact of net
insurance gains related to the two hurricanes which impacted the
Company’s operations in Central America, the discontinuance of PPE
SKUs, the impact of the Company's strategic initiative to
significantly reduce its retail product line SKU count which the
Company began implementing in the fourth quarter of fiscal 2020,
and the impact of adjustments related to the Company’s decision in
the fourth quarter of fiscal 2019 to implement a strategic
initiative to significantly reduce its imprintables product line
SKU count, by exiting all ship to-the-piece activities and
discontinuing overlapping and less productive styles and SKUs
between brands. These product line initiatives are aimed at
simplifying the Company's product portfolio and reducing complexity
in its manufacturing and warehouse distribution activities. The
impact of the strategic initiatives includes inventory write-downs
and a sales return allowance for anticipated product returns
related to discontinued SKUs. Adjusted gross margin is calculated
as adjusted gross profit divided by net sales excluding the sales
return allowance for anticipated product returns related to
discontinued SKUs. The Company uses adjusted gross profit and
adjusted gross margin to measure its performance from one period to
the next, without the variation caused by the impacts of the items
described above. The Company excludes these items because they
affect the comparability of its financial results and could
potentially distort the analysis of trends in its business
performance. Excluding these items does not imply they are
necessarily non-recurring.
(in $ millions, or otherwise indicated) |
Q2 2021 |
|
Q2 2020 |
|
|
YTD 2021 |
|
|
YTD 2020 |
|
|
Gross profit (loss) |
240.8 |
|
(148.5 |
) |
|
429.3 |
|
|
(41.9 |
) |
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
Impact of strategic product line initiatives(1) |
— |
|
26.0 |
|
|
1.2 |
|
|
34.0 |
|
|
Net insurance gains(1) |
(12.7 |
) |
— |
|
|
(19.0 |
) |
|
— |
|
|
Adjusted gross profit (loss) |
228.1 |
|
(122.5 |
) |
|
411.5 |
|
|
(7.9 |
) |
|
Gross margin |
32.2 |
% |
(64.6 |
) |
% |
32.1 |
|
% |
(6.1 |
) |
% |
Adjusted gross margin(2) |
30.5 |
% |
(52.2 |
) |
% |
30.8 |
|
% |
(1.1 |
) |
% |
(1) See footnotes
to table "Adjusted net earnings and adjusted diluted EPS" in this
press release. |
(2) Calculated as
adjusted gross profit divided by net sales excluding the sales
return allowance for anticipated product returns related to
discontinued SKUs. |
Adjusted operating income and adjusted operating marginAdjusted
operating income is calculated as operating income before
restructuring and acquisition-related costs. Adjusted operating
income also excludes impairment of goodwill and intangible assets,
net insurance gains related to the two hurricanes which impacted
the Company’s operations in Central America, the discontinuance of
PPE SKUs, the impact of the Company's strategic initiative to
significantly reduce its retail product line SKU count which the
Company began implementing in the fourth quarter of fiscal 2020,
and the impact of adjustments related to the Company’s decision in
the fourth quarter of fiscal 2019 to implement a strategic
initiative to significantly reduce its imprintables product line
SKU count, by exiting all ship to-the-piece activities and
discontinuing overlapping and less productive styles and SKUs
between brands. These product line initiatives are aimed at
simplifying the Company's product portfolio and reducing complexity
in its manufacturing and warehouse distribution activities. The
impact of the strategic initiatives includes inventory write-downs
and a sales return allowance for anticipated product returns
related to discontinued SKUs. Adjusted operating margin is
calculated as adjusted operating income divided by net sales
excluding the sales return allowance for anticipated product
returns related to discontinued SKUs. Management uses adjusted
operating income and adjusted operating margin to measure its
performance from one period to the next, without the variation
caused by the impacts of the items described above. The Company
excludes these items because they affect the comparability of its
financial results and could potentially distort the analysis of
trends in its business performance. Excluding these items does not
imply they are necessarily non-recurring.
(in $ millions, or otherwise indicated) |
Q2 2021 |
|
|
Q2 2020 |
|
|
YTD 2021 |
|
|
YTD 2020 |
|
|
Operating income (loss) |
159.7 |
|
|
(236.1 |
) |
|
273.5 |
|
|
(328.4 |
) |
|
Adjustment for: |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and acquisition-related costs |
1.6 |
|
|
29.0 |
|
|
3.1 |
|
|
39.2 |
|
|
Impairment of goodwill and intangible assets |
— |
|
|
— |
|
|
— |
|
|
94.0 |
|
|
Impact of strategic product line initiatives(1) |
— |
|
|
26.0 |
|
|
1.2 |
|
|
34.0 |
|
|
Net insurance gains(1) |
(12.7 |
) |
|
— |
|
|
(19.0 |
) |
|
— |
|
|
Adjusted operating income (loss) |
148.6 |
|
|
(181.1 |
) |
|
258.8 |
|
|
(161.2 |
) |
|
Operating margin |
21.4 |
|
% |
(102.8 |
) |
% |
20.5 |
|
% |
(47.7 |
) |
% |
Adjusted operating margin(2) |
19.9 |
|
% |
(77.2 |
) |
% |
19.4 |
|
% |
(23.0 |
) |
% |
(1) See footnotes
to table "Adjusted net earnings and adjusted diluted EPS" in this
press release. |
(2) Calculated as
adjusted operating income divided by net sales excluding the sales
return allowance for anticipated product returns related to
discontinued SKUs. |
Adjusted EBITDAAdjusted EBITDA is calculated as
earnings before financial expenses, income taxes, and depreciation
and amortization, and excludes the impact of restructuring and
acquisition-related costs. Adjusted EBITDA also excludes impairment
of goodwill and intangible assets, net insurance gains related to
the two hurricanes which impacted the Company’s operations in
Central America, the discontinuance of PPE SKUs, the impact of the
Company's strategic initiative to significantly reduce its retail
product line SKU count which the Company began implementing in the
fourth quarter of fiscal 2020, and the impact of adjustments
related to the Company’s decision in the fourth quarter of fiscal
2019 to implement a strategic initiative to significantly reduce
its imprintables product line SKU count, by exiting all ship
to-the-piece activities and discontinuing overlapping and less
productive styles and SKUs between brands. These product line
initiatives are aimed at simplifying the Company's product
portfolio and reducing complexity in its manufacturing and
warehouse distribution activities. The impact of the strategic
initiatives includes inventory write-downs and a sales return
allowance for anticipated product returns related to discontinued
SKUs. The Company uses adjusted EBITDA, among other measures, to
assess the operating performance of its business. The Company also
believes this measure is commonly used by investors and analysts to
measure a company’s ability to service debt and to meet other
payment obligations, or as a common valuation measurement. The
Company excludes depreciation and amortization expenses, which are
non-cash in nature and can vary significantly depending upon
accounting methods or non-operating factors. Excluding these items
does not imply they are necessarily non-recurring.
(in $ millions) |
Q2 2021 |
|
Q2 2020 |
|
YTD 2021 |
|
YTD 2020 |
|
Net earnings (loss) |
146.4 |
|
(249.7 |
) |
245.0 |
|
(349.0 |
) |
Restructuring and
acquisition-related costs |
1.6 |
|
29.0 |
|
3.1 |
|
39.2 |
|
Impairment of goodwill and
intangible assets |
— |
|
— |
|
— |
|
94.0 |
|
Impact of strategic product
line initiatives(1) |
— |
|
26.0 |
|
1.2 |
|
34.0 |
|
Net insurance gains(1) |
(12.7 |
) |
— |
|
(19.0 |
) |
— |
|
Depreciation and
amortization |
35.9 |
|
43.9 |
|
71.5 |
|
74.2 |
|
Financial expenses, net |
6.5 |
|
16.1 |
|
17.3 |
|
24.0 |
|
Income
tax expense (recovery) |
6.7 |
|
(2.5 |
) |
11.1 |
|
(3.4 |
) |
Adjusted EBITDA |
184.4 |
|
(137.2 |
) |
330.2 |
|
(87.0 |
) |
(1) See footnotes
to table "Adjusted net earnings and adjusted diluted EPS" in this
press release. |
Free cash flowFree cash flow is defined as cash
from operating activities, less cash flow used in investing
activities excluding business acquisitions. The Company considers
free cash flow to be an important indicator of the financial
strength and liquidity of its business, and it is a key metric
which indicates how much cash is available after capital
expenditures to repay debt, to pursue business acquisitions, and/or
to redistribute to its shareholders. The Company believes this
measure is commonly used by investors and analysts when valuing a
business and its underlying assets.
(in $ millions) |
Q2 2021 |
|
Q2 2020 |
|
YTD 2021 |
|
YTD 2020 |
|
Cash flows from (used in) operating activities |
200.3 |
|
181.8 |
|
220.9 |
|
(27.6 |
) |
Cash flows from (used in)
investing activities |
8.0 |
|
(4.7 |
) |
25.0 |
|
(30.3 |
) |
Adjustment for: |
|
|
|
|
Business acquisitions |
— |
|
— |
|
— |
|
— |
|
Free
cash flow |
208.3 |
|
177.1 |
|
245.9 |
|
(57.9 |
) |
Total debt and net debtTotal debt is defined as
the total bank indebtedness, long-term debt (including any current
portion), and lease obligations (including any current portion),
and net debt is calculated as total debt net of cash and cash
equivalents. The Company considers total debt and net debt to be
important indicators of the financial leverage of the Company.
(in $ millions) |
Jul 4, 2021 |
|
Jan 3, 2021 |
|
Long-term debt and total bank indebtedness |
600.0 |
|
1,000.0 |
|
Lease
obligations |
73.4 |
|
82.5 |
|
Total debt |
673.4 |
|
1,082.5 |
|
Cash
and cash equivalents |
(310.9 |
) |
(505.3 |
) |
Net
debt |
362.5 |
|
577.2 |
|
Net debt leverage ratio The net debt leverage ratio is defined
as the ratio of net debt 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 for the trailing twelve months. The Company uses
and believes that certain investors and analysts use the net debt
leverage ratio to measure the financial leverage of the
Company.
(in $ millions, or otherwise indicated) |
Jul 4, 2021 |
|
Jan 3, 2021 |
|
Adjusted EBITDA for the
trailing twelve months |
582.4 |
|
165.1 |
|
Adjustment for: |
|
|
Business acquisitions |
— |
|
— |
|
Pro-forma adjusted EBITDA for the trailing twelve months |
582.4 |
|
165.1 |
|
Net debt |
362.5 |
|
577.2 |
|
Net
debt leverage ratio(1) |
0.6 |
|
3.5 |
|
(1) The Company's
net debt to EBITDA ratio for purposes of its loan and note
agreements was 0.7 at July 4, 2021. |
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) pandemic and the more recent
appearance of COVID variants, including the scope and duration of
government mandated general, partial, or targeted private sector
shutdowns, travel restrictions, social distancing measures, and the
pace of mass vaccination campaigns;
- changes in general economic and financial conditions globally
or in one or more of the markets we serve, including those
resulting from the impact of the COVID-19 pandemic and the more
recent appearance of COVID variants;
- 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;
- 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, epidemics, pandemics and endemics, such as the
COVID-19 pandemic, 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 shortages or disruptions, political or
social instability, weather-related events, natural disasters,
epidemics and pandemics, such as the COVID-19 pandemic, and other
unforeseen adverse events;
- the impacts of the COVID-19 pandemic on our business and
financial performance and consequently on our ability to comply
with the financial covenants under our debt agreements;
- 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 human rights, 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, North America, and Bangladesh. With
approximately 46,000 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: |
Media inquiries: |
Sophie Argiriou |
Genevieve Gosselin |
Vice President, Investor
Communications |
Director, Corporate
Communications & Marketing |
(514) 343-8815 |
(514) 343-8814 |
sargiriou@gildan.com |
ggosselin@gildan.com |
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