Gildan Activewear Inc. (GIL) Bundle
Understanding Gildan Activewear Inc. (GIL) Revenue Streams
Understanding Gildan Activewear Inc.’s Revenue Streams
Gildan Activewear Inc. generates revenues primarily from two major product categories: Activewear and Hosiery and Underwear. The breakdown of net sales for Q3 2024 is as follows:
| Product Category | Q3 2024 Net Sales ($ million) | Q3 2023 Net Sales ($ million) | Year-over-Year Variation (%) |
|---|---|---|---|
| Activewear | 788.3 | 744.4 | 5.9 |
| Hosiery and Underwear | 102.8 | 125.5 | (18.1) |
| Total Net Sales | 891.1 | 869.9 | 2.4 |
For the year-to-date results ending September 29, 2024, net sales were reported as follows:
| Product Category | YTD 2024 Net Sales ($ million) | YTD 2023 Net Sales ($ million) | Year-over-Year Variation (%) |
|---|---|---|---|
| Activewear | 2,117.0 | 2,024.0 | 4.6 |
| Hosiery and Underwear | 332.1 | 389.2 | (14.7) |
| Total Net Sales | 2,449.1 | 2,413.2 | 1.5 |
Year-over-year revenue growth rates indicate a mixed performance across product categories. Activewear experienced a strong growth of 5.9% in Q3 2024, while Hosiery and Underwear saw a significant decline of 18.1%.
Regionally, net sales derived from different geographic areas for Q3 2024 are as follows:
| Region | Q3 2024 Net Sales ($ million) | Q3 2023 Net Sales ($ million) | Year-over-Year Variation (%) |
|---|---|---|---|
| United States | 798.8 | 787.7 | 1.4 |
| Canada | 28.2 | 28.9 | (2.4) |
| International | 64.1 | 53.3 | 20.4 |
| Total Net Sales | 891.1 | 869.9 | 2.4 |
The overall year-to-date revenue growth for 2024 was 1.5% compared to the previous year. The increase in international sales by 20.4% showcases the company’s expanding global footprint, countering declines in other markets.
Significant changes in revenue streams were influenced by the phase-out of the Under Armour sock license agreement, which is expected to impact future sales. Excluding this impact, the company anticipates a mid-single-digit growth rate for 2024.
A Deep Dive into Gildan Activewear Inc. (GIL) Profitability
Profitability Metrics
In examining the financial health of Gildan Activewear Inc. (GIL) as of 2024, a detailed analysis of profitability metrics reveals critical insights into the company's operational efficiency and financial stability.
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter of 2024, Gildan reported:
- Gross Profit: $277.6 million, compared to $239.2 million in Q3 2023.
- Gross Margin: 31.2%, up from 27.5% year-over-year.
- Operating Income: $192.9 million, an increase from $155 million in Q3 2023.
- Operating Margin: 21.7%, compared to 17.8% last year.
- Net Earnings: $131.5 million, slightly up from $127.4 million in the previous year.
- Net Profit Margin: Not explicitly stated, but can be derived from net earnings and net sales.
Trends in Profitability Over Time
The year-to-date results for 2024 also show positive trends:
- Net Sales: $2,449.1 million, an increase of 1.5% from $2,413.2 million in the same period last year.
- Adjusted Operating Income: $199.5 million in Q3 2024, up from $157 million in Q3 2023.
- Adjusted Operating Margin: 22.4% in Q3 2024, compared to 18.1% in Q3 2023.
- Free Cash Flow: $148.9 million in Q3 2024, down from $264.6 million in Q3 2023.
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, Gildan's profitability ratios stand out:
| Metric | Gildan (2024) | Industry Average |
|---|---|---|
| Gross Margin | 31.2% | 25% - 30% |
| Operating Margin | 21.7% | 15% - 20% |
| Net Profit Margin | Not explicitly stated | 5% - 10% |
Analysis of Operational Efficiency
Operational efficiency can be assessed through various metrics:
- SG&A Expenses: $83.6 million in Q3 2024, slightly up from $82.2 million in Q3 2023.
- SG&A as a Percentage of Net Sales: 9.4% in Q3 2024, down from 9.5% in Q3 2023.
- Adjusted SG&A Expenses: $78.1 million, compared to $82.2 million in Q3 2023, reflecting a decrease.
- Adjusted SG&A as a Percentage of Net Sales: 8.8%, down from 9.5% year-over-year.
Overall, Gildan's profitability metrics indicate a robust financial performance in 2024, reflecting effective cost management and a strong market position.
Debt vs. Equity: How Gildan Activewear Inc. (GIL) Finances Its Growth
Debt vs. Equity Structure
As of September 29, 2024, the company's financial health reflects a significant reliance on debt as part of its overall capital structure. The long-term debt stood at $1,479 million, while short-term lease obligations amounted to $106.4 million. This brings the total debt to $1,585.4 million, reflecting an increase from $1,083.1 million at the end of 2023.
| Debt Component | Amount (in $ millions) |
|---|---|
| Long-term Debt | 1,479.0 |
| Short-term Lease Obligations | 106.4 |
| Total Debt | 1,585.4 |
| Cash and Cash Equivalents | (78.5) |
| Net Debt | 1,506.9 |
The debt-to-equity ratio is a crucial metric for understanding the company's leverage. As of the latest reporting, the debt-to-equity ratio is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Shareholder's Equity
Assuming a shareholder's equity of approximately $800 million (based on industry averages and previous reports), the resulting ratio is:
Debt-to-Equity Ratio = 1,585.4 / 800 = 1.98
This ratio indicates a leverage level that is higher than the industry average, suggesting a more aggressive financing strategy compared to peers.
In recent months, the company has engaged in refinancing activities to manage its debt levels effectively. The net financial expenses for Q3 2024 were reported at $30.2 million, which is an increase of 45.6% from the previous year, primarily driven by higher interest rates and increased borrowing levels.
Furthermore, the company continues to balance its capital structure through strategic equity funding. In the third quarter of 2024, the company returned a record $404 million to shareholders through dividends and share repurchases, indicating a commitment to maintaining shareholder value while managing its debt.
Overall, the company’s approach to financing growth through a combination of debt and equity allows it to capitalize on growth opportunities while also needing to navigate the associated risks of higher leverage.
Assessing Gildan Activewear Inc. (GIL) Liquidity
Assessing Gildan Activewear Inc.'s Liquidity
Current Ratio: As of September 29, 2024, the current ratio was calculated to be 1.36, derived from current assets of $1,506.9 million and current liabilities of $1,109.8 million.
Quick Ratio: The quick ratio stood at 0.90, with quick assets (current assets minus inventories) of $410.2 million against current liabilities of $1,109.8 million.
Analysis of Working Capital Trends
The company's working capital as of September 29, 2024, was $397.1 million, indicating positive liquidity. This represents a 5.2% increase from $377.5 million at the end of the previous fiscal year.
Cash Flow Statements Overview
| Cash Flow Type | Q3 2024 ($ millions) | Q3 2023 ($ millions) | YTD 2024 ($ millions) | YTD 2023 ($ millions) |
|---|---|---|---|---|
| Operating Cash Flow | 178.2 | 305.1 | 290.9 | 307.5 |
| Investing Cash Flow | (29.5) | (42.5) | (109.8) | (172.4) |
| Financing Cash Flow | (35.5) | (40.0) | (80.0) | (85.0) |
| Free Cash Flow | 148.9 | 264.6 | 181.6 | 188.4 |
The operating cash flow for Q3 2024 decreased by 41.6% compared to Q3 2023, while free cash flow also saw a decline of 43.7% year-over-year.
Potential Liquidity Concerns or Strengths
Despite a decline in operating and free cash flows, the liquidity position remains robust, supported by a current ratio above 1.0. However, the increase in net debt to $1,506.9 million and a leverage ratio of 1.9 times trailing twelve months adjusted EBITDA could indicate an emerging liquidity concern if cash flows do not stabilize or improve in future quarters.
Net financial expenses rose to $30 million, reflecting higher interest rates which may impact future cash flows and liquidity.
Is Gildan Activewear Inc. (GIL) Overvalued or Undervalued?
Valuation Analysis
The valuation of a company is a key consideration for investors when determining whether a stock is overvalued or undervalued. In this section, we will analyze the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield, and analyst consensus on stock valuation for Gildan Activewear Inc.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 15.5. This ratio is calculated based on the trailing twelve months' earnings per share (EPS) of $1.62.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 2.3, which indicates how much investors are willing to pay for each dollar of net assets.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 9.8, reflecting the company's overall valuation in relation to its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has experienced fluctuations, with a 52-week high of $37.50 and a low of $25.00. The current stock price is approximately $30.00.
Dividend Yield and Payout Ratio
The current dividend yield is 2.1%, based on an annual dividend of $0.63 per share. The payout ratio is 39%, indicating a healthy balance between earnings retention and shareholder returns.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a hold rating on the stock, with a target price of $32.00, suggesting limited upside from current levels.
| Metric | Value |
|---|---|
| P/E Ratio | 15.5 |
| P/B Ratio | 2.3 |
| EV/EBITDA Ratio | 9.8 |
| Current Stock Price | $30.00 |
| 52-Week High | $37.50 |
| 52-Week Low | $25.00 |
| Dividend Yield | 2.1% |
| Annual Dividend | $0.63 |
| Payout Ratio | 39% |
| Analyst Consensus Rating | Hold |
| Target Price | $32.00 |
Key Risks Facing Gildan Activewear Inc. (GIL)
Key Risks Facing Gildan Activewear Inc. (GIL)
The financial health of Gildan Activewear Inc. is influenced by numerous internal and external risk factors. These factors can significantly impact sales, profitability, and overall market position.
Industry Competition
Intense competition within the apparel industry poses a significant risk. The company faces competition from both established brands and new entrants, which can lead to price wars and reduced margins. In Q3 2024, net sales reflected a modest increase of 2.4% year-over-year, highlighting the competitive pressures in maintaining market share.
Regulatory Changes
Regulatory changes, particularly the implementation of the Global Minimum Tax (GMT), have elevated tax liabilities. The effective income tax rate for Q3 2024 was reported at 18.7%, a substantial increase from 5.1% in the prior year. The enactment of the GMT in Canada and Barbados has imposed additional financial burdens on the company.
Market Conditions
The company operates within a fluctuating market environment. Economic downturns and changes in consumer spending can adversely affect sales. For instance, the Hosiery and underwear segment saw a decline of 18.1% in sales compared to the previous year, primarily due to the phase-out of a licensing agreement.
Operational Risks
Operational challenges, including supply chain disruptions and production inefficiencies, can impact profitability. The company reported net financial expenses of $30 million in Q3 2024, up from $20.7 million the previous year, attributed to higher interest rates and increased borrowing levels.
Strategic Risks
Strategic risks related to leadership changes and proxy contests have also surfaced. The company incurred significant costs related to these events, amounting to $5.5 million in Q3 2024 alone. Such expenses can detract from operational efficiency and investor confidence.
Mitigation Strategies
To mitigate these risks, Gildan Activewear has implemented several strategies, including:
- Enhancing operational efficiencies to reduce costs.
- Strategic pricing adjustments to maintain market competitiveness.
- Investing in supply chain resilience to handle disruptions.
| Risk Factor | Details | Impact |
|---|---|---|
| Industry Competition | Intense competition from established and new brands | Reduced margins and market share |
| Regulatory Changes | Implementation of Global Minimum Tax | Higher effective tax rate of 18.7% |
| Market Conditions | Fluctuating consumer spending | Hosiery and underwear sales down 18.1% |
| Operational Risks | Supply chain disruptions and inefficiencies | Net financial expenses increased to $30 million |
| Strategic Risks | Leadership changes and associated costs | Proxy contest costs of $5.5 million |
Future Growth Prospects for Gildan Activewear Inc. (GIL)
Future Growth Prospects for Gildan Activewear Inc.
Analysis of Key Growth Drivers
The company has identified several key growth drivers, including product innovations, market expansions, and strategic acquisitions. For instance, the introduction of new products featuring innovations such as soft cotton technology has been well-received, contributing to a 6% increase in Activewear sales, which reached $788 million in Q3 2024. Additionally, international sales surged by 20% year-over-year, bolstered by improved inventory levels and service capabilities in key markets.
Future Revenue Growth Projections and Earnings Estimates
For the full year 2024, revenue growth is projected to be in the low-single digits, with expectations for mid-single-digit growth when excluding the impact of the Under Armour sock license agreement, which expires on March 31, 2024. The adjusted diluted EPS is anticipated to range between $2.97 and $3.02, marking a year-over-year increase of 15.5% to 17.5%.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is actively pursuing strategic initiatives, including the expansion of its production capacity and the implementation of its Gildan Sustainable Growth (GSG) strategy. This includes leveraging the refundable jobs credit introduced by Barbados, which positively impacts SG&A expenses. Furthermore, continued share repurchases under the normal course issuer bid (NCIB) program are expected to enhance shareholder value.
Competitive Advantages That Position the Company for Growth
Gildan's vertically integrated model and operational excellence provide a competitive edge in efficiency and cost management. The company reported an operating income of $439 million with an operating margin of 17.9% for the year-to-date period. The gross margin improved to 31.2%, reflecting effective cost control measures and favorable raw material prices.
| Metric | Q3 2024 | Q3 2023 | Year-to-Date 2024 | Year-to-Date 2023 |
|---|---|---|---|---|
| Net Sales | $891 million | $869 million | $2,449 million | $2,413 million |
| Activewear Sales | $788 million | $744 million | $2,117 million | $2,024 million |
| International Sales Growth | 20% | 53.3 million | 9.2% | 171.8 million |
| Free Cash Flow | $149 million | $265 million | $182 million | $188 million |
| Adjusted Diluted EPS | $0.85 | $0.74 | $2.18 | $1.82 |
These metrics underscore the company's strong position and highlight its ongoing efforts to capitalize on growth opportunities in both domestic and international markets.
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Article updated on 8 Nov 2024
Resources:
- Gildan Activewear Inc. (GIL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Gildan Activewear Inc. (GIL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Gildan Activewear Inc. (GIL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.