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As Gildan Activewear Inc. executives continued to argue with its top shareholders over who should run the company open for sale, the company reported its first-quarter profits fell nearly 20 percent.
The fight has led some shareholders of Montreal-based Gildan to push to bring former chief executive Glenn Chamandy back to the helm of the company, a position former Fruit of the Loom boss Vince Tyra left in January had taken over.
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Tyra and other Gildan executives attributed the lower first-quarter results not to the battle for leadership, but to the expected slowdown emerging in the hosiery and underwear segment.
Sales across the category were $103.7 million, down 10 percent year over year. They reflected “broader market weakness” and an end to the company’s licensing agreement with sportswear giant Under Armor in March.
Retailers wanting to hold less inventory than before the COVID-19 pandemic also impacted the company.
“We’re not seeing the historical replenishment that you would normally see at this point,” Chuck Ward, Gildan’s president of sales, marketing and distribution, told analysts on a call Wednesday.
“We and retailers remain cautious on this but expect this to pick up again over the course of the year.”
These developments weighed on Gildan, which is known for making clothing that brands and consumers customize with their logos.
Net income was $78.7 million in the first quarter, compared to $97.6 million a year ago.
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Net sales for the period ended March 31 reached $695.8 million, down about 1 percent from $702.9 million a year ago.
Gildan executives told analysts they had expected such patterns and incorporated them into their previous forecasts.
For Tyra, the quarter was a testament to the company’s “resilience,” and he and other Gildan executives who took part in the call highlighted the performance of the company’s activewear division, which saw sales fall just under one percent year-over-year rose to $592.1 million.
Looking ahead, Tyra said he will be “focused heavily on the company’s supply chain and retail partners” with the aim of becoming “the supplier of choice”.
“We will apply a focused local approach from product to pricing to supply chain to recover and gain share in select international markets,” Tyra said.
His comments follow an intense few months at Gildan, which began last year when the company announced Chamandy’s firing. Gildan said it was appropriate to replace him with Tyra because Chamandy did not have a credible long-term strategy for the company and had lost the trust and confidence of the board.
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Several shareholders, including activist Browning West, protested the move and called on Gildan to reinstate Chamandy, whose performance they had been pleased with. Gildan’s largest shareholder Jarislowsky Fraser supported Browning West, which also sought changes to Gildan’s board.
Amid the feud, Gildan announced in March that it had received a “non-binding expression of interest” from a potential buyer it did not name. A special committee of independent directors was formed to consider the offer and any other offers received.
A month later, Gildan announced plans to replace five members of its board before its annual meeting scheduled for May 28. Gildan said it would recommend shareholders vote for Karen Stuckey and JP Towner, who Browning West had suggested as potential board members.
The dispute was barely mentioned in Wednesday’s conference call, but one analyst asked whether recent developments at the company would lead to changes in operations or governance.
Tyra responded that he had interviewed some of the candidates to join the board, but the decision on who would be offered a seat was not his.
“We respect and rely on the professionalism and experience of those who have joined us,” he said.
Gildan also said Wednesday that its diluted earnings per share for the quarter were 47 cents, compared with 54 cents a year ago. Analysts had expected the company to report profit of about 52 cents per share, according to financial markets data firm Refinitiv.
On an adjusted basis, the company reported net income of $99.2 million compared to $81.6 million a year ago.
This report by The Canadian Press was first published May 1, 2024.
Companies in this story: (TSX:GIL)
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