Gildan Activewear (Symbol-GIL)

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Gildan Activewear (Symbol-GIL)

Postby Peculiar_Investor » 20 Aug 2011 22:26

Continuing from viewtopic.php?p=438406#p438406 it appears it would be appropriate to open a Topic on Gildan.

deaddog wrote:
scomac wrote:
deaddog wrote:What do you like about the balance sheet?
A quick look shows GIL has the same red flags as CTUa.


Please expand.

Red Flag is the increase in inventory. Most of it finished product. They are either planning for a stellar upcoming season or, more than likely, have a bunch of stuff that didn’t move last year. Not a good thing in the fashion industry.

From Gildan Activewear Reports Record Results for Third Fiscal Quarter and Updates Full Year Fiscal 2011 Guidance
Gildan wrote:The Company plans to continue to run all of its manufacturing facilities at full production capacity during the fourth quarter, in spite of the uncertain economic environment, in order to rebuild inventories to optimal levels and to position the Company to take advantage of any improvement in market conditions and pursue its growth initiatives in fiscal 2012.

I'm not sure that I'd put Gildan in "the fashion industry". They make T-shirts, fleece, sports shirts and socks. Meat and pototoes stuff that doesn't go "out of fashion", as they are never "in fashion" IMHO.

deaddog does make a good point that it is probably worthwhile to watch the inventory numbers over the next few quarters to ensure that they don't build out too much inventory, particularly given the uncertain economic environment.
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Re: Gildan Activewear (Symbol-GIL)

Postby deaddog » 21 Aug 2011 18:20

Took a more detailed look at the Quarterly report and the numbers don’t look that bad.

The concern about increase in inventory might be related to the acquisition of Gold Toe Moretz. This probably also explains the decrease in cash and increase in Intangible assets, goodwill and long-term debt.

The acquisition also makes it hard to compare revenues and earnings quarter to quarter. I’m just looking at the % difference between the quarters.

There is still a small concern that bears watching. Sales increased 34% compared to Inventories that increased 60%.

I’d consider this company to be on sale. But the markdown might continue so I’d only nibble at it at this time.
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Re: Gildan Activewear (Symbol-GIL)

Postby FinEcon » 21 Aug 2011 21:56

deaddog wrote:
scomac wrote:
deaddog wrote:What do you like about the balance sheet?
A quick look shows GIL has the same red flags as CTUa.


Please expand.

Red Flag is the increase in inventory. Most of it finished product. They are either planning for a stellar upcoming season or, more than likely, have a bunch of stuff that didn’t move last year. Not a good thing in the fashion industry.


OK, so this thread is going to look buggered up because my quote is from another thread, which PI split into this one. Apologies if this makes either of you feel taken out of context.

They both have issues but they are not the same issues, GIL is in much stronger financial shape, has fewer substitutes and a much more diversified customer base. Personally, I think you have to get something like GIL at 6-8x over some longer interval's normalized earnings. And not to mention the premium of current market price to book value. There's no chance I'm looking to pay up to anywhere near that extent for a commodity product firm with only a logistical & operational moat. It's not that an investor won't do well with with an investment at or around current prices, but the margin of safety I require is not there yet.

An acquisition always muddies up the analysis and at this point in time I know exactly zero about GIL's latest and that may have something to do with inventory run up. However, in my view, AR > sales in the most recent quarter is not a big issue because Gildan is not a fashion company so what you correctly refer to as finished product does not really capture the whole picture. Only a portion of Gildan's business (the corporate stuff) is a final product, much of what they sell is a stock product, i.e it is something another firm uses as an input. That inventory is so basic and bland you can almost treat it like a stock of a commodity. The good news is that it doesn't decay in the sense of shelf ready apparel. There is one more thing worth noting, 2 customers account (and have for some time) for approximately 1/3 of their sales. Again, the recent acquisition may change that somewhat.

EDIT: above where I mention AR & sales should be taken to mean the 'relative % changes in each of the two variables, with respect to one another, quarter over quarter'. As deaddog pointed out, recently, AR is increasing faster than sales in percentage terms.
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Re: Gildan Activewear (Symbol-GIL)

Postby Peculiar_Investor » 21 Aug 2011 22:08

FinEcon and deaddog, thanks for taking the time to review and reply with well thought out responses. They give me another angle to examine my rationale for purchase. It also confirms why we have a stock market, multiple people having different criteria and viewpoints on companies and their business.
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Re: Gildan Activewear (Symbol-GIL)

Postby Lazy Ninja » 01 Oct 2015 19:37

I've been taking a closer look at this one lately and I couldn't help notice that this company essentially doesn't pay taxes. In the past five years Gildan has net income of over 1.25 billion dollars, and a total provision for income taxes over that span of negative four million dollars, for an annual effective tax rate of minus 0.3%. Seems like good work if you can get it. While I'm not sure how many FWF members own this one, I'm curious if the general consensus is that this company is never going to have to pay any meaningful amount of income tax. Here are a few links that a google search on Gildan tax rate turned up:

http://www.canadianbusiness.com/compani ... ear-taxes/

http://globalnews.ca/news/982440/tax-do ... ctivewear/

http://www.advisor.ca/tax/tax-news/tax- ... ire-169872


A snippet from the last link:
While the friendly arrangements enable Canada to crack down on tax-haven cheats and encourage international business expansion, it seems some large loopholes exist as an unintended consequence. For now, there’s no indication that anything will change in the short term, and Gildan investors can probably rest easy.


Is this a concern for anyone?

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Re: Gildan Activewear (Symbol-GIL)

Postby Peculiar_Investor » 14 Nov 2016 08:33

Gildan to buy some assets as American Apparel files for bankruptcy protection -- American Apparel files for second bankruptcy in just over a year | Reuters
Reuters wrote:Canadian apparel maker Gildan Activewear Inc said it agreed to buy intellectual property rights related to the American Apparel brand and certain assets from American Apparel for about $66 million in cash.

Gildan will not be purchasing any retail store assets, it said in a statement.

The bankruptcy filing allows American Apparel to hold an auction for its assets and business under which Gildan's proposed acquisition would constitute the initial bid.

"Gildan has asked for the opportunity to maintain certain of our manufacturing, distribution and warehouse operations in and around Los Angeles," American Apparel Chairman Bradley Scher said in a letter to employees, a copy of which was obtained by Reuters.

It's too early to tell whether a) this purchase is final and b) how it impacts Gildan's financials going forward.

Gildan's management have proven themselves as skilled, low-cost operators, so if they succeed this would seem to fit into their modus operandi.

Added: I found Gildan's press release, Gildan Activewear Announces Proposed Acquisition of American Apparel Brand
The closing of the transaction is subject to approvals by the American Apparel bankruptcy process and customary conditions, and is expected to occur during the first quarter of 2017.

The American Apparel® brand is a highly recognized brand among consumers and within the North American printwear channel. The American Apparel® brand would represent a strong complementary addition to the Company's portfolio of brands. The acquisition will create revenue growth opportunities by leveraging Gildan's extensive distribution network in North American and international printwear markets to further increase the brand's penetration in the faster growing fashion basics segments of these markets. In addition, with American Apparel®'s strong heritage as a consumer brand, the Company will evaluate potential wholesale opportunities for leveraging the brand within its Branded Apparel business.

American Apparel voluntarily filed for Chapter 11 bankruptcy protection on November 14, 2016. The Bankruptcy Court may require American Apparel to hold an auction for its assets and business under which the proposed acquisition would constitute the initial bid. Consummation of the acquisition would be subject to Gildan being selected as the successful bidder in any such auction and Bankruptcy Court approval. Gildan will be entitled to a break-up fee and certain expense reimbursements if it does not prevail as the successful bidder at any such auction.

I've bolded my three main takeaways from their press release. Expected to close in Q1 2017, provides revenue growth and they've got a break-up fee if they don't prevail in the auction.

Gildan has been a long-term hold in our portfolio and we've done well with it.
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Re: Gildan Activewear (Symbol-GIL)

Postby Peculiar_Investor » 10 Jan 2017 08:12

The deal has been concluded, although the price paid has risen from $66 million to $88 million.

Gildan Activewear Wins Auction in Bankruptcy Process to acquire American Apparel Brand
As announced on November 14, 2016, Gildan entered into an asset purchase agreement with American Apparel that served as the initial bid in a Bankruptcy Court-supervised auction. American Apparel voluntarily filed for Chapter 11 bankruptcy protection on the same day. The Company's final cash bid of approximately $88 million includes the acquisition of the worldwide intellectual property rights related to the American Apparel® brand and certain manufacturing equipment. The Company will also separately purchase inventory from American Apparel to ensure a seamless supply of goods to the printwear channel while the Company integrates the brand within its Printwear business. Consistent with the terms of the original agreement, Gildan will not be purchasing any retail store assets.

<snip>

The Company will provide details on the projected financial contribution of the acquisition on the Company's earnings in February, when it reports its full year 2016 earnings results and initiates guidance for 2017.
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Re: Gildan Activewear (Symbol-GIL)

Postby Hammerer » 10 Jan 2017 18:55

the price paid has risen from $66 million to $88 million.

CAD$ vs US$ ?

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Re: Gildan Activewear (Symbol-GIL)

Postby Peculiar_Investor » 10 Jan 2017 19:13

Hammerer wrote:
the price paid has risen from $66 million to $88 million.

CAD$ vs US$ ?

Good question. The press release doesn't mention which currency, which seems a bit sloppy. SInce American Apparel is an American company and Gildan reports in USD, I'd guess USD$88 million.

FWIW, I just checked their 2016 Third Quarter Shareholder Report and they indicated as of October 2, 2016 Cash and cash equivalents of USD 60.4 so it seems they'll be financing at least part of the purchase.
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Re: Gildan Activewear (Symbol-GIL)

Postby Hammerer » 10 Jan 2017 19:37

Looks like it is US$88m:

"Gildan Activewear has won an auction to buy bankrupt clothing company American Apparel for US$88 million, some US$22 million more than a stalking horse offer it made in November."

http://www.macleans.ca/economy/business ... 8-million/

I guess at least one other org was interested in the guts.

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Re: Gildan Activewear (Symbol-GIL)

Postby Peculiar_Investor » 10 Jan 2017 19:44

Hammerer wrote:I guess at least one other org was interested in the guts.

That's interesting because the link I posted and the quote comes from Gildan's own press release.

The original source for your link is actually Canadian Press, so they either fact-checked or made an educated guess. The G&M (same Canadian Press story) and Financial Post (using a Reuters article) both state US$88 million. As I said, seems like a sloppy press release from Gildan to not mention that dollar figures are USD.
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Re: Gildan Activewear (Symbol-GIL)

Postby jay » 03 Feb 2017 10:19

What is with the 6% drop this morning?

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Re: Gildan Activewear (Symbol-GIL)

Postby Peculiar_Investor » 03 Feb 2017 10:50

No idea. They did announce the date of their Q4 earnings release (2/23) but there's nothing of substance in the announcement. The only other financial article that I could find via Google was The Gildan Activewear, Inc. (GIL) Upgraded by Zacks Investment Research to Hold - DailyQuint
Zacks Investment Research upgraded shares of Gildan Activewear, Inc. (NYSE:GIL) (TSE:GIL) from a sell rating to a hold rating in a research note issued to investors on Wednesday.

That hardly seems worthy of any sort of move. BTW, who said analysts never have a sell rating on a stock, we just found at least a sample size of one? :lol:
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Re: Gildan Activewear (Symbol-GIL)

Postby jay » 03 Feb 2017 11:21

ya couldn't find anything either.

It just popped on my screen of TSX60 stocks making new or trading near 52-wk lows. Good P/E and EPS growth, but high P/B. Anyways, it seems relatively cheap at these levels and thinking of starting a position. Do you own Peculiar_Investor?

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Re: Gildan Activewear (Symbol-GIL)

Postby jeremy » 03 Feb 2017 12:00

Hanesbrands reported below-consensus results yesterday and is down ~15% today. TD put out a report today indicating that GIL may be affected by the same trends.


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