A top-notch clothing store to own for the long haul

Despite the serious challenges caused by the COVID-19 pandemic, Gildan sportswear (TSX: GIL) (NYSE: GIL) ended the year on a strong note, posting sales growth of 5% and adjusted earnings per share (EPS) growth of 10%. The company also generated strong free cash flow of $ 358 million for the full year and ended 2020 with approximately $ 1.6 billion in free cash.

Extremely resilient garment industry

Additionally, despite severe COVID-19 restrictions in 2020, such as hampering the travel and tourism industries and suspending major in-person events, the Canadian apparel industry has proven to be extremely resilient. This seems to be an indicator of the universal appeal of decorated clothing and how Gildan products are embedded in the everyday lives of Canadians as clothing and forms of self-expression.

Respond to accelerating customer online shopping

During the pandemic, end markets and consumers found ways to access Gildan’s products. With the expansion of e-commerce, online players are offering custom printed products to consumers and small businesses. In addition, retailers appear to be increasingly turning to Gildan’s printables channel for local sourcing, and wholesale printable distributors and retailers are responding to the acceleration of customer online shopping.

Priority to the protection of the company’s employees

When it comes to Gildan’s private and retail brands, although markets have been affected to varying degrees by the lockdowns, the company’s customers are mostly made up of retailers who have fared better during the pandemic, including mass retailers and major online players. Gildan appears to have gone to great lengths to respond to COVID-19 in a way that prioritizes protecting company employees and supporting customers while ensuring operational and financial flexibility for the company.

Scale operations to align with demand

In addition, Gildan quickly appointed and deployed local pandemic response teams to adapt to various situations in different parts of the world, implemented biosecurity protocols, resumed production safely, supported efforts. to address the temporary global shortage of personal protective equipment (PPE), and evolved the company’s operations to match demand.

Better positioning Gildan for the long term

In addition, Gildan also made difficult decisions regarding workforce, capital allocation priorities and company operations as it focused on what was needed to better position the company for the long term. term. With these actions, the organization has shown the necessary agility to mobilize the company’s teams and respond to the COVID-19 crisis in an efficient and responsible manner, in line with the company’s values.

Simplify the business by removing complexity

Gildan’s “back to basics” strategy has become more important and essential during this difficult time. Since 2018, Gildan has remained on the path to simplifying the business of the company by removing the complexity that has accumulated through various acquisitions and other actions.

Consolidation of certain manufacturing and distribution operations

With the initial realignment of Gildan’s organizational structure, the streamlining of functions across Gildan’s business, the consolidation of some manufacturing and distribution operations, and the start of the rationalization of Gildan’s product portfolio, the he company was able to become a leaner and more focused company, putting it in a solid operational and financial position at the onset of the crisis. This makes Gildan shares a very attractive buy at current prices.


This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .

The Motley Fool recommends GILDAN ACTIVEWEAR INC. Fool contributor Nikhil kumar has no position in any of the stocks mentioned.


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