Gildan Activewear’s Strong Earnings Call: Record Sales & 2025 Optimism

Gildan Activewear ((TSE:GIL)) has held its Q4 earnings call. Read on for the main highlights of the call.

Gildan Activewear’s recent earnings call paints a robust picture of the company’s financial health and strategic initiatives, despite a few challenges on the horizon. The sentiment expressed during the call was generally positive, buoyed by record revenues and innovative product expansions. However, the phase-out of Under Armour’s products, increased tax rates, and uncertainties in the macroeconomic landscape were noted as potential headwinds. Nevertheless, the company’s optimistic outlook for 2025 suggests confidence in overcoming these challenges and achieving growth.

Record Fourth-Quarter Sales

Gildan Activewear Inc. achieved a milestone in the fourth quarter with sales reaching $822 million, marking a 5% increase compared to the previous year. Excluding the impact of Under Armour’s phase-out, the growth rate was in the low double digits, highlighting the company’s ability to drive sales independently of this partnership.

Record Full-Year Financial Performance

The company reported record revenues of approximately $3.3 billion for the year, coupled with a strong adjusted operating margin of 21.3%. Shareholders were rewarded with a record $889 million in returns, reflecting Gildan’s commitment to providing value to its investors.

International Sales Recovery

Gildan’s international business demonstrated resilience with a 20% increase in sales over the last two quarters. This recovery was bolstered by market recovery efforts and capacity expansion in Bangladesh, underscoring the company’s strategic focus on global markets.

Innovation and Product Expansion

New innovations such as soft cotton technology, plasma print technology, and ColorBlast were well-received, driving significant growth in the Comfort Colors brand, which soared by 40% for the year. This innovation-led strategy is central to Gildan’s growth plans.

Hosiery and Underwear Sales Decline

The company faced a 23% decline in hosiery and underwear sales year over year, primarily due to the phase-out of its Under Armour business. This highlights a key area where Gildan will need to focus its strategic efforts to mitigate sales impact.

Gross Margin Concerns

Despite the positive sales figures, Gildan’s fourth-quarter gross margin fell slightly below expectations. This was attributed to tactical pricing strategies and the impact of foreign exchange rates, pointing to areas for potential improvement.

Macroeconomic and Geopolitical Uncertainty

The earnings call highlighted caution due to the mixed macroeconomic environment and geopolitical uncertainties. These factors could potentially impact Gildan’s future performance, necessitating careful navigation.

Increased Tax Rate

Gildan reported an increase in the adjusted effective income tax rate to 13.4% from 3.1% the previous year. This was largely due to the enactment of a global minimum tax in Canada and Barbados, affecting the company’s net income.

Guidance for 2025

Looking ahead, Gildan Activewear provided an optimistic guidance for 2025. The company anticipates mid-single-digit revenue growth and a 13% to 19% increase in adjusted diluted EPS. Free cash flow is expected to surpass $450 million, with continued share repurchases planned. This guidance reflects confidence in growth across key product categories and market share gains, bolstered by recent innovations.

In summary, Gildan Activewear’s earnings call conveyed a positive outlook underscored by record financial performance and strategic innovations. While challenges like the Under Armour phase-out and increased tax rates present hurdles, the company’s forward-looking guidance for 2025 suggests strong growth potential, driven by international markets and product innovation. Investors and market watchers will be keen to see how Gildan navigates these dynamics in the coming year.