Gildan Activewear (GIL) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales reached $862 million, up 2.6–3% year-over-year, driven by strong Activewear growth, while Hosiery and underwear declined due to the Under Armour phase-out and market weakness.

• Adjusted operating margin rose to 22.7%, with adjusted operating income up 41% to $195.5 million and adjusted diluted EPS up 17–17.5% to $0.74, reflecting improved profitability and lower input costs.

• The company reaffirmed its full-year 2024 guidance and three-year outlook, emphasizing execution of its Sustainable Growth Strategy, capacity expansion, innovation, and ESG initiatives.

• Significant proxy contest and leadership changes led to $76.8 million in non-recurring SG&A charges, impacting GAAP net earnings, which fell 62% to $58.4 million.

• Recognized for ESG leadership, included in TIME's World's Most Sustainable Companies and Corporate Knights' Best 50 Corporate Citizens in Canada.

Financial highlights

• Q2 net sales were $862 million, up 2.6–3% year-over-year, with Activewear sales up 6–6.5% and international sales up 6.8–7%.

• Gross margin improved to 30.4% (up 4.6 percentage points), driven by lower raw material and manufacturing costs.

• Adjusted operating margin was 22.7% (up 6.2 percentage points), exceeding the 18–20% target range.

• Adjusted EPS was $0.74, up 17–17.5% year-over-year; GAAP EPS was $0.35 due to proxy contest charges.

• Free cash flow for Q2 was $104 million after $36 million in CapEx; $182 million returned to shareholders via dividends and buybacks.

Outlook and guidance

• 2024 revenue growth expected to be flat to low single digits; excluding Under Armour, growth would be low to mid-single digits.

• Adjusted operating margin for 2024 projected slightly above the high end of the 18–20% range; adjusted EPS for 2024 expected between $2.92–$3.07, up 13.5–18.5% year-over-year.

• CapEx to remain at ~5% of sales; free cash flow expected above 2023 levels.

• Three-year outlook (2025–2027): mid-single-digit net sales CAGR, mid-teen adjusted EPS CAGR, continued margin improvement, and ongoing share repurchases.

• Adjusted effective tax rate for 2024 expected to be around 18.3%, reflecting new global minimum tax rules.