Gildan Activewear (GIL) Q2 2024 earnings summary

Executive summary

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

• Adjusted operating margin rose to 22.7%, with adjusted diluted EPS up 17% to $0.74, reflecting improved profitability and lower SG&A expenses after adjustments.

• Significant proxy contest and leadership changes led to $76.8 million in non-recurring SG&A charges, impacting reported results and GAAP net earnings.

• The company reconfirmed its full-year 2024 guidance and provided a three-year outlook, emphasizing continued execution of its Sustainable Growth Strategy.

• 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 2024 sales reached $862 million, up 2.6% year-over-year, at the high end of guidance, with Activewear sales up 6.5% to $737 million.

• Gross margin improved to 30.4% (up 460 bps), driven by lower input costs.

• Adjusted operating income rose 41% to $195.5 million; adjusted EBITDA up 36% to $232.3 million.

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

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

Outlook and guidance

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

• Adjusted operating margin for 2024 expected slightly above the high end of 18%-20% target; adjusted EPS guidance for 2024 is $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, and continued margin improvement.

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