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Gildan Activewear A Solid Fit For Investors
Gildan Activewear (NYSE:GIL) just closed out its fiscal year in fine fashion. The company's results were impressive and growth was well ahead of others in the industry. Additionally, the firm overall has a number of appealing investment characteristics.
Fourth-Quarter Review
Net sales jumped 22.2% to $369 million as trends in the core U.S. market were strong. Gildan sells blank t-shirts, fleeces, other shirts, socks and underwear to wholesale apparel distributors that place different brands on the apparel for sale at retailers and mass-market channels such as Wal-Mart (NYSE:WMT) and Target (NYSE:TGT). Gildan bills itself as the market share leader with about 64% of the U.S. market. It also cited strong international growth in Europe and strong sales of underwear to mass-market retailers.
Strong top-line trends were enough to offset higher cotton commodity costs . Gross profit jumped almost 30% to $100.7 million while other cost controls helped push operating income up nearly 31% to $55.8 million. Other income offset higher taxes and sent net income up 34% to $53.4 million, or 47 cents per diluted share. This came in ahead of analyst projections.
Full Year Results and Outlook
Sales for the full year rose 26.3% and reached $1.3 billion. Similar dynamics to the fourth quarter occurred during the year as strong volumes and lower discounting pushed the top line up significantly. Reported net income more than doubled to $196.5 million, or $1.63 per diluted share and was just as robust when stripping out restructuring items. The company's estimate of free cash flow was $175.9 million, or approximately $1.44 per diluted share.
The company expects sales for the coming year to reach $1.6 billion for year-over-year growth of 23%. Analysts currently project nearly $2 in earnings for fiscal 2011.
Bottom Line
Gildan's forward P/E of about 12 is very reasonable given it has grown sales and earnings at a high rate. Cash flow generation is also strong and the company is financially sound with no long-term debt. Archrival Hanesbrands (NYSE:HBI) has a forward earnings multiple of approximately 10, but it's saddled with significant debt that stemmed from a spinoff from Sara Lee (NYSE:SLE). Berkshire Hathaway's (NYSE:BRK-B) Fruit of the Loom subsidiary is another important rival. Mr. Buffett picked up Fruit of the Loom after the firm went bankrupt following a major income loss, but Buffett's purchase of it demonstrate that the business model has appeal considering he is a long-term investor. (Financial discipline is the key to successful growth in the retail industry. Check out The 4 R's Of Investing In Retail.)
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Net sales jumped 22.2% to $369 million as trends in the core U.S. market were strong. Gildan sells blank t-shirts, fleeces, other shirts, socks and underwear to wholesale apparel distributors that place different brands on the apparel for sale at retailers and mass-market channels such as Wal-Mart (NYSE:WMT) and Target (NYSE:TGT). Gildan bills itself as the market share leader with about 64% of the U.S. market. It also cited strong international growth in Europe and strong sales of underwear to mass-market retailers.
Strong top-line trends were enough to offset higher cotton commodity costs . Gross profit jumped almost 30% to $100.7 million while other cost controls helped push operating income up nearly 31% to $55.8 million. Other income offset higher taxes and sent net income up 34% to $53.4 million, or 47 cents per diluted share. This came in ahead of analyst projections.
Full Year Results and Outlook
Sales for the full year rose 26.3% and reached $1.3 billion. Similar dynamics to the fourth quarter occurred during the year as strong volumes and lower discounting pushed the top line up significantly. Reported net income more than doubled to $196.5 million, or $1.63 per diluted share and was just as robust when stripping out restructuring items. The company's estimate of free cash flow was $175.9 million, or approximately $1.44 per diluted share.
Bottom Line
Gildan's forward P/E of about 12 is very reasonable given it has grown sales and earnings at a high rate. Cash flow generation is also strong and the company is financially sound with no long-term debt. Archrival Hanesbrands (NYSE:HBI) has a forward earnings multiple of approximately 10, but it's saddled with significant debt that stemmed from a spinoff from Sara Lee (NYSE:SLE). Berkshire Hathaway's (NYSE:BRK-B) Fruit of the Loom subsidiary is another important rival. Mr. Buffett picked up Fruit of the Loom after the firm went bankrupt following a major income loss, but Buffett's purchase of it demonstrate that the business model has appeal considering he is a long-term investor. (Financial discipline is the key to successful growth in the retail industry. Check out The 4 R's Of Investing In Retail.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Ryan C. Fuhrmann
Ryan C. Fuhrmann, CFA, has a background in portfolio management, overseeing assets for high-net-worth individuals and covering a broad array of industries from a generalist perspective. An active student of investing, he focuses on communicating his ideas as an investment writer and learning from the financial community. Ryan is also actively involved with the CFA Institute. Feel free to visit his website at www.rationalanalyst.com.
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