Gildan Earnings: No Major Strategy Shifts in Chamandy’s Return; Shares Overvalued

Gildan delivered second-quarter results that included many one-time items but were largely in line with expectations on an adjusted basis. The report was Gildan's first since Glenn Chamandy was reinstated as CEO in May. On the earnings call, Chamandy had little to say about the acrimonious proxy battle, but he did reiterate his support for the Gildan Sustainable Growth Strategy for growth through capacity expansion, sustainability, and product innovation. He also highlighted a three-year financial plan, which includes mid-single-digit percentage sales growth and rising operating margins. Our estimates (such as 2% sales growth and 19% operating margins) are generally below Gildan's targets as we rate it as a no-moat company. Although a low-cost producer, we think the firm lacks a strong brand and operates in a market with limited product differentiation.