Gildan Activewear, Inc. (USA) (NYSE:GIL)

CAPS Rating: 3 out of 5

The Company is a vertically-integrated marketer and manufacturer of branded basic apparel including activewear, underwear and socks.

Recs

1
Player Avatar allocationaxe (< 20) Submitted: 10/16/2007 2:13:50 PM : Outperform Start Price: $40.34 GIL Score: -6.03

Everyone knows Wal-mart is expanding quickly into international markets like China. Now there is an opportunity to play off of their expansion that is little followed in the US.

Gildan Activewear (GIL):

Gildan makes sportswear and basic apparel products. Meaning t-shirts, tank tops, sweatshirts, golf shirts, socks, underwear, etc. They distribute much of their merchandise through Wal-mart. Or orders for imprinted clothing (have a golf shirt with a stitched corporate logo?) Gildan is also North America's market leader in screen-printing. The company is out of Montreal, Canada.

Recently the company purchased a sock manufacturer that increased its sales and bottom line dramatically. The management team, though their quarterly report believes growth comes from:
? continued use of activewear for event merchandising (such as concerts, festivals, etc.);
? continued evolution of the entertainment/sports licensing and merchandising businesses;
? the growing use of activewear for uniform applications;
? the growing use of activewear for corporate promotions;
? continued increase in use of activewear products for travel and tourism;
? an increased emphasis on physical fitness; and
? a greater use and acceptance of casual dress in the workplace.

Current market penetration is increasing with solid market share positions. (Russell, Fruit of the Loom, and VFC are its biggest competitors).
Gildan Market Share:
Q3 07 Q3 06
All products 47.6% 43.6%
T-shirts 48.3% 44.5%
Fleece 42.2% 32.3%
Sport shirts 34.0% 32.7%

Sales and revenues are growing. ROA is at 12.82% for the past 12 months and ROE is at 18.67%. While trailing PE is a concern for some quarterly earnings growth is over 22% and gross margins for the past 9 months were at 32%!

Currently the company is reorganizing from corporate acquisitions and consolidating/relocating/modernizing facilities. I received an e-mail from Sophie Argiriou, Director of Investor Communications, which stated: "...during the course of fiscal 2007 are expected to contribute in excess of U.S. $0.30 per share year-over-year EPS growth...." Efficiencies and consolidation will help retail market penetration.

While the company will see some drops in EPS due to restructuring and consolidation the future EPS following the changes should be dramatic and garner significant revenue increases. So long as the company stays in its niche its growth and earnings look very sound. Technically the price is a bit high but averaging in would be well worth it to avoid missing continued growth especially with only 400k shares typically traded.

Revenues should continue to do well as the US dollar drops and exchange rates add bit to the bottom line but watching the Dollar/Canadian Dollar changes would be prudent.

Pullbacks under $40/share provide good opportunities. 15-20% return over the 6-12 month period is quite plausible.
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Disclosure:
Long Gildan Activewear at time of posting at a price of $33.50.

Not to be construed as professional advice. Consult a professional to review your personal situation.

Member Avatar allocationaxe (< 20) Submitted: 11/29/2007 11:22:20 AM
Recs: 0

News that will directly determine this stocks direction was delayed until mid December. Look for the results of potential US Safeguards and if they are started. Tariffs could influence earnings for 6 months to 1 year following the possible tariffs until US production gets up to speed to replace that in Honduras. This will only be important if the safeguards are put into place and tariffs begin. Look for information if you are watching the stock.

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