Description

Gildan is a rapidly growing manufacturer of high quality activewear for sale in the wholesale segment of the North American apparel market; product lines include T-shirts and sweatshirts that are sold to wholesalers in a variety of colors,sizes, and styles.Gildan has a goal of achieving sales of C$1 billion dollars by the year 2003 according to Harris Partners analyst Cynthia Rose-Martel.Gildan is executing in a "logical methodical fashion" according to Rose-Martel, adding that going from virtually no revenues five years ago to C$459 million in 2001 she isn't about to bet against Gildan.Gildan discussed its plans for long term growth in a conference call Thursday December7th, 2000 about its fourth-quarter, and full year results.Gildan had fourth-quarter results C$1.14 a diluted share, compared to C$.71 a year earlier, and penny better than Rose-Martel's forecast of C$1.13.A First Call/Thompson poll of five analysts had an average earnings estimate of C$1.10.Gildan Activewear has had a sales target of C$1 billion dollars for several years and sees the Trade Enhancement Act of 2000, new legislation which provides quota and duty-free access for countries in the Caribbean Basin initiative helping it get there.Gildan is using the bilateral agreement between the U.S. and CBI countries, passed on October 1st to gain cost efficiencies, Greg Charmandy, the companies chairman and chief executive told Dow Jones.We're going to be the first company in our peer group of competitors to have textile dying and finishing operations in the Caribbean and Central American basin," said Chamandy. "One of the reasons Gildan has been very successful is that we've been a pioneer in addressing the globalization of the marketplace. We're one of the first companies to have our garment's assembly 100% off-shore, which is what basically every one of our competitors is following right now." No stranger to free-trade legislation,Montreal based Gildan already benefits from NAFTA with operations in Canada, USA,and Mexico.Gaining cost advantages over its competitors is the key to Gildan's strategy which also includes completing plants in North Carolina and Honduras,increasing its operation in Europe and entering into a joint-venture supply agreement with a U.S. yarn manufacturer,according to an analyst.In the increasingly-commoditized world of wholesale apparel as long as the quality remains high ,success will be determined by cost efficiencies,the analyst said,noting that Gildan's multi-country approach helps in gaining that competive advantage.Based on the new initiatives, Gildan expects to have an overall production capacity of 30 million dozens by the end of fiscal 2003, up from 18.5 million dozens recently announced for fiscal 2001, and more than double the level of approximately 14 million dozens achieved in-year in fiscal 2000. Annual capital expenditures are anticipated to continue in the range of $40 to $50 million, in line with the Company's historical capital investment trend.

"We believe the initiatives announced today will provide Gildan with a cost structure that will be unrivalled by any of our competitors and will position us to achieve our sales and earnings growth targets through fiscal 2003," said H. Greg Chamandy, Chairman and Chief Executive Officer of Gildan. "By reinforcing our low-cost manufacturing advantage and adding substantial new capacity, the plan will enable us to continue to drive our results through higher sales volumes as well as lower costs. As we implement these new initiatives and continue to drive down our cost structure," said Mr. Chamandy, "we will aggressively pursue our model of flowing through our cost reductions into lower selling prices, while maintaining attractive profit returns for our Company based on our cost-competitive advantage."

"We recognize that Gildan's ongoing success and growth will be driven by our ability to anticipate and manage change in a global economy. These initiatives do just that - while reinforcing our single-minded focus on being the low-cost producer in every geographical market in which we compete," Mr. Chamandy concluded.
So far Gildan's strategy has been very successful in the last three years revenue has grown at an average rate of 52.9%,income has averaged a growth rate of 105.4%, and the cash flow growth rate has averaged 93.6%.Gildan's ROE last year was 27.7%, compared to an industry average of 9.13%.Gildan's average ROE over the last three years averaged 23.2%, compared to an industry average of 13.1%.Gildan's P/E ratio is 16.77 compared to an industry average of 49.2,its P/S ratio is 1.88, compared to an industry average of 3.19.and its PEG ratio is 0.4, compared to an sector average of
2.9.Gildens intrinsic value as calculated by Quicken.Com is 50.39 while its current price is 41.75 so Gilden appears to be undervalued.Analysts give Gildan a consensus rating of 1.44, where 1.0 is a strong buy and 5.0 is a stong sell.Finally, Gildan's 5 year earning growth rate is projected to be 25.5%.

Catalyst

Gildan's strategy is giving its competitors severe problems. Fruit of The Loom one of Gildan,s main competitor filed for Chapter 11 bankruptcy protection December29th,2000.