T-Shirt Titan Gildan Drops 6% as CEO Feud Continues: Buy the Dip?

Gildan (TSX:GIL) stock dropped even further after investors saw negative momentum that could be attributed to the company’s new CEO.

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Shares of Gildan Activewear (TSX:GIL) fell further this week as the company announced first-quarter earnings. It all comes as a feud over the top spot at the company continues for the retail company. So, let’s take a look at what’s been happening with Gildan stock, and if there is enough momentum to at least have investors add the stock back on their watchlist once more.

About Gildan stock

To really understand what helps Gildan stock perform, or otherwise, let’s look at the company a bit deeper. Gildan stock is a Canadian-American manufacturer of basic apparel, including activewear, underwear, socks, hosiery, and other related products. Founded in 1984 by Glenn and Greg Chamandy, it has grown into one of the largest manufacturers of branded clothing, serving both the wholesale blank apparel market and the retail market under its own brands.

A significant portion of Gildan’s business comes from the wholesale market. Many businesses, organizations, and clothing brands purchase Gildan’s blank apparel for customization through printing or embroidery. In addition to its wholesale business, Gildan also sells its products directly to consumers through retail channels. The company has its own brands, including Gildan, American Apparel (which it acquired in 2017), Comfort Colors, and Anvil, which are available in various retail outlets worldwide.

Ongoing CEO issue

The problem now is that the company continues to struggle with leadership issues. Gildan stock executives have continued to argue with its largest shareholders on who should run the company. Former chief executive Glenn Chamandy has been urged by shareholders to return to the top position.

Meanwhile, former Fruit of the Loom executive Vince Tyra continues to be in the chief executive officer (CEO) role, and lower results in the last quarter have been solely attributed to his leadership. After lower results were reported, Tyra stated the company would be “laser focused” on supply chains and retail partners. 

“We will apply a focused local approach from product to pricing to supply chain to regain and gain share in targeted international markets,” Tyra said.

Meanwhile, Chamandy is still on the sidelines after being ousted for his lack of long-term strategy with the company. And thus, the feud continues.

Quarterly negative momentum

As for earnings, the first quarter saw net sales reach $696 million, with a gross profit of $211 million, and operating income of $105 million. Even so, the company managed to reconfirm 2024 guidance announced back during its fourth quarter.

This was a far drop from the last few quarters. The third quarter saw $870 million in net sales for Gildan stock, with gross profit of $239 million, and operating income of $155 million. And what’s more, altogether, we can see a lower momentum underway.

The fourth quarter saw a drop even further, with net sales at $783 million and gross profit down to $237 million from the third quarter. Operating income did increase however to $178  million. Even so, this could mark a rough trend. And management needs to get it together if they hope to convince investors to come back. And frankly, a 10% dividend increase isn’t going to cut it at this point.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Gildan Activewear. The Motley Fool has a disclosure policy.

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