Gildan Activewear Inc. · TSX:GIL
Gildan Activewear — Shareholder Meeting (May 2019)
33 slides from Gildan Activewear's shareholder meeting presentation, May 2, 2019
Slide 1: Annual Meeting of Shareholders
ANNUAL MEETING OF SHAREHOLDERS May 2, 2019
Slide 2: William D. Anderson, Chairman of the Board
W I L L I A M D. A N D E R S O N CHAIRMAN OF THE BOARD 2
Slide 3: Forward looking statements
Forward looking statements Certain statements included in this presentation constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities legislation and regulations, and are subject to important risks, uncertainties,
Slide 4: Agenda
Agenda 1. Presentation of Financial Statements 2. Nomination and Election of Directors 3. Confirmation of Advance Notice By-law 4. Advisory Vote on Executive Compensation 5. Appointment of Auditors 6. Other Business 4
Slide 5: Glenn J. Chamandy – Strategic Business Overview
G L E N N J . C H A M A N DY PRESIDENT AND CHIEF EXECUTIVE OFFICER S T R AT E G I C B U S I N E S S O V E RV I E W
Slide 6: Strong financial performance
Strong financial performance Sales2 Adjusted EBITDA1,2 596 US$ millions 2 751 2 909 6% US$ millions 524 586 11% 2 569 2 585 CAGR 504 2 299 CAGR (2014-18) (2014-18) 388 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Diluted Earnings per share2 13% Free cash flow1,2 $1.4B 1,86 in US$ US$ millions A
Slide 7: Capitalizing on strategic growth drivers
Capitalizing on strategic growth drivers 2018 FASHION INTERNATIONAL GLOBAL LIFESTYLE ACH I E V EMENT S BASICS MARKETS BRANDS Double-digit growth 27% growth Double digit growth Broadened American Expanded offering New business with Apparel distribution Fanatics Targeted distributor La
Slide 8: Improving operational efficiency to drive gross margin expansion
Improving operational efficiency to drive gross 2018 margin expansion ACH I E V EMENT S Start of Rio Nance 6 operations, new state-of-the-art equipment for fashion basics Transitioned less efficient AKH production into RN6, consolidating all Honduran textile production in Rio Nance complex Glo
Slide 9: Driving SG&A leverage by executing organizational consolidation
Driving SG&A leverage by executing 2018 organizational consolidation ACH I E V EMENT S Successfully consolidated two sales divisions into one unified front-end organization Eliminated duplicate administrative, marketing and merchandising functions Right-sizing of warehouse network Driving co
Slide 10: Driving mid-single-digit top line growth
Driving mid-single-digit top line Growth 1 Growing share in fashion basics 2 Driving International Growth 3 Leveraging e-commerce to grow our brands 4 Capitalizing on shift to private label 5 Growing with Global Lifestyle Brands 10
Slide 11: Growing share in fashion basics
1 GROWING SHARE IN FASHION BASICS Gildan now holds largest share in Opportunity / Strategy U.S. fashion basics space Fastest growing category in imprintables Higher price points and attractive margin profile >20% Uniquely positioned with ring spun yarn capacity ~$2.0B Strong portfolio of fas
Slide 12: Driving international growth
2 DRIVING INTERNATIONAL GROWTH Opportunity MID TEEN% Addressable market opportunity ≥ $6.5B NA market $303M GROWTH South East Asian manufacturing provides duty free access TARGET Historically capacity constrained Currently only 10% of Gildan sales base FY 18 Strategy Building large-scale m
Slide 13: Leveraging e-commerce to grow our brands
3 LEVERAGING E-COMMERCE TO GROW OUR BRANDS Leveraging portfolio of brands Gildan has a leading position on Leveraging e-commerce marketplaces Growing online availability of brands and SKUS Increasing digital marketing 13
Slide 14: Capitalizing on shift to private label
4 CAPITALIZING ON SHIFT TO PRIVATE LABEL 19% In units Private Label penetration 7% increasing1 Basic apparel 2018 private label unit growth % sales Mass Private Label growth Private Label growth retailers for Total Apparel for Activewear > 60% Key success factors Mass continues to be the Long-stan
Slide 15: Growing with global lifestyle brands
5 GROWING WITH GLOBAL LIFESTYLE BRANDS Opportunity Global brands seeking suppliers in the western hemisphere for − Flexibility − Shorter lead times − Lower inventory levels − Strong CSR practices Gildan model of low-cost, efficient supply chain and strong CSR practices aligns with customer crite
Slide 16: Go-forward manufacturing strategy to capture sales opportunities
Go-forward manufacturing strategy to capture sales opportunities Key areas of focus Flexibility Cost improvement through global optimization Operational sustainability − Biomass / Energy production − Water recycling − Energy optimization − Strong CSR practices 16
Slide 17: Increasing flexibility to meet evolving preferences
Increasing flexibility to meet evolving preferences and capitalize on opportunities Value-added Rio Nance 6 update Fashion basics Operations began in June 2018 Flexibility Installed capacity approaching 80% by November 2019 Dedicated to value-added fashion basics and performance products Fabri
Slide 18: Large-scale multi-plant manufacturing complex in Bangladesh
Establishing large-scale multi-plant Incremental capacity manufacturing complex in Bangladesh to support over Significantly expanding global textile and sewing capacity 1 Enhancing low-cost positioning to service international markets and other $500M key growth areas 2 in sales Duty-free acces
Slide 19: M&A strategy
M&A strategy Strategic Fit Complementary brands and products Focus on Acquisitive growth Geographic markets imprintables opportunities meeting Distribution channels and strict criteria Manufacturing assets manufacturing Ease of integration Digestible size Cultural fit Financial criteria
Slide 20: Rhodri J. Harries – Financial Overview
RHODRI J. HARRIES EXECUTIVE VICE-PRESIDENT, CHIEF FINANCIAL AND ADMINISTRATIVE OFFICER F I N A N C I A L O V E RV I E W
Slide 21: 2018 results: a solid year of delivery
2018 results 2018 was a solid year of delivery GUIDANCE DELIVERED NET SALES Sales growth Low to Mid 5.7% $2.9B SG&A expenses Flat in $ $9M lower 100 bps SG&A as % of sales Improvement improvement Adjusted operating margin1 Slightly up 40 bps lower ADJUSTED EBITDA1 Adjusted diluted EPS1 1.80 to
Slide 22: FY 2019 Guidance
FY 2019 Guidance GUIDANCE Continued Sales growth MSD3 momentum Gross margin Flat in key SG&A as % of sales Improvement growth GAAP diluted EPS 2 $1.75 to $1.85 areas Adjusted diluted EPS 1,2 $1.90 to $2.00 Capital expenditures $175M Free Cash Flow1 $300M to $350M Targeting to deliver another strong
Slide 23: 2019 Outlook: Net Sales
2019 Outlook Net Sales (in US$ billions) Growth drivers MSD % Higher sales volume in key growth areas: 2.9B GROWTH1 - Fashion basics - International markets - Retail brands leveraging e-commerce - Global lifestyle brands - Private label programs Favourable product-mix and selling price increases
Slide 24: 2019 Outlook: Gross Margin and SG&A
2019 Outlook Gross Margin % Maintaining margins 27,7% Flat Favorable product mix Higher net selling prices Manufacturing integration cost reductions materializing in Q4 2019 Offsetting raw material and inflationary FY 18 FY 19E cost pressures Further SG&A % 12,5% improvement Continued improv
Slide 25: 2019 Outlook: Adjusted EBITDA and EPS
2019 Outlook Adjusted EBITDA1 (in US$ millions) 596 >605 Growing profitability Mid-single-digit top line growth Maintaining gross margins despite cost pressures Driving further SG&A leverage FY 18 FY 19E Offsetting non-recurring headwinds Diluted EPS1 (in US$) 1.90- 1.75- 2.00 1,86 1.85 1,66
Slide 26: Investing for the future
Investing for the future Capital expenditures1 Go-forward (in US$ millions) Capex spending 4-5% 14% of total sales 700,0 0,1 600,0 0,1 500,0 9% 9% 0,1 400,0 332 0,1 6% Capex % of sales 300,0 230 5% 4% 0,1 200 200,0 140 3% ~175 0,0 125 100,0 95 0,0 0,0 0,0 2013 2014 2015 2016 2017 2018 2019E Building
Slide 27: Driving for RONA expansion
Driving for RONA1 expansion 350 2 Capex 16,0% 15,6% RONA1,2 $MM 332 15,5% 300 Drivers 14,9% 14,9% 15,0% 250 Operational efficiencies 14,2% 14,0% 14,5% 200 230 14,0% Focus on margins 150 175 13,5% 140 125 Earnings growth 100 95 13,0% 50 12,5% Better asset utilization 0 12,0% 2014 2015 2016 20
Slide 28: Strong cash flow with significant liquidity available
Strong cash flow with significant liquidity available Free cash flow1,2 Net debt leverage ratio2,3 Target (in US$ millions) $1.7B ratio 519 Approx. Approx. 1x-2x (2014-19E) 429 1,0x 1,0x 1,0x 398 $300-350 0,8x 0,6x 159 2015 2016 2017 2018 2019E 2014 2015 2016 2017 2018 -82 2014 Strong free cash flow
Slide 29: Capital allocation
Capital allocation Historical capital allocation 2019 capital allocation priorities (in US$ millions)1 ~$2.1B Capital Investing in capacity expansion, Capital Investment to technological improvement and deployed Last 5-years support organic sustainable solutions in Dividend 74 manufacturing growth M
Slide 30: Creating shareholder value
Creating shareholder value Top line growth Mid-single-digit Drive operational efficiencies Gross margin expansion and SG&A as % of sales <12% by 2020 Disciplined capital allocation 1x -2x Leverage2 Deliver higher returns on net assets1 15% 20% 1 See Definition and reconciliation of non-GAAP financia
Slide 31: Q1 2019 – On track to achieve full year outlook
Q1 2019 – On track to achieve full year outlook Results at top end of guidance - Sales $624M, GAAP diluted EPS2 of $0.11, Adjusted diluted EPS1,2 of $0.16 Sales and earnings decline expected - Anticipated lower distributor restocking - Higher raw material and inflationary cost pressure in first
Slide 32: Question Period
QUESTION PERIOD May 2, 2019
Slide 33: Annual Meeting of Shareholders
ANNUAL MEETING OF SHAREHOLDERS May 2, 2019