Gildan Activewear Inc. · TSX:GIL
Gildan Activewear — Investor Day (March 2022)
59 slides from Gildan Activewear's investor day presentation, Mar 29, 2022
Slide 1: Growing Sustainably
I nv e stoGILDAN r D ay 2022 INVESTOR DAY GROWING March 29th, 2022 SUSTAINABLY
Slide 2: Agenda
AGENDA SALES & SUPPLY CHAIN & STRATEGIC MARKETING MANUFACTURING OVERVIEW Chuck Ward Israel David Salinas Glenn Chamandy President, Sales, Marketing SVP, Global Supply Chain President & Chief Executive Officer & Distribution & Product Development 5 MINUTE BREAK ESG Peter Iliopoulos HUMAN CAPITAL SVP,
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: Strategic Business Overview
Glenn Chamandy President and Chief Executive Officer STRATEGIC BUSINESS OVERVIEW 4
Slide 5: Stronger Than Ever
STRONGER THAN EVER HEADING INTO OUR NEXT STAGE OF GROWTH $2.9B ~20% Net Sales Adjusted Operating Margin(1) Net sales above pre-pandemic levels ahead of Delivered record margins and fundamental full demand recovery improvement in margin profile $2.72 $594M Adjusted Diluted EPS(1) Free Cash Flow(1,2)
Slide 6: A Look at Gildan's Historical Growth
A LOOK AT GILDAN’S HISTORICAL GROWTH Net sales(1) $2.9B $2.8B $2.2B $1.1B 2009 2013 2017 2021 HIGH ORGANIC GROWTH EXPANSION INTO NEW AREAS ACQUISITION-FUELED GROWTH BACK TO BASICS Accelerated penetration into Simplified the business by Strong organic growth fueled by International markets Acquired b
Slide 7: Building on Back to Basics with GSG Strategy
BUILDING ON BACK TO BASICS WITH GSG STRATEGY Phase 1: Back to Basics Phase 2: Sustainable Growth Reinforced focus on wholesale model Capacity driven growth Expanding our competitive advantage as a Reduced complexity by eliminating underperforming low-cost vertically integrated manufacturer and overl
Slide 8: Creating Value Through Margin Expansion and Capital Efficiency
CREATING VALUE THROUGH MARGIN EXPANSION AND CAPITAL EFFICIENCY Adjusted operating margin(1) RONA(1) ~800 bps 23% ~500 bps 20% 15% 15% 2017 2021(2) 2017 2021(2) (1) These are non-GAAP ratios. These measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comp
Slide 9: Market Success Factors
MARKET SUCCESS FACTORS Everyday low pricing Strong availability Leveraging our low-cost competitive advantage Maintaining industry-leading product to sustain everyday low-pricing availability and servicing Superior product innovation Leading ESG Delivering superior quality, value-driven and Accentua
Slide 10: A Focused Go-To-Market Strategy
A FOCUSED GO-TO-MARKET STRATEGY EFFICIENT WHOLESALE MODEL B2B Large-scale replenishment orders Limited product complexity No fashion risk Note: Companies referenced above do not reflect comprehensive list of our customers 10
Slide 11: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES PRIORITIZING CAPITAL REINVESTMENT TO DRIVE ORGANIC GROWTH AND CAPITAL RETURNS VIA DIVIDENDS AND BUYBACKS % CAPEX Dividends Support capacity expansion through Annual dividend growth capital investment of 6-8% of net sales over the next 3 years(1) GIL Share Repurchases M&
Slide 12: A Clear Path to Long-Term Value Creation
A CLEAR PATH TO LONG-TERM VALUE CREATION(1) STRONG FOUNDATION COMPELLING PATH Vertically integrated, large-scale, low-complexity, TO SHAREHOLDER low cost, responsible manufacturing VALUE CREATION 3-year net sales CAGR FAVORABLE MARKET DYNAMICS of 7% - 10% Well positioned to gain market share in an e
Slide 13: Sales and Marketing Overview
Chuck Ward President, Sales, Marketing and Distribution SALES AND MARKETING OVERVIEW 13
Slide 14: Global Apparel Market
GLOBAL APPAREL MARKET Activewear ~75% GILDAN’S GLOBAL … accounting for ~5% of ADDRESSABLE MARKET IS Approx. $480B the global apparel ~$22B … global apparel market market Hosiery and underwear ~25% Sources: Management estimates, NPD Retailers Tracking service, POS and consumer data, and BCG market as
Slide 15: Global Addressable Market
GLOBAL ADDRESSABLE MARKET GILDAN HAS 14% MARKET SHARE PREDOMINANTLY IN NORTH AMERICA MARKET BY MAJOR PRODUCT CATEGORY MARKET BY GEOGRAPHIC AREA Activewear North America ~75% ~80% Approx. Approx. $22B global $22B global addressable addressable market market Hosiery and underwear International ~25% ~2
Slide 16: Well Positioned to Capitalize on Favorable Market Trends
WELL POSITIONED TO CAPITALIZE ON FAVORABLE MARKET TRENDS CASUALIZATION CREATOR ECONOMY PRIVATE BRANDS NEARSHORING ENVIRONMENTAL, SOCIAL & GOVERNANCE Amplified by remote Digital models gaining Continuing to gain Customers looking for working conditions and ground increasing traction at the expense re
Slide 17: North American Addressable Activewear Market
NORTH AMERICAN ADDRESSABLE ACTIVEWEAR MARKET CURRENTLY CAPTURING APPROXIMATELY 18% OF AN $11B ADDRESSABLE MARKET By major product group Casualization expected to continue driving growth Open-end T-shirts as activewear becomes a wardrobe staple Open-end Ts account for ~50% of the T-shirt 5-7% CAGR ma
Slide 18: North American Activewear Value Chain
NORTH AMERICAN ACTIVEWEAR VALUE CHAIN ACTIVEWEAR FLOWS FROM MANUFACTURERS THROUGH GO-TO-MARKET CHANNELS BEFORE REACHING END-CUSTOMERS GO-TO-MARKET CHANNELS(1) Sell blank and decorated apparel to end users through MANUFACTURERS DISTRIBUTORS purchase occasions such as: Purchase large quantities - Corp
Slide 19: North American Addressable Activewear Market by Channel
NORTH AMERICAN ADDRESSABLE ACTIVEWEAR MARKET BY CHANNEL DISTRIBUTORS AND NATIONAL ACCOUNTS EXPECTED TO GROW AT MID-TO-HIGH SINGLE DIGITS ~$15B 5 – 7% CAGR ~$13B ~$11B ~$7B ~$6B ~$5B ~$8B ~$7B ~$6B 2022 2024 2027 Distributors National Accounts Sources: Management estimates, and BCG market assessment
Slide 20: End-Customers Purchase Occasions
END-CUSTOMERS PURCHASE OCCASIONS NORTH AMERICAN BLANK ACTIVEWEAR MAINLY REACHES END CUSTOMERS VIA SIX DISTINCT PURCHASE OCCASIONS Corporate Brick and mortar and Digital printing Event merchandising Sports Collegiate and promotional online retailers and tourism ~26% ~21% ~15% ~14% ~13% ~11% Promotion
Slide 21: Focus Brands for Activewear
FOCUS BRANDS FOR ACTIVEWEAR ADDRESSING ALL MARKET SEGMENTS THROUGH WELL ESTABLISHED OWNED AND THIRD-PARTY BRANDS GILDAN COMFORT COLORS AMERICAN APPAREL THIRD-PARTY BRANDS Make your mark New shirt. Old Soul. Fit for Purpose Partner of choice Delivering superior value through The original “lifestyle”
Slide 22: Industry Leading Portfolio at Everyday Low Pricing
INDUSTRY LEADING PORTFOLIO AT EVERYDAY LOW PRICING COMPETITIVE POSITIONING ACROSS A BROAD RANGE OF PRODUCTS 64000 ~2.99 Competitor A ~$4.39 Competitor B ~$4.44 67000 ~$3.25 Competitor A ~$4.54 Competitor B ~$4.49 2001W ~$3.99 Competitor A ~$4.39 Competitor B ~$4.44 18500 ~$9.99 Competitor A ~$9.99 C
Slide 23: Product Innovations in T-Shirts
PRODUCT INNOVATIONS IN T-SHIRTS MODERNIZING BASICS, INCREASING RING-SPUN MARKET PENETRATION REINVIGORATING BASICS EZ-PRINT EXPANDING OUR RS OFFERING Hammer Heavyweight 100% ring-spun cotton with modern fit and color palette speaks to West Coast streetwear trend Softstyle Midweight Everyday midweight
Slide 24: Product Innovations in Fleece
PRODUCT INNOVATIONS IN FLEECE EXPANDING OUR OFFERING TO FURTHER CAPITALIZE ON A RAPIDLY GROWING SEGMENT EXPANDING OUR FLEECE OFFERING GILDAN NET SALES Double-digit GROWTH 2017 2021 BASICS NEW – SOFTSTYLE NEW – 3-END PLUSH Large market Highest growth across activewear Accessible price point Premium p
Slide 25: International Activewear
INTERNATIONAL ACTIVEWEAR INTERNATIONAL OPPORTUNITY REMAINS COMPELLING OVER THE LONGER-TERM Currently servicing ~60 countries from Central America and Bangladesh EUROPE ASIA • Leverage Bangladesh to improve • Simplifying product offering to cost competitiveness and service reduce complexity, improve
Slide 26: North American Addressable Hosiery and Underwear Market
NORTH AMERICAN ADDRESSABLE HOSIERY AND UNDERWEAR MARKET CURRENTLY CAPTURING APPROXIMATELY 10% OF A $6B ADDRESSABLE MARKET BY MAJOR PRODUCT GROUP Retailers are looking to nearshore supply chains for quicker speed to market and better availability Retailers continue to focus on their own exclusive Hos
Slide 27: Focus Brands for Hosiery
FOCUS BRANDS FOR HOSIERY WELL-ESTABLISHED BRANDS AND SUPPLIER OF CHOICE FOR LIFESTYLE BRANDS AND MAJOR RETAILERS FOCUS BRANDS Strong demand from lifestyle brands looking to nearshore their supply chains “Industry players are anticipating that GOLDTOE PEDS THIRD-PARTY BRANDS Asia’s status as the manu
Slide 28: Focus Brands for Underwear
FOCUS BRANDS FOR UNDERWEAR SERVICING LARGE PRIVATE LABEL PROGRAMS AND THE GILDAN BRAND FOCUS BRANDS Amongst best sellers across multiple Men’s underwear categories at Amazon GILDAN PRIVATE LABEL Driving growth by expanding cotton Quality underwear and Expanding relationships with assortment and prem
Slide 29: Gildan Respects, Our ESG-Centric Marketing Campaign
GILDAN RESPECTS, OUR ESG-CENTRIC MARKETING CAMPAIGN A GLOBAL CONSUMER-FACING PLATFORM TO DRIVE AWARENESS AND ESTABLISH OUR ESG AS A DIFFERENCIATING FACTOR STRIVING TO BE THE BRAND THAT CREDIBLY Made with respect for the future. BREAKS OUTSIDE Made with respect for the land. Made with respect for cle
Slide 30: Supply Chain and Manufacturing Overview
Israel David Salinas Senior Vice-President, Global Supply Chain and Product Development SUPPLY CHAIN AND MANUFACTURING OVERVIEW 30
Slide 31: A World-Class, Industry-Leading Manufacturing Platform
A WORLD-CLASS, INDUSTRY-LEADING MANUFACTURING PLATFORM MORE THAN TWO DECADES OF DEVELOPING LARGE-SCALE MANUFACTURING BASE HONDURAS HONDURAS HONDURAS RIO NANCE 1 RIO NANCE 2 RIO NANCE 5 TEXTILES TEXTILES TEXTILES FRONTIER YARNS HONDURAS HONDURAS ACQUISITION RIO NANCE 3 RIO NANCE 4 YARN SPINNING HOSIE
Slide 32: Global, Vertically-Integrated Manufacturing Infrastructure
GLOBAL, VERTICALLY-INTEGRATED MANUFACTURING INFRASTRUCTURE LARGE-SCALE LOW-COST VERTICALLY INTEGRATED AND ENVIRONMENTALLY RESPONSIBLE ~$0.6-0.9B to be invested to support capacity expansion and vertical integration through 2024 29 company-owned factories ~95% of sales derived from internally-produce
Slide 33: A Competitive Advantage in Manufacturing
A COMPETITIVE ADVANTAGE IN MANUFACTURING LARGE-SCALE LOW-COST VERTICALLY INTEGRATED AND ENVIRONMENTALLY RESPONSIBLE Vertical Integration Large-Scale Manufacturing Capabilities Strong oversight of our supply chain, leading to Strategically located in low-cost and duty greater governance and control o
Slide 34: Overview of Yarn Spinning Operations
OVERVIEW OF YARN SPINNING OPERATIONS LEVERAGING OUR STATE-OF-THE-ART SPINNING ASSET BASE Approx. $600M of capital investment(1) to acquire, build, or modernize yarn spinning facilities inclusive of Frontier Yarns acquisition in late 2021 Network of ten yarn spinning facilities across the southeaster
Slide 35: Frontier Yarns Acquisition
FRONTIER YARNS ACQUISITION FULLY INTEGRATING OE AND MVS YARN REQUIREMENTS AND SUPPORTING GROWTH Frontier Yarns Strategic Rationale Founded in 1996, led by strong management team with significant industry experience ✓ Reducing dependency on third-party suppliers Leading producer of 100% cotton, polye
Slide 36: Manufacturing Capacity Expansion Initiatives
MANUFACTURING CAPACITY EXPANSION INITIATIVES COMMITTED EXPANSION INITIATIVES AND FUTURE OPPORTUNITIES COULD DRIVE UP TO $2B IN INCREMENTAL SALES ✓ COMMITTED EXPANSION INITIATIVES FUTURE EXPANSION OPPORTUNITIES Central America and the Caribbean Kohinoor Phase 2 • Capacity expansion to support increme
Slide 37: Building Capacity in Bangladesh
BUILDING CAPACITY IN BANGLADESH SUPPORTING GROWTH IN NORTH AMERICAN AND INTERNATIONAL MARKETS GILDAN APPAREL BANGLADESH FACILITY • Maximizing existing facility output to support near-term demand BENEFITS OF OPERATING Phase I Kohinoor Facility IN BANGLADESH • On track to delivering production in Q1 2
Slide 38: Manufacturing Innovation
MANUFACTURING INNOVATION INCREASING THE SUSTAINABILITY AND LOWERING THE COSTS OF OUR PRODUCTS THROUGH AN UNWAVERING COMMITMENT TO INNOVATION Process-Related Innovations Fabric-Related Innovations Focus on reducing both our Developing processes and carbon and water footprints technologies to reduce o
Slide 39: 5 Minute Break
5 MINUTE BREAK 39
Slide 40: Environmental, Social and Governance Overview
Peter Iliopoulos Senior Vice-President, Taxation, Sustainability and Governmental Affairs Claudia Sandoval Vice-Present, Corporate Citizenship ENVIRONMENTAL, SOCIAL AND GOVERNANCE OVERVIEW 40
Slide 41: A 20-Year Journey in the Making
A 20-YEAR JOURNEY IN THE MAKING MORE THAN TWO DECADES OF DEVELOPING AND ACHIEVING ESG TARGETS 2001 2002 2003 2004 2005 2006 2007 CODE OF ENVIRONMENTAL OEKO-TEX ETHICS FIRST BIOTOP POLICY & STANDARD ENVIRONMENTAL CODE FIRST WASTEWATER CODE OF PRACTICE 100 GHG MANAGEMENT SYSTEM FIRST WRAP OF TREATMENT
Slide 42: Gildan's Next Generation ESG Framework and Future Targets
GILDAN’S NEXT GENERATION ESG FRAMEWORK AND FUTURE TARGETS(1) Climate, energy, Circularity Human capital Long-term Transparency and and water management value creation disclosure 2030 2025 2027 2026 2022 Align to Science Based Source 100% sustainable cotton Achieve gender parity Allocate 1% of pre-ta
Slide 43: ESG Today
ESG TODAY STRENGTHENING BUSINESS PERFORMANCE THROUGH IMPACTFUL ESG PROGRAMS Human capital(1) Environment(1) Communities(1) ✓ 53% of employees are covered by a ✓ 33% of our energy use comes ✓ 85% of all Gildan managers collective bargaining agreement from renewable resources worldwide are local talen
Slide 44: Human Capital Management
Arun Bajaj Executive Vice-President, Chief Human Resources Officer and Legal Affairs HUMAN CAPITAL MANAGEMENT 44
Slide 45: Human Capital Management
HUMAN CAPITAL MANAGEMENT ~50K EMPLOYEES 13 COUNTRIES LOCAL LEADERSHIP 45
Slide 46: Human Capital Supporting Growth
HUMAN CAPITAL SUPPORTING GROWTH ATTRACT AND GROW Management STRATEGIC PARTNERSHIPS 60% Of all management DIVERSITY, EQUITY AND INCLUSION opportunities were filled via internal promotions TALENT MANAGEMENT Leadership Programs EMPLOYEE WELL-BEING Executive Coaching Leading the Gildan Way School of Lea
Slide 47: Health and Safety
HEALTH AND SAFETY Declining work-related injury rate(1) since 2018 0.44 0.41 0.40 Gildan plans to attain the ISO 0.27 45001 certification at all its Company-owned and operated facilities by 2028. 2018 2019 2020 2021 OUTSTANDING AT THE PROMOTING A Progress made: COVID-19 FOREFRONT OF PREVENTION Over
Slide 48: Diversity Equity & Inclusion
DIVERSITY EQUITY & INCLUSION EMBRACING THE DIVERSITY OF OUR GENDER PARITY EMPLOYEES AND OUR COMMUNITIES, TO Achieve gender parity within the CULTIVATE A PRODUCTIVE AND INNOVATIVE employee group encompassing ENVIRONMENT BY WELCOMING EVERY Director level and above positions by INDIVIDUAL’S UNIQUENESS
Slide 49: Financial Review
Rhodri Harries Executive Vice-President, Chief Financial and Administrative Officer FINANCIAL REVIEW 49
Slide 50: Strong Financial Performance
STRONG FINANCIAL PERFORMANCE SUPPORTED BY DELIVERING ON OUR BACK TO BASICS STRATEGY Net sales Operating income (in millions of dollars) (in millions of dollars) 2% CAGR Operating income Adjusted operating income(1) 2,751 2,909 2,824 2,923 9% CAGR(2) 1,981 652 591 401 424 403 437 289 391 (181) 18 201
Slide 51: Key Categories of Top-Line Growth
KEY CATEGORIES OF TOP-LINE GROWTH By major product category By geographic area (in millions of dollars) (in millions of dollars) 2,909 2,824 2,923 2,909 2,824 2,923 2,751 2,751 307 281 587 558 239 314 562 708 1,981 1,981 213 483 2,512 2,602 2,510 2,641 2,321 2,262 2,365 2,043 1,768 1,498 2017 2018 2
Slide 52: Enhanced Profitability Driving Strong Returns
ENHANCED PROFITABILITY DRIVING STRONG RETURNS BACK TO BASICS DELIVERED LOWER COST STRUCTURE, DRIVING PROFITABILITY IMPROVEMENT 32.2% 30.9% 29.1% 29.1% 27.7% 27.7% 24.9% 26.7% Gross margin 12.6% 15.3% Balancing gross margin and volume growth going forward 2017 2018 2019 2020 2021 Gross margin Adjuste
Slide 53: Back to Basics Enabling Strong Asset Utilization
BACK TO BASICS ENABLING STRONG ASSET UTILIZATION SIMPLIFICATION AND STREAMLINED FOCUS DRIVING IMPROVED ASSET RETURNS 36.2% 34.0% 36.4% 34.3% 27.5% Working capital(1) as a percentage of net sales ~30% target level 2017 2018 2019 2020 2021 5.0% CAPEX as a percentage 3.4% 4.3% 4.5% 2.9% of net sales Ca
Slide 54: Strong Track Record of Capital Returns
STRONG TRACK RECORD OF CAPITAL RETURNS IN EXCESS OF $1.6B OF CAPITAL RETURNED TO SHAREHOLDERS OVER THE PAST FIVE YEARS Dividends $0.68 Share repurchases (in millions of dollars) in 2022 (in millions of dollars and shares) Annual cash dividends per common share Percentage of shares repurchased(2) $0.
Slide 55: Strong Balance Sheet to Support Capital Allocation Priorities
STRONG BALANCE SHEET TO SUPPORT CAPITAL ALLOCATION PRIORITIES WELL POSITIONED FOR STRONG ONGOING RETURN OF CAPITAL Net debt leverage ratio(1) 2.1 2.0x Target leverage framework 1.0x 0.7 0.6 0.4 Q1 Q2 Q3 Q4 Target 2021 (1) This is a non-GAAP ratio. This measure does not have any standardized meanings
Slide 56: 3-Year Financial Outlook
3-YEAR FINANCIAL OUTLOOK(1) CREATING SHAREHOLDER VALUE BY DELIVERING ON REVENUE GROWTH, TARGET MARGINS AND CAPITAL ALLOCATION Net sales Adjusted Capital allocation (in billions of dollars) operating margin(2,3) CAPEX investment of 6-8% 7 – 10% CAGR of net sales over the 3-year period 20% 18-20% $3.6
Slide 57: A Clear Path to Long-Term Value Creation
A CLEAR PATH TO LONG-TERM VALUE CREATION(1) STRONG FOUNDATION COMPELLING PATH Vertically integrated, large-scale, low-complexity, TO SHAREHOLDER low cost, responsible manufacturing VALUE CREATION 3-year net sales CAGR FAVORABLE MARKET DYNAMICS of 7% - 10% Well positioned to gain market share in an e
Slide 58: 5 Minute Break
5 MINUTE BREAK 58
Slide 59: Q&A Period
Q&A PERIOD Qs GILDAN