LOS ANGELES--(BUSINESS WIRE)--Browning West, LP (together with its affiliates, “Browning West” or “we”), which is a long-term shareholder of Gildan Activewear Inc. (NYSE: GIL) (TSX: GIL) (“Gildan” or the “Company”) and beneficially owns approximately 5.0% of the Company’s outstanding shares, today issued the following statement regarding the Company’s April 15th investor update.
As a reminder, Browning West is seeking to elect eight highly qualified and independent director candidates to Gildan’s Board of Directors (the “Board”) at the Annual Meeting of Shareholders on May 28, 2024. Browning West’s director candidates possess strong track records of value creation, expertise in successful succession planning, relevant industry and governance experience, as well as proven management and board service pedigrees in Canada and the U.S.
“Browning West believes that Vince Tyra’s ‘new plan’ raises troubling questions about the current Board’s stewardship of the Company and confirms our fears that Mr. Tyra may lead Gildan down a similar destructive path as the ones he did at the helm of Fruit of the Loom Inc. and Broder Brothers Co.
Our key questions are outlined below:
-
Why Should Shareholders Allow Mr. Tyra, an Executive With a Record of Failure, to Pursue the Same Strategy as Glenn Chamandy, Who Has a Long Record of Success?
Mr. Tyra’s ‘plan’ is clearly nothing more than a continuation of the Gildan Sustainable Growth (“GSG”) strategy, which Mr. Chamandy launched in 2022. In fact, the GSG strategy was positively referenced 14 times across Mr. Tyra’s presentation materials and his own statements. We appreciate that the Board is finally reversing its prior, baffling criticism of Mr. Chamandy’s growth strategy and acknowledging that he established the best strategy and foundation for the Company. But why should shareholders allow a proven value-destroyer like Mr. Tyra to attempt to deliver this strategy when proven value creator Mr. Chamandy is available and excited to execute the plan he designed?
-
Why is Mr. Tyra Giving Himself Room to Reduce Margins When the Company Has Margin Tailwinds?
Mr. Tyra gives himself room to reduce operating margins by 200 basis points from the current 20% level he inherited from Mr. Chamandy, whereas the Browning West slate’s plan seeks to increase operating margins by over 200 basis points from current levels. This is highly concerning because while our plan reflects the opportunity to improve margins by shifting to higher-margin products and lower-cost production facilities in Bangladesh, Mr. Tyra’s plan does not appear to capitalize on these opportunities. However, we are not surprised to see underwhelming margin guidance from Mr. Tyra because we observe significant margin degradation in his track record at both Fruit of the Loom and Broder Bros.
-
Why is Mr. Tyra Proposing to Spend Shareholder Funds on Speculative Investments Like Branding and International Expansion?
Mr. Tyra’s plan contemplates speculative investments in brand building and international expansion. We are alarmed to hear Mr. Tyra referring to ‘brand’ 39 times across his presentation materials and statements. Sadly, Mr. Tyra appears to be introducing to Gildan the same failed branding strategies that doomed his prior employer, Fruit of the Loom. Mr. Tyra’s plan also includes a vague strategy to invest in Gildan’s international business, an area where Mr. Tyra has no previous experience. In contrast, the Browning West slate’s plan calls for a disciplined focus on the few key initiatives that will deliver outsized returns for shareholders with minimal risk.
-
Why are the Board and Mr. Tyra Persisting with Their Vague and Timid Capital Allocation Policy?
We believe that in recent years the Board’s vague and timid capital allocation policy has degraded Gildan’s earnings per share growth and valuation multiple. Mr. Tyra’s plan continues this policy as it does not call for any increased levels of share repurchases despite the Company’s current low valuation and low leverage. It also alludes to potential acquisitions with no framework for what would qualify as an acquisition target. We remind shareholders of the dangers of allowing Mr. Tyra to undertake any acquisitions given that he destroyed tremendous value at Broder Bros. with an acquisition-based strategy. In contrast to the current Board’s weak capital allocation policy, the Browning West slate’s plan is specific and clear, calling for leverage and buyback targets that would supercharge returns by reducing outstanding shares by 36% over five years while also growing the dividend at a 9% annual rate.
-
Why do the Board and Mr. Tyra Fail to Outline Specific Long-Term EPS and Stock Price Targets?
Mr. Tyra fails to outline any specific medium- or long-term earnings per share and stock price targets. In fact, Mr. Tyra’s plan includes lower sales growth, lower operating margins, higher capital intensity, and weaker capital allocation relative to the Browning West slate’s plan. This obviously suggests far lower long-term potential returns than our plan. We believe that Mr. Tyra is avoiding any specific long-term targets because he lacks relevant experience in low-cost manufacturing and vertical integration, and he does not want to be held accountable by shareholders. In contrast, the Browning West slate’s plan provides a clear pathway to at least a $60 USD share price by the end of 2025 and a $100 USD share price over the next five years.”
Shareholders are encouraged to visit www.SuperchargeGildan.com to download a copy of the slate’s operating plan, learn how to vote for Browning West’s slate of highly qualified director candidates, and sign up for important campaign updates. Visit SEDAR+ (www.sedarplus.ca) to review a copy of Browning West’s information circular and other relevant materials.
Disclaimer for Forward-Looking Information
Certain information in this news release may constitute “forward-looking information” within the meaning of applicable securities legislation. Forward-looking statements and information generally can be identified by the use of forward-looking terminology such as “outlook,” “objective,” “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “plans,” “continue,” or similar expressions suggesting future outcomes or events. Forward-looking information in this news release may include, but is not limited to, statements of Browning West regarding (i) how Browning West intends to exercise its legal rights as a shareholder of the Company, and (ii) its plans to make changes at the Board and management of the Company.
Although Browning West believes that the expectations reflected in any such forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. Such forward-looking statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements including, without limitation, the risks that (i) the Company may use tactics to thwart the rights of Browning West as a shareholder and (ii) the actions being proposed and the changes being demanded by Browning West, may not take place for any reason whatsoever. Except as required by law, Browning West does not intend to update these forward-looking statements.
Advisors
Olshan Frome Wolosky LLP is serving as legal counsel, Goodmans LLP is serving as Canadian legal counsel, and IMK is serving as Quebec legal counsel. Longacre Square Partners is serving as strategic advisor and Pelican PR is serving as public relations advisor. Carson Proxy is serving as proxy advisor.
About Browning West, LP
Browning West is an independent investment partnership based in Los Angeles, California. The partnership employs a concentrated, long-term, and fundamental approach to investing and focuses primarily on investments in North America and Western Europe.
Browning West seeks to identify and invest in a limited number of high-quality businesses and to hold these investments for multiple years. Backed by a select group of leading foundations, family offices, and university endowments, Browning West’s unique capital base allows it to focus on long-term value creation at its portfolio companies.