Gildan Activewear Inc – Restructuring Update & Supply
Chain Constraints – 25 August 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Sibel Turkmen (ST)
Former CFO, Sales Marketing & Distribution at Gildan Activewear Inc
Agenda:
1. Imprintables segment trends
2. Gildan's (TSE: GIL) channel strategy across wholesale and retail
3. Pricing and promotional activity
4. Update on 2019's “Back to Basics” restructuring strategy
Contents
Q: Could you give an overview of activewear apparel as it relates to Gildan’s core categories? Throughout
your time in the industry, how has that really changed?
3
Q: What have been the trends of activewear? As you noted, outdoor events have basically ceased, and
Gildan’s other group, underwear and hosiery products, has experienced a decline in that group as well. Could
you explain why the company was losing sales in that group, given that everyone was in the house more,
buying more of these loungewear products or comfortable products? Why wasn’t Gildan able to really take
advantage of this?
5
Q: When you compare Gildan to other traditional apparel companies, is Gildan overly reliant or exposed to
this type of complex distributor market, channel-wise? Could you discuss some of those complexities vs
where a traditional D2C brand or other apparel brands could either ship to the consumer or the retailer?
What do you think about driving all of this complexity within the distribution network? I assume this is the
private label part.
6
Q: It seems that Gildan is trying to cling onto a volume at whatever cost possible. Why hasn’t Gildan made a
much more targeted focus on expanding its fashion basics? Does it have the capability to do so? It seems it
has the most complex distribution network. Why hasn’t the company leveraged that scale, the know-how
when it comes to the different types of yarn, to really expand in the fashion basics?
8
Q: Where do you think management is really focused on vs where you think the company should be? It
seems like there are multiple parts of the business in manufacturing, and then there is the brand
management perspective that it seems to be neglecting. Given that the category is shrinking, it seems like the
company is trying to double down on a strategy that’s not working. Where do you think management is
prioritising its resources?
8
Q: What do you think is most important or something that investors commonly overlook throughout the
company when assessing Gildan? Could you elaborate on the company’s ability to manage brands? Given
that you can find a Gildan shirt in almost every household in the US, I think it’s hard to believe that it can’t
just leverage that outreach already and that penetration to really take control of its brand.
9
Gildan Activewear Inc – Restructuring Update & Supply
Chain Constraints
Transcription begins at 00:00:02 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview entitled Gildan Activewear Inc – Restructuring Update &
Supply Chain Constraints. I am Nyree Hinton and I’ll be facilitating today’s Interview with Mrs Sibel
Turkmen, former CFO of Sales and Marketing and Distribution at Gildan Activewear.
Sibel, before we get started with today’s Interview, please state I agree or I disagree to the following statement:
You understand the definition of material non-public information and agree not to disclose any such
information, or any other information which is confidential, during this Interview.
ST: Agree.
NH: Could you start by giving the audience an overview of your background and the various roles you’ve held
in the industry?
ST: My name is Sibel Turkmen, I’m a CFO for many years, different industries based in Canada. I was CFO for
Gildan’s Sales, Marketing and Distribution Division, one of the two major divisions, the other being
manufacturing, reporting to the global CFO, corporate CFO, based in Barbados due to company structure, for
almost two-and-a-half years. I left one year ago, so I’m out of any confidentiality, non-disclosure whatnot
requirements. Again, just for clarification, everything that I will be discussing here will be based on my
personal experience and my own personal opinions of all the public information that is currently available in
the market, because I have not been subject to any company data since I left. It’s my own interpretation of the
industry and the industry players, some of which are private companies. Whatever I have known about them
from the market, the news and using my past knowledge and experience, I’m interpreting what’s happening in
the market, reviewing all apparel company public information, including Gildan’s competitors.
[00:02:38]
Q: Could you give an overview of activewear apparel as it relates to Gildan’s core categories? Throughout your
time in the industry, how has that really changed?
ST: The global addressable market for the apparel that Gildan and Hanes operate is estimated to be around
USD 20bn, and this is based on all the estimates that the analysts, etc, give everyone. Of this addressable
market, and it’s again public knowledge that Gildan is the market leader in the basic T-shirt category in North
America, and in terms of market shares, you’re looking at 70-75% in this category, which is basically what is
called activewear. Activewear includes, again, just for clarification of jargon, basic T-shirts, hoodies, which are
sometimes also known as fleece, and anything to do with T-shirts, like polos, etc, so it is including the fashion
basics as well, which is one area that seems to be growing. Then within this market, there is underwear, which
again you could say is around 10-15%, and then you have socks which is around 10% and everything else,
which is usually accessories like bags and stuff like that, or hats, that’s around 5-7%, 8%. That’s your market.
How this has been changing in the past five years, I would say, so let’s look at before COVID and after COVID,
I should say, there is a trend that has come more towards fashion basics. What’s the difference between
fashion and basic basics, I should say, is fashion basics are more softer, treated fabric products, usually with
side seams, whereas basic T-shirts are your tubular, usually one-time sports or events or promotional or
tourism-related printed T-shirts that people buy cheap, wear a couple of times maybe and throw it away, and it
Private and confidential 3
repeats itself.
Fashion is the things like Comfort Colors, one of the brands that Gildan has, or the Champions of the world
that Hanes owns. It’s more something people wear as loungewear or even to the street. That’s one trend that
has been trending even before COVID. One other basic difference between the two categories, basic T-shirts
and fashion basics, is the mix of the fabric. Basic T-shirts are usually your 100% cotton T-shirts, whereas
fashion basics have some poly in them, so they are a mix and they’re more sophisticated mixed fabrics. Also
there could be some climate wear put in or some antimicrobial things or resistance to heat when people print
on it. Usually your basic T-shirts, when you wash them, they shrink or they’re not resistant to heat when you
dry them, etc, whereas fashion, you do certain finishes that make them more durable.
The other trend is the fleece, which is the hoodies. Hoodies have become a replacement for T-shirts, to be
honest, and your casual business wear, and it has expedited its demand with COVID even, because of people
working from home due to again air conditions, whatnot, everyone wearing comfortable clothes, and hoodies
become a big item in demand. The issue with hoodies and fashion basics is the complexity of production, as
well as complexity in yarn, which has created a big supply shortage in the market for everyone, and I will come
back to this point when we are discussing vertical integration benefits and disadvantages. These are your
trends. In terms of underwear and thick socks, again, another trend has been, with COVID, people staying at
home, it was actually to our surprise, and I think if you look at even Amazon results, you see that underwear
for some reason has become one of the top seller items in the industry, and the thick socks, naturally people
being at home, I think, wearing thicker socks at home, but in terms of other socks which again Gildan owns
likes pantyhose or Goldtoe business socks, you don’t see much demand moving there. This is the summary.
In terms of, again, the market if you look at the market from a geography point of view, when people talk
about global markets, you have basically Europe, including the UK, and then you have LATAM, Latin America,
and then you have North America and Canada separately, and Asia. If I go with North America, North America
is a very saturated market. Again, I will come back to this market and how it is playing out with the changes in
the distribution channel especially. In terms of basics, it’s a mature market, and if it can stay flat, that would
be a success, but I think, in my opinion, the basics market, which is a majority of Gildan’s strength area, is a
shrinking market. Again, COVID has shown how the revenues went down immediately, because that is where
the majority of the revenue was. With the cancellation of events, sports activities, tourism, whatnot, this has
gone down to zero, almost. That’s the vulnerability there. Again, I’m not sure if this will come back to the 2019
levels ever. In my view, it will not. I think if you achieve a mid-single-digit decline in North America in the
basic T-shirt market and if you keep it there, I think that is a success and you need to compensate that
shrinkage with fashion basics if you can, or hoodies. Otherwise I think you see a revenue shrinkage.
In terms of Canada, Canada is a small market for everyone and it is basically flat. Canada has seen some
growth in the recent years because of, again, a lot of diversified local suppliers as well. It’s not a strength
market for, I think, any of the major players and that’s why you don’t see large, many distributors operating in
Canada. There is just S&S on the west coast, sorry, SanMar on the west coast and S&S recently on the east
coast, but it’s a small market. Europe and the UK is another challenge. Again, I will talk about the back-to-
basics strategy that Gildan has been talking about since 2018 and in their latest MD&A for Q2. Everyone’s
dream is to grow internationally, because the US is done, and Europe, UK together are a large market, as large,
from a potential, as the US, but because of a couple of things, one is Brexit, it is a difficult market and it is very,
again, diversified and people don’t care about vertical integration, whatnot. UK distributors care about
product availability and pricing, so they just go shop around and they go direct to Bangladesh or other markets
to buy from suppliers. Same for Europe. There are so many, I call them pop-up suppliers that come and supply
one time, so there’s no loyalty.
If you look at the distributors in Europe, there are only one or two left. The major distributor, I won’t give
names, but if you know the market, you can get, is out there for many years trying to be sold, which was
looking after France and Spain, etc. Italy, there’s only one major distributor which is going out of business,
and so that’s your Italy coverage is, again, impossible through a distributor, because Italy is a very, printers
there directly go to small cheap suppliers coming from Bangladesh, sort of. UK is where the strength is for
Gildan, where they have some loyal four or five distributors, but they again have been neglected, I would say.
Because everybody is trying to supply the US first, all the major suppliers, they feel that Europe and UK are
seen as a secondary adopted child and they’re a bit pissed off with that, so they have sorted out their own
supply chains. With the changes in Brexit, there is a new challenge that is ahead of companies like Gildan,
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because how distribution had worked in the past is, from the US, if you are manufacturing in Latin America or
US, you ship it to a UK port first, and from a UK port to mainland Europe.
Right now, there is uncertainty how this is going to work after Brexit, are there going to be some custom
duties, etc, levies applied, because now UK is no more part of Europe? In the past, you would ship from US to
UK first and from UK to a port in mainland Europe. That’s all questionable right now, whether you can do that
without paying any taxes. Hence Europe, as I said, has been an ambition for many companies, including Fruit
of the Loom, Hanes and Gildan, to capture, but it is a very difficult market to capture because of too many
small suppliers in the market. As far as I know, Fruit of the Loom is shrinking, Hanes is out and Gildan is still
talking about growth international, but I will walk you through from 2018 to now, from the quarterly press
releases and MD&As, and the recent Q2 press release already said that there was -30% in international, which
shows that not being successful there.
In terms of Asia, the big market is China, but China is made up of hundreds of suppliers of basic T-shirts, so it
is impossible to gain a double-digit market share there. It’s very competitive, it’s very price-sensitive and there
are complexities of doing business in China in terms of operations coverage, logistics coverage, as well as the
credit issues. The Chinese major distributors, and when I say major, even with them, most major brands,
including Gildan, are less than 5% market share. You have to give very long credit terms to really do business
and the profit margins are usually half of what you get in US. To address all these things is the initiative that
brought Bangladesh, I think, and it’s public information that Gildan is investing in Bangladesh manufacturing.
There are, I think, a couple of motives there. It would be cheaper for Europe for goods to come from
Bangladesh and China as well, and to increase capacity, but there’s also, I think, another reason you could
consider, which is where are the manufacturing facilities of Gildan. If you look at I think it’s page 2-3 of their
MD&A’s, again public information, all their eggs are in one basket, the majority of their investment is in
Honduras and they have some in Haiti and Nicaragua and Mexico and all the difficult countries to operate.
The recent inflation that has been going on in dollar terms in these countries in terms of labour, you’re looking
at, in Bangladesh, I should say, if you look at a monthly salary of a manufacturing employee, it’s less than USD
100 per month US, whereas in Honduras or in Central America, you’re looking at, because of competition and
proximity to US, all the US companies went there, Gildan is not unique, so there is competition on labour,
you’re looking at USD 300-400 per month, so it’s 3-4 times. Again, I will tie this back to vertical integration
benefits and disadvantages. You can do your own judgement on that, but there is a huge investment in
Honduras, which you cannot really get rid of. Even Mexico, I think in the call, Glenn mentioned that they
moved the Mexico facility to, I think, Honduras or Nicaragua, but somewhere, because once you have the
investment, you can’t really write it off. Mexico was probably, from a capital investment point of view, you’re
looking at probably, I don’t know, less than 5% of your total investment in Honduras, so that shows that you
need to really keep that Honduras business going on. Could this be a competitive disadvantage in the longer
term, from a costing point of view? It could be, because of the labour costs there going really high every year. I
think that’s my market analysis. In terms of the channel, I can talk about the distributors, how that has
changed, if you like.
[00:21:47]
Q: What have been the trends of activewear? As you noted, outdoor events have basically ceased, and Gildan’s
other group, underwear and hosiery products, has experienced a decline in that group as well. Could you
explain why the company was losing sales in that group, given that everyone was in the house more, buying
more of these loungewear products or comfortable products? Why wasn’t Gildan able to really take advantage
of this?
ST: This would be my guess. I’ll give you a comparison, and I agree, everyone is seeing an increase. I was
looking at Hanes’ Q2 results. When you look at Hanes, for example, 2020, nobody wants to compare against
2020, it’s irrelevant, because it’s the COVID year, so you have to look against 2019 as your basis year, and vs
2019, Hanes has reported that in Q2, they saw 19% growth in sales vs 2019 same period, whereas Gildan noted
a 7% decline. This is your question basically, why did this happen? This is two things. The channel has
changed. How? In the past, there was full control of the distributor channel. What do I mean by that is push
Private and confidential 5
and pull of sales, because at the end of the day, there is POS, which is basically the point of sale at the
distributor level, but what does Gildan or Hanes report as their sales number sometimes had been
disconnected with the reality of POS. What I mean is you could push sales to distributors. Distributors were, if
you go back, look back 2-3 years ago when Gildan, being the market dominant, had full control of S&S, Broder,
SanMar, TSF, Staton, whatnot, the distributors, the large five distributors, they could actually push inventory,
in a way, which is common in any industry. Towards the quarter end, if you look at retailers even, they do sales
to increase sales or you can give incentives towards distributors to take inventory.
That’s what I mean, pull and push. The distributors were carrying about 18-20 weeks of sales as inventory and
this was around 2018 and before. Their incentivisation, which is called the growth inventive plan for
distributors, was based on POS, but also the base sales was the number which was the number that you would
multiply the POS growth for them to get your basically successful, I would say, YoY. If you look at, go back to
2017 and ’18 and ’19, there is a constant increase in the distributor inventory levels. In the call in Q2, I think
one of the analysts asked, “In Q1, it was mentioned that there was USD 100m of destocking in the channel,
what is the number in Q2?” I think Rhod said USD 30m. This has been going on since 2019. It is not an effect
of COVID. What happened is the ownership structures of the distributors have changed. S&S is now managed
by a private equity. SanMar has always been steady. What’s happening is everyone has become aware that
carrying inventory is expensive and they are now down to, at best case, eight weeks of inventory. You’re
looking at a big fundamental change in the market and they are not going to be shoved inventory anymore, so
I think that was the reason.
There was excess inventory from previous years, and so they are still destocking. How long that will continue, I
think it’s a good sign, in Q1 it was USD 100m and in Q2 it’s USD 30m, which means they are probably at the
end of that destocking, but that’s the fundamental change. There is no more channel full control on the
suppliers. They are shopping around and they have seen, again coming back to vertical integration, that in the
past, because of steady demand, which was steady demand to basic T-shirts, no change in terms of styles or
colours or whatnot, the top eight colours, eight styles made 95% of the sales, they were able to maintain that
relationship. The recent years have seen a change in demand and they have realised that they were stuck with
items people don’t want anymore. Now they want to stay more aligned to the market and the distributors are
acting a bit like retailers, in a way. They don’t want to be keeping items in their shelves long term, one of the
reasons being fleece.
If you think about fleece, which is the hoodie, one hoodie takes up a shelf space of 4-6 T-shirts. That is where
the profits are now and that is where the demand is now, so they’re not going to stop. Fashion basics, if I’m
Broder or S&S, I don’t want to be stuffing my shelves with only Gildan fashion basics, because people want
other T-shirts like Bella + Canvas, Next Level, etc. They want to have the flexibility to be able to shift and ship,
so that’s the change. I think Gildan is still living through what they keep saying, 2019 record sales, but those
record sales are what is being used still in the channel, if you see what I mean, I think, it’s my opinion, if there
is such restocking going on in the market still. The control structure of the distributors, being private equity,
more financially driven managements rather than relationship-based management, because in the past, these
distributors, they had been in the industry for 30 years, they have grown with Gildan, so they were like
married old couples, I should say, they do whatever each other says to each other and they complain, but at the
end, they find a solution to get a win-win case, but with now large private equity companies investing in these
companies, they just look at financial metrics. They say to Broder or S&S, “You cannot have more than 6-8
weeks of inventory,” because they are reporting as well to their shareholders, so end of story. I think that is the
bottom line.
[00:31:11]
Q: When you compare Gildan to other traditional apparel companies, is Gildan overly reliant or exposed to
this type of complex distributor market, channel-wise? Could you discuss some of those complexities vs where
a traditional D2C brand or other apparel brands could either ship to the consumer or the retailer? What do
you think about driving all of this complexity within the distribution network? I assume this is the private label
part.
Private and confidential 6
ST: I think the distributors are an advantage and a disadvantage, I should say. I think they were in a locked
relationship with the suppliers, which is like Stockholm syndrome, I should say, a love-and-hate relationship,
and with again some financial power from their new private equity investors, they are trying to get out of this
handcuff situation. This is also driven by major players, which are what are called national accounts in the US,
which are the large print houses like Custom Ink, Jiffy, etc. They have basically become large players and they
don’t want to go through distributors, so everyone is now trying to capture the consumer directly, and that is I
think, again, expedited with the COVID situation. We have seen a growth in the customer-driven sales over the
years. Around, YoY, they have gained almost 20% market share. Where I say they have gained 20% market
share from distributors, I’m talking about the likes of Custom Ink, Zazzle, JiffyShirts, Vistaprint, etc. Basically
the resellers are growing at above market rate by selling directly to consumers and small businesses via their
online platforms.
I think that is where I would say Gildan has lost a bit of market share, in my view, because coming the back-to-
basics strategy, I was looking at, just to remind myself, 2018 when this was first launched, this strategy was
launched, they were saying, if you look at their MD&A section four, the pillars of this strategic initiative were
growing share in fashion basics, driving international growth, capitalising on retailer private label
programmes, growing the global athletic and lifestyle brands, pursuing e-commerce growth, enhancing sales
and earnings growth with acquisitions that complement our strategy. Compare and contrast to this, over the
quarters, to what have they done and what has been still there, if you look at the most recent section four, they
have changed all these drivers to saying, “North American imprintable brands, what does that mean? What
happened to fashion basics, which is the growth in the market?” and then the retail brands, and then they talk
about private brands and intentional markets. You can see that they have shrunk these, which was more
detailed, because I think they were unable to implement on these initiatives.
They lost, I think, market share in fashion basics. International growth, as you said, is not happening. In Q2,
they were down 30% and they’ve never grown since 2018. I think next calls you have, you can ask them these
questions. The private label programme, in various quarters, they have announced that because of complexity
of the SKUs that is demanded by the private label programmers like the likes of Costco, I think they
announced, for example, ending that programme, which was one of the major programmes they had, and so
again, I would say how successful is that? The e-commerce it’s not mentioned at all, because I think the e-
commerce initiatives, which are tied to, again it’s public information, when they announced they are ending
ship-to-piece business, which is, I think, one of the, I would say, bad decisions on their part, because if you
don’t do ship-to-piece, you lose this consumer-driven sale, because Custom Ink can be ordering one item.
They want you to be able to fulfil that, or distributors even want to do that as well. I think that is where the
investment, stopping investment in e-comm is going to be an issue.
I think that was a good idea at the time, thinking, “The distribution costs are high. Let’s again focus on the
major distribution hub,” which is in North Carolina for Gildan, and I think it’s, how do I say it, if you are in a
hole, people say, “Don’t dig it.” If you already have an investment, unfortunately, that investment can be your
curse as well. Instead of asking, on an open white paper, again this is my personal opinion, sometimes you
have to stop and look at where the market is going and you forget that you have this investment, you save
some cost, “How do I best fulfil my customer’s demand?” If that requires you being in Texas, which makes
more sense, if you ask me, for the business now, where are the distributor’s main locations, where are the
major printers distribution houses? Instead of being stuck on this, “I have my yarn facility in North Carolina, I
have my large distribution centre in North Carolina and I have my Honduras facility,” 10-15 years doing this
loop, basically a loop of transportation was a good idea maybe, but that was 15 years ago. It’s not anymore,
maybe. My view, again, if I were to write this up all from scratch, I would not definitely, or if you ask any
distribution guy, they would say, “It doesn’t make sense, because containers cost money, containers piling up
in Florida port cost money. Why do you need to?”
In the past, it was a good idea, because you had the yarn, so you would process the yarn, put it on a container,
it would go down to Honduras, come back as a fabric, or in Honduras, you do the fabric and you have the T-
shirts, it comes back full, but not anymore. You are paying for a lot of demurrage, you are paying a lot of time
value. Time is the essence here. It takes you, to complete the loop, weeks, weeks, weeks. Anyhow, I think that’s
why they stopped ship-to-piece, because Gildan’s infrastructure and the distribution facilities are not made for
consumer-driven business. Fulfilment is not as easy as it is to a wholesale distributor. You cannot just have
five customers to serve the market anymore. People prefer to buy online, they want to buy 10 pieces, five
Private and confidential 7
pieces, whatever. Again, not investing in your e-comm platform and relying on, “I’m going to use the retailer’s
e-comm platform,” I’m talking about Amazon, but I think anyone and everyone who has dealt with Amazon
knows that Amazon is not going to leave you dollars on the table.
They are going to let you use their superb delivery and make you carry a lot of inventory for them, but the
profitability, you can grow on Amazon, which is what has happened in terms of, I think, underwear and socks,
this is where you are seeing growth in underwear and socks, because of Amazon, but the profitability is half of
going direct or going through your distributors. That’s the price you’re paying. Amazon is not going to leave
you the same operating margin. They are going to keep it themselves. I think that is that.
[00:41:57]
Q: It seems that Gildan is trying to cling onto a volume at whatever cost possible. Why hasn’t Gildan made a
much more targeted focus on expanding its fashion basics? Does it have the capability to do so? It seems it has
the most complex distribution network. Why hasn’t the company leveraged that scale, the know-how when it
comes to the different types of yarn, to really expand in the fashion basics?
ST: I think it’s a good question. It’s a couple of things and everything you said. One is capabilities. If you have
invested in basic T-shirt manufacturing, obviously you have a capacity that you want to use, which is basically
the tubular machines are not easy to convert to side-seam machines, and everything, all the machinery is, on
basic T-shirts, tubular, from knitting to cutting and everything else, so that’s one handicap. Again, because
they see themselves as a manufacturing company, I think it’s only normal. It’s like if you are a Coca-Cola, you
don’t go buy Pepsi products to fulfil your customers. They don’t want to go to another supplier to get their
fashion basics demand. I think that’s the problem. They’re, again, handcuffed with their production
capabilities. They cannot go ask another supplier, whereas Bella + Canvas or Next Level, they don’t care.
Whatever is the trend, they go to whatever supplier can supply. The other side is the yarn facility.
I think the problem is deciding are you a sales company or are you a manufacturing company, if you see what I
mean? There is a big difference. If you’re a sales company like Next Level or Bella + Canvas or Hanes, you just
look at the demand and you deliver from wherever you can find the products, and you are flexible and you
adjust to markets. If you’re a manufacturing company, you are limited to your manufacturing capabilities.
That’s one. The other thing is I think because it’s not in its nature to act like a sales company, the marketing,
again you can ask next time what are the marketing dollars, these companies spend, when you look at Hanes
and the amount of money they spend to Champion, for example, is quite substantial in terms of marketing
dollars vs what are the marketing dollars spent by Gildan. Gildan is a big name in itself, but the name is
associated with basic T-shirts, it doesn’t attach to fashion goods. What I mean is Comfort Colors, American
Apparel, these are your fashion brands.
What has been done, again, I think is the question, in terms of putting these in front of Gildan. If your
locomotive or the main ship is Gildan brand, it’s very difficult to put much of an emphasis or marketing dollars
to these other smaller brands, which are the fashion basics. That’s the I think problem, but that’s also an
opportunity. They have very good brands. The fashion brands are really liked in the market, I think. With
some focus, like you said, it can be overcome, because I think Comfort Colors and American Apparel have a
good name in the market.
[00:46:55]
Q: Where do you think management is really focused on vs where you think the company should be? It seems
like there are multiple parts of the business in manufacturing, and then there is the brand management
perspective that it seems to be neglecting. Given that the category is shrinking, it seems like the company is
trying to double down on a strategy that’s not working. Where do you think management is prioritising its
resources?
Private and confidential 8
ST: Again, these are my personal views, but I would recommend everyone on the call to go back and look at
2018 strategy vs the recent section four, or just put the section fours next to each other and then prepare your
questions to ask to management in your next call, or if you like, before the call, if you’re attending the Gildan
calls, let me know and I will prepare you some 10-15 questions to ask directly to the management. I cannot
speak on their behalf where they are lacking or if they’re lacking. They seem to be seeing everything is working
great, but again, I would just look at the competitor’s numbers vs Gildan numbers. Where I see that I think the
focus is lacking is, again this is my personal view, the company is still run like a private company, because of,
again, Glenn Chamandy being the CEO, basically he decides what he wants to do. I think you should ask him
about, next call, 2018 section four to 2021 section four, why this has changed, what happened to the pillars
then and now, and let him speak to it. What I mean is how it is difficult for a mother to accept the failures of
their children and deal with it. Acceptance is the first step, I would say, and that is where you need to accept
that if you have a child which is less than six foot, you know that they’re not going to be an NBA player, but if
your ambition is, “No, they’re going to be an NBA player,” they’re not going to be. I think to know your
shortcomings and to tackle starts with acceptance.
Again, it was public knowledge they were opening an American Apparel shop in LA at one stage, and then the
next quarter, it was announced that they’re not opening it anymore. Why is this happening? I don’t know.
Again, that’s the lack of focus or inability to execute, I would say, and those are the things one should look at,
what have they said, what have they done? What I don’t see in the calls is, again, if I was on the call and asking
the questions, I’m not trying to teach anyone their jobs, but I would ask, “This is what you said and this is
what’s happened. Why? Why is there this change or what happened to what you said last quarter or two
quarters ago?” I think those are the things, a follow-up is needed. “Ship-to-piece, was that a good idea to
cancel, given that there is a big boom in retail?” One of your pre-questions that you sent or your colleague sent
me was what can Gildan do to expand shelf space and increase price points? I think price points are very
sensitive. I don’t know if there is room to increase prices.
What you need to understand is how the pricing works in this market. The pricing is irrelevant. What comes as
net is what is important, because they do price increases in the market. It’s like when you go to a retail shop, if
there is a buy one get one free, whatever the price increase, if it is absorbed by a 50% promotion like that,
there is no price increase, if you ask me, I’m a financial person. If there is a price increase, but immediately
you give an incentive kickback to the sales channel, again, it’s not a price increase. The price increases don’t
flow down to EBITDA, is what I’m saying. I think that’s where the analysts have to be careful. When somebody
says, “There’s a price increase,” you need to ask, “Following this price increase, what are the changes to your
incentive structure or promotions, whatnot, to your channel?” That’s the important thing. For retailers, again,
the shelf space, in my view, is not going to expand because the awareness, especially with COVID now, there
are less customers in the stores, so why would they put stuff on the shelves? It’s not going to happen in the
short term. They will have stuff online and that’s where online business is a ship-to-piece business and you
need to have a corresponding e-comm platform to be able to talk to the e-comm platforms of your retailers and
your distribution centre, which is an area of opportunity in the longer term.
[00:54:02]
Q: What do you think is most important or something that investors commonly overlook throughout the
company when assessing Gildan? Could you elaborate on the company’s ability to manage brands? Given that
you can find a Gildan shirt in almost every household in the US, I think it’s hard to believe that it can’t just
leverage that outreach already and that penetration to really take control of its brand.
ST: In terms of the industry and what they can do, what are the opportunities, I think opportunities are in
fashion basics, in hoodies, etc. In terms of brand management, I totally agree, Gildan is such a strong brand
name and that’s why, in the DNA of the company, there is nothing which says, “Because we are Gildan, we
don’t need to spend.” They have come so far without spending any money because they were one and only and
they had the cost advantage, as I said, 5-10 years ago, by having this huge manufacturing facility in Honduras,
but I think one should ask is this still applicable, is this still a valid statement, that you are the lowest-cost
manufacturer? I don’t think so. There are lower-cost manufacturers in the market and that’s not the biggest
advantage anymore. As I said, their major advantage was on tubular wear. Again, the market there is
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saturated. They are going to just keep what they have and they will not lose it, and you don’t need to spend
marketing dollars to keep that, because everybody will come and buy Gildan if they have a sports team at
school or if they are going to all these activities, whatnot, printing, but for fashionwear and hoodies, people are
shopping around.
This is where you need to spend some marketing dollars, both for your Gildan name, because your name is
associated with basics. People don’t think that you are good at fashion basics, so you need to really make that
jump for them by, I don’t know how, but by showing them you can. It will be either through discounting or
promotions or something like that. If you are known for a particular product, it could be your advantage and
disadvantage. If you are known for basic T-shirts, people might not automatically come to you for fleece and
think that you are the lowest manufacturer, which you are not. For example, in Europe, there is a company, All
We Do Is Hoodies, I think, or sweats or something, and they just, the name even is that all they do is fleece, so
people might actually want to go buy from them, and they are manufacturing in Bangladesh and it’s cheap. I
think that is the handicap. If you’re known for one thing, you need to show people that you are able to do the
other 2-3 things that are the trend in the market.
Then in terms of your already owned brands, which are American Apparel, Comfort Colors, Anvil, Hammer,
etc, again these are all very good products, if you ask me. They are really good brand names, but you need to
take them out of the shadow of Gildan. Because maybe I’m a mother, I give this example, you should forget
your first child sometimes and give a chance to the little ones, that they can also do things. You shouldn’t be
obsessed with your first-born. You have to really look at the others for opportunity. Again, that comes back to
your vertical integration, but if you are acting like a manufacturing company, you are still maybe thinking of,
“I have invested a couple of billion dollars’ capital investment to do tubular, I’m going to insist on it.” For
example, Goldtoe, a very good example, you and I, we probably don’t know, our fathers maybe know Goldtoe,
but if Goldtoe has moved from that traditional knee-high, black sweat socks to fun design socks, where do I see
that? Where is the advertisement? Why would I know or why would my children know about Goldtoe? It’s
such a strong brand known to people who are 65 plus year-old. How is this brand going to continue if my
children don’t know about it? If Goldtoe cannot switch to this fun, colourful design like Justin Trudeau wears,
because nobody wears black socks under even sweats anymore, where do we see that?
The other thing is basically being a more pro-sales company, more agile, more responsive to market needs and
really sometimes acting towards the market. That’s where the win is. Right now, if you look at the coming
generations, it’s all about fashion, comfort, and the other thing is sustainability. Sustainability is a big threat to
one-time-wear companies. I see, again, from my children, who are 18, 22, etc, they don’t want to buy
something just to wear once. They feel disgusted if people are just buying and tossing things. I think that’s the
part, whereas sustainability is only seen as part of the manufacturing process. We don’t put chemicals out into
the world, we are processing them and making drinkable water, yes, that’s part of it, you have to do that
anyway and it has been there for years, but hello, there is the sustainability side of the products. People are
wanting products which are more eco-friendly, which are durable. They don’t want products which will shrink
or go bad or whatever. You can charge a little bit more, but if they know this is going to be sustainable, because
people know that all these T-shirts, at the end of the year, are going into the world, some dump yard at the
end, I think those are the opportunities for any company.
[01:02:15]
NH: Thank you, Sibel. We will now end the Interview there, but let me just close by saying thank you for your
time today. We covered a lot, a very extensive Interview. Thank you, clients, for joining Third Bridge Forum’s
Interview today. If you wish to speak with our specialist, Sibel, in a private call or meeting then please let your
relationship manager know. Have a good one.
ST: Thank you.
Transcription ends at 01:02:31 of the recorded material
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