Gildan Activewear Inc. raised its dividend nearly 10 per cent Wednesday as it laid out its plan to grow sales and earnings over the next three years.
Chief financial and administrative officer Rod Harries said Gildan is a "fundamentally stronger company" by generating strong results in the fourth quarter and record sales, earnings and free cash flow in 2021.
"Thanks to the strong efforts, expertise and focus of our whole team, we navigated through a still challenging environment in 2021 to deliver on the core objective of our back to basics strategy," he said Wednesday during a conference call with analysts.
Gildan said it plans to continue to expand its capacity in Central America and the Caribbean and resume the expansion in Bangladesh where it is building the first of two large textile and sewing facilities. The company said capital expenditures as a percentage of sales will climb to between six and eight per cent to support its long-term growth and vertical integration.
In its outlook, Gildan said it expects a compounded annual growth rate for sales of seven to 10 per cent over the next three years with growth of adjusted EBIT (earnings before interest and taxes) of 18 to 20 per cent.
The forecasts, which will be detailed at the company's investor day next month, were beyond analyst forecasts.
"We expect Gildan to outperform today given better-than-expected 4Q results and favourable three-year growth outlook ahead of its investor day on March 29," Chris Li of Desjardins Capital Markets wrote in a note.
Li said he plans to "revisit" his share price forecasts.
Gildan shares increased $1.70 or 3.5 per cent at $50.74 in afternoon trading on the Toronto Stock Exchange.
The Montreal-based company, which keeps its books in U.S. dollars, said Wednesday it will now pay a quarterly dividend of 16.9 cents per share, up from 15.4 cents. It also increased its share buyback program to repurchase 10 per cent of outstanding shares up from five per cent.
The increased payment to shareholders came as it reported a fourth-quarter profit of US$173.9 million or 89 cents per diluted share, up from US$67.4 million or 34 cents per share a year earlier.
Net sales for the three month ended Jan. 2 reached a record for the fourth quarter of US$784.3 million, up 14 per cent from US$690.2 million in the prior year.
Quarterly revenue growth was propelled by a 17 per cent increase in activewear sales and higher net selling prices, while hosiery and underwear revenue increased three per cent.
On an adjusted basis, Gildan says it earned 76 cents per diluted share, up from an adjusted profit of 45 cents per diluted share a year earlier.
Analysts on average had expected an adjusted profit of 60 cents per share and US$735.6 million in revenue, according to financial markets data firm Refinitiv.
For the full-year, Gildan earned US$607.2 million or US$3.07 per diluted share on US$2.9 billion of sales, compared with a net loss of US$225.3 million or $1.14 per share on US$1.98 billion of revenues in 2020.
Gildan also announced the appointment of former Unilever executive Dhaval Buch to the company’s board of directors. Buch will serve on the board’s corporate governance and social responsibility committee.
This report by The Canadian Press was first published Feb. 23, 2022.
Companies in this story: (TSX:GIL)
Ross Marowits, The Canadian Press
