Pat McKeough responds to many personal questions on specific stocks and other investing topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions.
This week, one Inner Circle member asked for an assessment of a company that at times has been one of Canada’s most impressive growth stocks, but has also seen some sharp declines in its shares, as it did in December.
Q: Pat: I currently hold a significant portfolio position of Gildan Activewear. At current levels, does Gildan look attractive? Any views? Thanks in advance.
A: Gildan Activewear Inc., (symbol GIL on Toronto; www.gildan.com), makes and sells T-shirts, fleece sweatshirts and sweatpants, sport shirts, underwear and socks in a variety of weights, sizes, colours and styles. Its customers are in Canada, the U.S., Europe and other countries.
Gildan makes most of its products from 100% cotton, blended cotton and polyester. It doesn’t add designs to its clothes; instead, it sells them to wholesale distributors as blanks. The distributors then sell Gildan’s clothing to screen printers and embroiderers who add their own images.
The company competes with Fruit of the Loom Inc., Hanesbrands Inc., Delta Apparel Inc. and Anvil Knitwear Inc.
In its fiscal 2011 fourth quarter, which ended October 2, 2011, Gildan’s revenue rose 30.6%, to $481.8 million from $368.9 million a year earlier. (All figures in U.S. dollars.) However, earnings fell 14.6%, to $48.5 million, or $0.40 a share, from $56.8 million, or $0.47 a share. That mainly reflects a sharp rise in the price of cotton.
As a member of my Inner Circle, you will get individual answers to your personal investment questions. And you will see my answers to questions other investors like you are asking. In fact, you will get virtually all the investment advice I have to give. You will have access to all of our advisories – The Successful Investor, Wall Street Stock Forecaster, Stock Pickers Digest and Canadian Wealth Advisor – and full access to the members-only, password-protected Inner Circle section of The Successful Investor Network website.
Although my team carefully researches all the stocks that members ask about, I personally review each and every recommendation. To ensure this close personal attention, only a limited number of members can be admitted to our Inner Circle. Under the pressure of world events, even more investors are asking for my personal investment advice. We are nearing our membership limit already. Click here to secure your membership in the Inner Circle right away.
Growth stocks: Gildan has lower earnings forecast for 2012
Gildan’s shares fell 31% on December 1, 2011, when the company announced its latest results. The lower earnings were part of the reason for the drop, but it was mostly because the company lowered its earnings forecast: it now expects to lose $0.40 a share in the first quarter of fiscal 2012.
That’s because the company’s customers are drawing down their inventories and holding off on restocking. As well, Gildan’s profit margins have shrunk, because it has been forced to cut its prices to clear out higher-cost inventory (made from cotton purchased at higher prices).
In addition, the company now expects to earn just $1.30 a share in fiscal 2012, compared to $1.97 a share in fiscal 2011.
Gildan’s $208 million of long-term debt is just 9.0% of its market cap. The shares yield 1.5%.
One of Gildan’s key risk factors is that it sells what is basically a commodity product. Although it has moved most of its production to low-cost countries, such as Honduras and the Dominican Republic, it is still vulnerable to competitors that make their products in other low-wage countries, such as China or Bangladesh.
In the Inner Circle Q&A, Pat looks at Gildan’s near-term prospects for profit margin improvement and higher revenue. He also considers this growth stock’s long-term outlook in light of the fact that cotton prices have retreated significantly since last March. He concludes with his clear buy-hold-sell advice.
Inner Circle members see Pat’s analysis and recommendations on the stocks other members have asked about in each week’s Inner Circle Q&A. You can view it immediately when you become a member of this special investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle website, and many other membership privileges. Click here to get started right away.
no matter whats influenced in gildan success, they really did hard work, customer support, quality of fabric, and most importantly, their prices of products which is far cheaper then other brands!
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no matter whats influenced in gildan success, they really did hard work, customer support, quality of fabric, and most importantly, their prices of products which is far cheaper then other brands!