Browning West Cautions Shareholders Regarding Gildan Activewear’s Risky Path Forward Under CEO Vince Tyra
Vince Tyra’s Attempt to Copy Former CEO Glenn Chamandy’s Strategy is Fraught with Risk Due to Mr. Tyra’s
Mr. Tyra Unveils Underwhelming Margin Guidance, Speculative Spending, Weak Capital Allocation, and No Long-Term Earnings Per Share or Stock Price Targets
Browning West Urges Shareholders to Support its Slate of Eight Highly Qualified Directors and Strategy for Superior Value Creation
As a reminder,
“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
Our key questions are outlined below:
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Why Should Shareholders Allow
Mr. Tyra , an Executive With a Record of Failure, to Pursue the Same Strategy asGlenn 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, whichMr. 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 likeMr. Tyra to attempt to deliver this strategy when proven value creatorMr. 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 fromMr. 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 inBangladesh , Mr. Tyra’s plan does not appear to capitalize on these opportunities. However, we are not surprised to see underwhelming margin guidance fromMr. Tyra because we observe significant margin degradation in his track record at both Fruit of the Loom andBroder 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 hearMr. 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 whereMr. 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 allowingMr. Tyra to undertake any acquisitions given that he destroyed tremendous value atBroder 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 thatMr. 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.comto 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.
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Browning West is an independent investment partnership based in
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.
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Source: Browning West, LP