One of the biggest losers in the markets on Friday was a Canadian clothing manufacturer. Gildan Activewear (NYSE: GIL) saw its shares plunge by over 25% after news broke out that demand for its printwear clothing failed to meet expectations.
Now analysts across the board have been downgrading the stock as worries continue to grow regarding the consumer goods industry as a whole.
Gildan, which owns the American Apparel brand, fell drastically after it reported a decline in Q3 sales and stated that it would take a $100 million loss this year in terms of revenues. The company said that its printwear/imprintables business segment, which is where it makes various articles of clothing with custom logos imprinted on them, saw a significant downturn in demand.
“The company estimates that lower demand expectations than previously projected will reduce the company’s sales projection for the fourth quarter by approximately $70 million and anticipates distributor inventory destocking will negatively impact sales by approximately $100 million,” said the company in an official statement.
Overall, sales are down 2% in comparison to the same time last year, a significant change from the company’s earlier, more optimistic assessment. The news was especially surprising, as Gildan stated that its Asian business segment was supposedly “on fire.” Now that the company is revising its year-end guidance, analysts have responded with a slew of downgrades for the stock.
Bank of America Merrill Lynch analyst Heather Balsky wrote in a note to clients that this was a worrying sign for the company, expecting that a continued decline in the U.S. economy would further hurt the company’s prospects. Desjardins analyst Keith Howlett added to this idea, reiterating the idea that the downturn in the global economy could be to blame. It is possible that economic anxiety has caused some companies to reduce discretionary spending,” he commented.
Almost every analyst covering the stock ended up downgrading their overall rating for the stock. Even those that didn’t change their overall rating, whether it be a “buy” or a “hold” still changed their price target for the company, slashing their estimates by at least 20-30% across the board in light of the news.
In response to the news, Gildan fell by 25.7% on Friday, hitting a 1.5-year low in the process while also being the biggest single-day drop in the company’s history. While some might consider the company to be a buying opportunity now that shares have been so heavily discounted, many experts look at this decline more as a symptom of the ongoing weakness seen in the consumer goods and apparel industries.
Gildan Activewear Company Profile
Gildan is a vertically integrated designer and manufacturer of basic apparel, including T-shirts, underwear, socks, and hosiery. Its primary market is the sale of blank T-shirts to wholesalers and printers (printwear). Gildan also sells branded clothing through retail and direct-to-consumer channels. Brands include Gildan, American Apparel, Comfort Colors, and Gold Toe. Gildan produces most of its clothing at factories in Latin America. The Montreal-based company generates most of its sales in the U.S. and was incorporated in 1984. – Warrior Trading News
