This print confirmed many elements of our bull thesis. Growth accelerated in 3Q despite macro headwinds as the company is gaining share in the core US business, specifically highlighting the performance in fleece and ring spun (fashion basics). The company is talking about continued performance at POS meaning rate of change is likely accelerating in 4Q given easy compares and further share gains. It slightly tempered 4Q on the international markets being a drag, specifically Europe macro and inflation in Asia. Given Bangladesh capacity will fuel growth in these markets, the trend will likely inflect in the coming quarters. The company is also talking about the directional margin improvement as we are in the late innings of YY cotton inflation headwind. At the same time capacity coming online should be a gross margin drag, so the company is accelerating top line with margin trends likely getting better each quarter. Acceleration up and down the P&L is a recipe for multiple expansion. Numbers not moving much in 4Q, but 2024 expectations are likely 15% to 20% too low as the growth and margin performance become realized over the next 6 to 12months. The company highlighting share gains supports our view that in a challenged consumer/macro environment, share will tend to gravitate toward the low cost producer and best value proposition. That is Gildan. Additionally, the company accelerated its buyback this Q with $80mm in repo vs $75mm last Q in $62mm in 1Q. Its buying back stock good chunks of stock ahead of the coming cash flow acceleration, meaning even better returns for shareholders to come. See below for Elevator Pitch and SIGMA Analysis.
GIL is a Best Idea Long and one of the few names we think you can make money on across durations in US retail. Potential for a 2 year double or better.
