GIL: Ok, the market finally gets it...

Gildan finally had its day of reckoning. A nasty preannouncement on April 29th sent the stock down 37%. Not a shocker to us (see our comment from the day before) that the rationale is slower sales growth, weaker gross margins, and higher SG&A. Not a good concoction for a stock that was trading at 22x EBITDA and universally loved by the Street.

The timing bugs us. 2 weeks prior, Barron's ran a positive story (citing management) which highlighted the growth, but glossed over the risks on the cost side of the equation. The bigger timing issue is the 3.6mm shares that CEO Chamandy sold in 4Q for $147mm. We don't have a huge problem with executive stock sales - as it is within their right to diversify in a prudent and responsible fashion. But this sale was near the top, and just as pressures in the businesses started to build. The $147mm in proceeds is one thing, but the $70mm in loss avoidance is another. We wish the investing public at the other end of the trade had the same insight.

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