Gildan Activewear Inc's then-president and CEO Glenn Chamandy poses for a photograph following the apparel manufacturer's annual meeting on February 5, 2015 in Montreal. THE CANADIAN PRESS/Paul Chiasson
MONTREAL: Gildan Activewear Inc’s former chief executive officer said he has a strategy to nearly double the clothing maker’s profits by 2028 if he returns to the job – and that investors will be better off with his plan than selling the company to the highest bidder.
Glenn Chamandy, who was fired in December after a bitter fight with board members over succession, said that under his leadership, the Canadian company would borrow more, accelerate stock buybacks and avoid large acquisitions.
The goal is to quickly boost earnings per share and raise the stock price to US$60 by the end of next year and more than US$100 in about five years. It closed last week at US$37.13.
First, though, Chamandy’s allies would have to win their battle to unseat Gildan’s current board. Los Angeles-based investment firm Browning West LP, which owns 5% of the company, is leading the campaign to install new directors and bring the former chief executive officer back.
Investors holding about a third of Gildan’s shares have publicly said they want him reinstated.
That would appear to give Browning West and Chamandy a strong chance of prevailing at a shareholder vote scheduled for May 28.
But board members are fighting back and have put the company in play, hiring investment banks including Goldman Sachs to reach out to potential buyers after receiving an unsolicited expression of interest from an unnamed firm.
At stake in the boardroom struggle is a business that’s a powerhouse in the world of cheap casual apparel.
Gildan is one of the world’s largest makers of blank T-shirts, produces items for Walmart Inc and Nike Inc, and owns the American Apparel brand.
Since it went public in the late 1990s, it’s grown from a tiny player to one with a market capitalisation of about US$6.3bil, making it one of the biggest Canadian manufacturers of consumer goods.
Members of the Chamandy family have been in charge for decades, until the company shocked the market on Dec 11 by announcing that Glenn Chamandy was making an immediate exit. The shares tumbled more than 10% that day.
“I’m not entrenched, but I’m here to create value and a good succession because this is not just a company, this is my legacy,” Chamandy said in an interview with Bloomberg News. “My grandfather started the company in 1946. I’m quite passionate about it and I want to make sure that when I do leave, it’s in good hands.”
The board ousted Chamandy, 62, saying he had become a disengaged chief executive who refused to stick to an agreed-upon succession plan and wanted to embark on a risky acquisition strategy.
By putting forward a strategy that doesn’t rely on mergers and acquisitions, Chamandy aims to quell any concerns and win shareholders’ support.
He developed it with Browning West and a slate of proposed directors that includes United Rentals Inc chair Michael Kneeland as well as current and former executives of Nike, Walmart and Canadian National Railway Co.
“The operating plan is built 100% on organic growth,” said Chamandy. It envisages net sales rising to US$4.3bil by 2028, a 34% increase from last year, with better margins – resulting in adjusted operating profit of US$956mil by that year.
“There’s nothing here that I think is unrealistic,” he said. “The board is trying to sell the company because they really don’t want to take accountability.”
“If the company gets sold and they put on some ridiculous amount of debt, how is it going to be able to reinvest?” he added. “The company will lose its competitive advantage, and over time, I think it would just fizzle out, really.”
A spokesperson for Gildan did not reply Sunday to a request for comment about the plan.
Gildan, which employs 43,000 people worldwide, has become a dominant global player in printwear – T-shirts that can be customised by companies or organisations with their own logos or designs.
It’s a business where low costs are crucial, and Gildan has spent heavily in recent years to expand facilities in Bangladesh.
Under Chamandy and Browning West’s potential strategy, Gildan would move more production to the South Asian country and away from Honduras, where energy and labour costs are higher.
The company would also focus on trying to grow in higher-end segments of the market, such as fleece products and clothing with better-quality fabric that’s sold under brands such as American Apparel and Comfort Colors, Chamandy said. — Bloomberg
