Yahoo Finanzas Gildan CEO Vince Tyra Says Supply Chain is Top Pillar for Growth
Gildan Activewear CEO Vince Tyra has identified five priorities to drive growth at the underwear and tees giant, and the first one centers on the supply chain.
“We will continue to focus on our supply chain excellence and focus on driving successful execution of our investments and Bangladesh while remaining true to our back to basic principles. in our commitment to innovation and ESG. I’m truly energized with what’s to come,” newly named CEO Vince Tyra said during an investor update on Monday afternoon that outlined his priorities, relying on the three key pillars—growth, innovation and ESG—previously outlined in the Gildan Sustainable Growth (GSG) strategy.
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“We will have a renewed focus on our brands and enhance our commercial capabilities to deliver the best offering to customers across the board. We will further increase our emphasis of serving our retail partners. We will apply a focused approach to growth and international markets to make sure we win, wherever we decide to play. And lastly, we will make people and their development a priority, ensuring that the next generation of leaders has the space and support to grow to their full potential,” Tyra said of the remaining four priorities.
Gildan is slated to hold an Investor Day this fall. The timing of Monday’s investor update is interesting because the apparel firm is locked in a proxy fight by activist investors led by Browning West. The investment firm and eight other institutional investors control 35 percent of Gildan’s outstanding shares. They are trying to reconstitute Gildan’s board at the Annual Shareholders Meeting on May 28, with the aim of firing Tyra and reinstating former CEO Glenn Chamandy once they take control of the board.
Tyra and Gildan have also been met with criticism for lack of details about growth plans after the company posted fourth-quarter earnings results in February. In the midst of the proxy battle, Gildan also put itself up for sale last month. And there’s an outside chance Gildan could ink a sale agreement just prior to the May 28 meeting, which could derail Browning West’s proxy plans.
Tyra said in his first three months he has visited “Honduras multiple times, the Dominican Republic, Nicaragua, Barbados, our yarn mills in North Carolina and one of our primary distribution centers in the U.S.,” and he wants to unlock growth potential while also focusing on cost containment and key “business fundamentals that we know drive value.”
“First, we will successfully execute the supply chain initiatives that were previously launched that includes delivering on Bangladesh, optimizing production in the Western Hemisphere, and continuing to innovate our processes,” Tyra said. “These projects cannot be taken for granted. We need to rigorously focus on execution to deliver these projects on time and on budget. Therefore, maintaining availability cost leadership and industry leading margins, is my number one priority.”
He said that the company is already diversifying and increasing volume through the first phase of an integrated manufacturing hub in Bangladesh, which is expected to increase capacity by about 350 percent. At the same time, Gildan is also optimizing its yarn spinning assets in the U.S., while adding solar capacity in the Dominican Republic to mitigate political instability in Haiti, Tyra said.
One interesting factoid is that Browning West on April 1 introduced its five-pillar strategy to revamp Gildan’s operations, which includes setting Bangladesh and Honduras as key hubs. The two plans share similar goals on market share and new programs, growing fleece and ESG. But one difference centers on the investment firm’s push to improve margins by shifting to high-margin products and lower-cost production in Bangladesh, which Tyra’s presentation didn’t address.
On Monday’s call, Tyra also said that Gildan is innovating through improved fabric softness, while revising cuts and fits to match market demands. These innovations allow the company to consolidate share in the open-end fabric products in ringspun and fleece items, he said.
As for its Comfort Colors and American Apparel operations, Tyra said Gildan can do more on the marketing front to increase both businesses, his second priority. The former has the opportunity to expand in new market segments, such as event merchandise or up-market corporate gifting. For the latter, which once had a devoted brand following, the company “must update customers on what the brand represents today, while reconnecting American Apparel with its roots,” the CEO said.
Tyra called his third priority in growing relationships with retail partners an “untapped potential,” noting that Gildan has historically been under-indexed in the retail activewear channel. He explained that the collaborative approach allows Gildan to proactively adapt to retailers’ evolving needs, while at the same time solidify the firm’s position as the supplier of choice.
“We are one of the few apparel manufacturers that can offer a dual sourcing model and service retailers from East Asia for cost competitiveness, as well as from Central America for flexibility and quick turnaround times,” he said, adding that Gildan’s model allows its retail customers to benefit from nearshoring, without sacrificing price competitiveness.
But the CEO also said that the American Apparel owner’s manufacturing model has been focused on “large volume runs with little to no change ups.” While that has enabled Gildan to maintain its cost leadership position, some global brands require flexibility, which Gildan can meet through the development of “pockets of flexible selling capacity.” That shift would allow others to benefit from Gildan’s expertise and at the same time complement the manufacturer’s existing large-scale manufacturing model.
Tyra also sees an opportunity to grow Gildan’s footprint in international markets, his fourth priority. He said the company won’t take its eye off the U.S. market, but that it can grow overseas through a “very focused targeting on select” markets. Noting the fragmentation inherent in some international markets, focused targeting is a move that works provided the Gildan’s framework is on local needs via select product introductions, tailored pricing and closer customer presence. That’s because the U.S. market operates differently than the rest of the world and one size doesn’t fit all, Tyra said.
The final and fifth priority is an ESG goal where Gildan can transition to a “more collaborative and inclusive leadership model,” he said, adding that the shift will make Gildan the employer of choice in every market it is in. Strong corporate citizenship includes reducing energy and water usage, increasing use of sustainable cotton and recycled materials, and diversity goals, such as a target to “achieve 40 percent gender parity at the director level and above by 2027,” Tyra said.
He’s also open to the idea of select M&A opportunities down the road, but emphasized that’s not an immediate priority. However, Tyra did note that he wants to make sure talent, bandwidth and ability are in place so the company can “properly execute when there is an opportunity.”
Gildan said in a statement Monday that it can deliver on key financial metrics over the 2025 to 2028 period that forecasted net sales growing at a compound annual growth rate in the mid-single digits range, with adjusted diluted earnings per share growth each year in the high-single to low-double-digit range and annual adjusted operating margin between 18 percent to 21 percent.
Executives on the call said the ranges can be met even with the expectation of Canada implementating a global minimum tax. More than 140 countries have signed onto the tax treaty, which imposes a minimum 15 percent rate on the profits of multinationals.
After Tyra’s investor update, Browning West attacked the CEO’s presentation, saying it was just a copy of the GSG strategy that Chamandy had launched in 2022. While it said that at least the Gildan board is “finally reversing its prior, baffling criticism of Mr. Chamandy’s growth strategy,” Browning West once again raised its lack of confidence in Tyra’s ability to execute. The investment firm has repeatedly alleged that Fruit of the Loom ran into financial challenges when Tyra was running the show.
Browning West also charged that the new financial metrics Tyra and his team noted gave them some ability to reduce operating margins. And it considered Tyra’s second and third pillars on brand building and international expansion fraught with risk. “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 where Mr. Tyra has no previous experience,” Browning West said in a statement.
In trying to get votes from investors of the remaining 65 percent of outstanding shares that it does not control, Browning West insists that its plan provides a “clear pathway” to a $60 share price by the end of 2025 and $100 over the next five years.
