Posted March 25, 2020

MONTREAL – Gildan Activewear Inc. provided an update in response to the impact of the coronavirus pandemic (COVID-19) on its business and operations.

 

The spread of COVID-19 continues to heighten and is having a significant impact on global economic activity. As it relates to areas of Gildan's business, it said it first priority is the health and welfare of its employees, customers suppliers and other partners who it has been working to address. It has also started to see a meaningful deceleration in demand in the imprintables channel, given measures that governments, companies and individuals are taking to limit the spread of COVID-19, including the limitation of social gatherings, travel restrictions and the cancellation of various sporting, entertainment, promotional and cultural events, among others.

 

Additionally, although Gildan said it has not yet seen as significant a deceleration of demand for our products in all the retail channels that it serves, it said it expects the multitude of recently announced temporary store closures and social distancing measures being recommended by governments and health protection agencies will also continue to slow retail demand.

 

Effective March 17, the government of Honduras mandated a seven-day closure of all private enterprises operating in the country, which has now been extended to March 29. Governments of some of the other countries in which Gildan operates are also issuing similar directives to combat the spread of COVID-19.

 

Accordingly, given the impact of all these factors, the company announced that it is temporarily suspending production at all of its manufacturing facilities until mid-April. This will allow the company to respect government recommendations and align production and inventory levels with current demand requirements. All other areas of its business, including distribution centers that service the various regions where it sells its products will remain open for the time being with good inventory availability levels to service its customers, operating with appropriate measures in place to protect its employees, including remote working arrangements for many of its office staff.

 

Given the unprecedented nature of the COVID-19 situation that is changing rapidly, the company will continue to monitor and adjust its plans for its business as the situation evolves, it said. At the end of the fourth quarter of 2019, Gildan had a net debt to adjusted EBITDA leverage ratio of 1.6 times. As a precautionary measure on March 17, the company elected to draw down on the remaining available portion of its revolving long-term bank credit facility, positioning it with close to $600 million of liquidity.

 

Accordingly, it has a high degree of financial flexibility as its move forward to deal with COVID-19 challenges given its fixed cost structure and focus on expense, capex and working capital management, as well as its balance sheet and access to liquidity.

 

The company issued its first quarter and full year 2020 guidance on February 20, which did not include the impact of COVID-19 disruptions. Due to the heightened uncertainty relating to the impacts of COVID-19, the company said it is withdrawing its first quarter and full-year 2020 financial guidance. The company added that it expects to provide a further update when it releases its first quarter 2020 earnings results.

 

Gildan said it is working diligently across all areas of its business to safeguard its people and the continuity of its business, while maintaining support to all its customers. It has been able to successfully navigate through difficult times over the years and adapt to changing environments, which gives the company confidence that its strong business model, financial position and resilience will continue to position it well for long-term success as it emerges from the COVID-19 crisis.

 

Source: Gildan