FBR Capital Mintains an 'Underperform' on Gildan Activewear (GIL); Announces Intent to Acquire Gold Toe Moretz
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Price: $56.72 -0.54%
Rating Summary:
11 Buy, 15 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
11 Buy, 15 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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FBR Capital maintains an 'Underperform' on Gildan Activewear (NYSE: GIL).
FBR analyst says, "On the surface the deal seems like a good one for Gildan, providing the company with a portfolio of owned and licensed brands that extend distribution beyond the core, while also layering in potential synergies. We do have some questions: (1) with so much organic growth opportunity in retail, why did Gildan need to acquire a turnaround brand (Gold Toe sales have declined from ~$350 million in 2006 to $280 million in FY10, or -20%, while EBITDA has also declined over the same period), which is now placed on top of the Gildan sock business that has been challenged (8 of last 9 quarters have been negative), (2) with roughly 30% of the mix tied to dress socks, how can Gildan fully leverage the portfolio through its low cost supply chain (this category will have to be sourced) and (3) how does Gildan integrate an Asia sourcing base (management has previously called out competitive advantage as one of few vendors with no Asia exposure) where inflationary pressures are building. Paying 7x EBITDA is roughly in line with recent takeout multiples, but deal couldn't be funded through cash alone (needed to tap revolver), while also creating integration risk."
For more ratings news on Gildan Activewear click here and for the rating history of Gildan Activewear click here.
Shares of Gildan Activewear closed at $32.02 yesterday.
FBR analyst says, "On the surface the deal seems like a good one for Gildan, providing the company with a portfolio of owned and licensed brands that extend distribution beyond the core, while also layering in potential synergies. We do have some questions: (1) with so much organic growth opportunity in retail, why did Gildan need to acquire a turnaround brand (Gold Toe sales have declined from ~$350 million in 2006 to $280 million in FY10, or -20%, while EBITDA has also declined over the same period), which is now placed on top of the Gildan sock business that has been challenged (8 of last 9 quarters have been negative), (2) with roughly 30% of the mix tied to dress socks, how can Gildan fully leverage the portfolio through its low cost supply chain (this category will have to be sourced) and (3) how does Gildan integrate an Asia sourcing base (management has previously called out competitive advantage as one of few vendors with no Asia exposure) where inflationary pressures are building. Paying 7x EBITDA is roughly in line with recent takeout multiples, but deal couldn't be funded through cash alone (needed to tap revolver), while also creating integration risk."
For more ratings news on Gildan Activewear click here and for the rating history of Gildan Activewear click here.
Shares of Gildan Activewear closed at $32.02 yesterday.
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