Gildan Activewear Inc. is undergoing upheaval over its shocking CEO change, and now two shareholders are urging a reversal of that decision.
Glenn J. Chamandy, Gildan’s co-founder and former CEO, said on Monday that after four decades of service to the company—including nearly 20 years as president and CEO—he was told by Gildan’s board chairman that his employment agreement was terminated without cause. “It is unfortunate that my vision of the path forward has differed from that of other Board members,” Chamandy wrote in a statement.
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The executive change didn’t sit well with two longtime shareholders, Browning West and Turtle Creek Asset Management Inc., who are both seeking the reinstatement of Chamandy as company CEO.
But Gildan’s chairman Donald C. Berg said on Monday that the company has named Vince Tyra president and CEO, effective Feb. 12. Craig Leavitt, a board member since 2018 and former CEO of Kate Spade & Co., will serve as interim president and CEO until Tyra joins the firm.
Browning West LP, a longtime shareholder who holds a 3.9 percent stake in the outstanding shares of Gildan, is pushing back. The Los Angeles-based hedge fund on Thursday sent a letter to Gildan’s board urging the reinstatement Chamandy as CEO and the ouster of Berg as board chair.
“Our confidence in Gildan’s business and long-term potential stems from our in-depth and multifaceted analysis, including 46 total meetings with senior leadership, 13 on-site visits, and multiple trips to the company’s manufacturing plants in Honduras and North Carolina,” wrote Browing West co-founders Usman S. Nabi and Pete M. Lee. Nabi also serves as the hedge fund’s chief investment officer. “Through the course of our research, we found that Gildan’s long-time CEO and Co-Founder, Glenn Chamandy, is a strong leader who has played an instrumental role in the company’s impressive success.”
According to the two, Chamandy built Gildan into a dominant business with a “wide competitive moat,” and his leadership resulted in the company’s stock generating a 99 times total return for its stakeholders. They noted the current macroeconomic environment, and still concluded in favor of Chamandy: “We believe that under Mr. Chamandy’s leadership, Gildan’s share price was poised to be worth $60 to $80 over the next two years, which represents an approximately 80 percent to 140 percent increase from the current price, which assumes that Mr. Chamandy delivers $4 of earnings per share and the stock re-rates to its historical valuation range.”
The two also said that they learned the primary reason for Chamandy’s ouster was his view for a thoughtful succession plan over the next few years while remaining as CEO. That’s a viewpoint that Browning West’s members said would allow the company to further develop internal candidates for the job.
Nabi and Lee charged that the board’s poor handling of succession planning puts the business and shareholders at “great risk,” and that its CEO search was flawed, adding that they do not believe Tyra has the right qualifications for the top job. They noted that his tenure at Fruit of the Loom included a share price decline by 99 percent and the company’s bankruptcy in 1999.
In seeking the removal of Berg as board chair, the Browning West co-founders said Leavitt could assume the role on an interim basis as a board chair search is initiated. And the two want to name Lee to the Gildan board as a shareholder representative.
Turtle Creek also sent a letter to Gildan on Thursday, noting, “We were understandably dismayed by the Board’s abrupt termination of Mr. Chamandy, which we believe exposes Gildan to a significant loss of leadership, loss of institutional and operational knowledge, damages employee morale and potentially threatens key customer relationships.”
Like Browining West, Turtle Creek said it too believes in succession planning. It described the termination of Chamandy as “abrupt” and in “great haste,” and without consideration of the “substantial adverse impact on Gildan’s business.”
A spokeswoman from Gildan did not respond to a request for comment by press time.
Chamandy and his brother Greg founded the company in 1984 through the acquisition of a knitting mill in Quebec, Canada. The mill made fabric that was a supplier to the family’s children’s wear firm Harley Inc. The business was later expanded to include T-shirts. Among the firm’s highlights include its 1998 initial public offering, listing shares on both the Toronto and New York Stock Exchanges, and the 2012 acquisition of 130-year-old apparel manufacturing Anvil Holdings Inc., the parent firm of Anvil Knitwear. It later acquired American Apparel for $88 million in 2017.
The tough macro backdrop, coupled with a slowdown in international sales, hurt first quarter results as retail customers remained cautious on replenishment orders. A weak replenishment cycle for men’s socks and underwear, suggesting some retailers still had too much inventory on their hands, continued through the third quarter ended Oct. 1. But in other categories, hosiery and underwear sales rose 16 percent in the third quarter, while activewear’s performance held steady. At the time, Chamandy said he didn’t “expect de-stocking to be a headwind in 2024.”
The firm posted a third-quarter net income decline of 16.7 percent to $127.4 million on a net sales gain of 2.3 percent to $869.9 million. Full-year 2023 revenues and earnings were guided to the lower end of prior forecasts, reflecting muted demand in some markets.
Chamandy told investors the quarter saw some share momentum as point-of-sale rose in the mid-single digits, driven by double-digit gains in fleece and ring-spun products during a period when the overall market for its distribution channel was down double-digits.