Gildan Plummets After Issuing Lower Guidance; Bank Of America Turns Bearish

Gildan Activewear GIL shares were trading sharply lower on Friday after the apparel company issued weak third-quarter preliminary earnings guidance.

The Analyst

Bank of America Merrill Lynch analyst Heather Balsky downgraded Gildan from Buy to Underperform and lowered the price target from CA$58 ($44.15) to CA$30 ($22.84). 

The Thesis

The new rating reflects a significant deceleration in printwear sales and a lack of confidence in Gildan's medium-term sales growth trajectory, Balsky said in a Friday downgrade note. (See her track record here.) 

Bank of America’s macro team expects continued U.S. economic deceleration, which does not bode well for future demand, the analyst said. 

U.S. printwear deceleration is broad-based and not specific to Gildan, as the company did not lose market share, Balsky said. 

BofA lowered its sales growth forecast for the company from positive 5% to negative 2%. 

The company still has a meaningful opportunity to grow its private label business and anticipates additional product announcements in the near term, according to BofA. 

Price Action

Gildan shares were down 22.27% at $27.50 at the time of publication Friday. 

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