MONTREAL — March 23, 2020 — Gildan Activewear Inc. today 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, our first priority is the health and welfare of our employees, customers, suppliers and other partners which we have been working to address. We have 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, amongst others. Additionally, although we have not yet seen as significant a deceleration of demand for our products in all the retail channels that we serve, we expect 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 7-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 we operate are also issuing similar directives to combat the spread of COVID-19. Accordingly, given the impact of all these factors, the company announced today that it is temporarily suspending production at all of its manufacturing facilities until mid-April. This will allow us to respect government recommendations and align production and inventory levels with current demand requirements. All other areas of our business, including our distribution centers which service the various regions where we sell our products will remain open for the time being with good inventory availability levels to service our customers, operating with appropriate measures in place to protect our employees, including remote working arrangements for many of our office staff.
Given the unprecedented nature of the COVID-19 situation which is changing rapidly, the company will continue to monitor and adjust its plans for its business as the situation evolves. 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, we elected to draw down on the remaining available portion of our revolving long-term bank credit facility, positioning us with close to $600 million of liquidity. Accordingly, we have a high degree of financial flexibility as we move forward to deal with COVID-19 challenges given our fixed cost structure and focus on expense, capex and working capital management, as well as our balance sheet and access to liquidity.
The company issued its first quarter and full year 2020 guidance on February 20, 2020, which did not include the impact of COVID-19 disruptions. Due to the heightened uncertainty relating to the impacts of COVID-19, the company is withdrawing its first quarter and full year 2020 financial guidance. The company expects to provide a further update when it releases its first quarter 2020 earnings results.
Gildan is working diligently across all areas of our business to safeguard our people and the continuity of our business, while maintaining support to all our customers. We have been able to successfully navigate through difficult times over the years and adapt to changing environments, which gives us confidence that our strong business model, financial position and resilience will continue to position us well for long-term success as we emerge from the COVID-19 crisis.
Posted March 23, 2020
Source: Gildan Activewear Inc.