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February 09, 2024

Activist Investor Goes on Offensive Against New Gildan CEO, Board of Directors

Browning West issued a sharply worded statement questioning new chief executive Vince Tyra’s fitness for the position and the board’s process in hiring him.

By  Christopher Ruvo

Browning West isn’t backing off.

The investment firm has been spearheading a charge to reinstate Glenn Chamandy as CEO and board director at Top 40 supplier Gildan (asi/56842).

Its latest step in that effort is the issuing of a statement on Feb. 8 that accused the Gildan board of directors of “diligence failures” in the process of hiring new CEO Vince Tyra.

Browning West, which owns about 5% of publicly traded Gildan’s outstanding shares, also posed a list of questions to the board that, in effect, detail alleged examples of Tyra having failed spectacularly in previous apparel executive roles at Fruit of the Loom (asi/84257) and Broder Bros., which has evolved into Top 40 supplier alphabroder (asi/34063).

Browning West principals said they met on Feb. 2 with Tyra, but left with more questions than answers.

“Both our research based on public information and our conversation with Mr. Tyra reveal a record of value destruction,” the firm said. “These findings stand in stark contrast to the board’s numerous public statements about its apparently well-governed CEO succession process and exhaustive vetting of Mr. Tyra, which forces us to question whether the board properly exercised its duty of care when carrying out its most important responsibility.”

Accusations of Bad Leadership

In its statement, Browning West presented questions that ask if the board was aware of certain alleged occurrences in Tyra’s business background.

One question asked if the board knew that when Tyra was CEO of Broder Bros., that “net income decreased from $7 million to negative $3 million, net debt increased from $51 million to $316 million, and cumulative free cash flow was negative $15 million over the five years he was CEO.”

Browning West further questioned if the Gildan board was aware that Broder Bros. “was forced to restructure in the years after Mr. Tyra’s departure as CEO, largely due to the substantial debt he added to the business, and that its shareholders ultimately incurred substantial losses.”

Regarding Tyra’s time at Fruit of the Loom, Browning West inquired: “When it made its hiring decision, was the board aware that Fruit of the Loom’s activewear division endured a 26% decline in revenue and operating profit swung from $75 million to a loss of over $30 million during Mr. Tyra’s tenure as president of that division?”

Browning West also asserted that Fruit of the Loom’s share price “decreased by 99% and the company filed for bankruptcy during Mr. Tyra’s tenure.”

Directors Defend Tyra

ASI Media contacted Gildan for comment regarding the latest challenge from Browning West. The company hadn't responded as of this writing, but in the past the board has vigorously defended Tyra and its hiring of the executive.

The directors have pointed to a report from a corporate governance expert – one it hired – that found directors had undertaken a “good and rigorous” process in the succession planning and appointing of the new CEO.

In talking about Tyra in past statements, the board has painted a vastly different portrait than Browning West.

It has said that Tyra invested in and grew his own activewear business in his 20s, using Gildan as a key supplier. Based on that early success, he then joined Fruit of the Loom where the board there promoted him to president “in the company’s darkest hour to develop and implement a restructuring plan that put Fruit of the Loom back on sound financial footing ahead of its eventual sale to Berkshire Hathaway,” Gildan’s board said.

Based on that performance, Bain Capital, then owner of Broder Bros., hired Tyra as CEO of Broder. Far from tanking it, Tyra helped the company triple its revenue over the six years he was in charge, Gildan said.

Tyra also had a successful career in private equity, the board said, and served as the athletic director at the University of Louisville, “fixing the scandal-plagued athletics program at the NCAA powerhouse. … Under his leadership, Vince established a new culture of excellence and compliance while rebuilding the sports program.”

Background & Outlook

The Gildan board of directors ousted Chamandy, a co-founder of the Montreal-headquartered company, in December 2023. It subsequently asserted that the once astute apparel executive had become a disengaged, ineffective leader lacking in the vision and acumen necessary to guide Gildan into its next stage of growth.

A titanic power struggle for control of the multibillion-dollar vertically integrated manufacturer of apparel basics has ensued since the firing, with the board and Tyra on one side and Chamandy and shareholders that reportedly hold as much as 35% of Gildan’s outstanding shares on the other.

Browning West had called for a special meeting where shareholders could vote on its proposed plan to reinstate Chamandy and replace eight board directors. It subsequently withdrew that request after the board scheduled the meeting for the same day as the annual meeting shareholder meeting – May 28. A vote could occur at that meeting.

Based on estimated 2022 North American promotional product revenue of $762.2 million, Gildan ranked fifth on Counselor’s most recent list of the largest suppliers in the industry.

Across all its business channels, including promo and others, Gildan tallied record total revenue of $3.24 billion in 2022. Through the first nine months of 2023, the company’s sales were down 4.3% compared to the prior year. Full-year results for 2023 are due out on Feb. 21.