An anonymous director reports

GILDAN ACTIVEWEAR BOARD OF DIRECTORS ISSUES OPEN LETTER TO SHAREHOLDERS AND SETS RECORD STRAIGHT ON BROWNING WEST'S MISGUIDED CAMPAIGN TO REINSTALL FORMER GILDAN CEO

The board of directors of Gildan Activewear Inc. has issued an open letter to shareholders.

Dear fellow Gildan shareholders,

In response to Browning West's Dec. 29, 2023, letter articulating its misguided campaign to reinstall Glenn Chamandy as chief executive officer of Gildan Activewear, the board of directors is sharing further information on recent events. We would have preferred to keep many of these details private, but the public misinformation tactics by Mr. Chamandy and Browning West demand a public response.

The board is unanimous in its conviction that retaining Mr. Chamandy as CEO would have jeopardized the future of Gildan and destroyed shareholder value. Mr. Chamandy has attempted to frame this as a dispute over the board's CEO succession process. That is not what this is about. This is about the future of Gildan.

The board had gradually lost trust and confidence in Mr. Chamandy. It had become clear that he had no credible long-term strategy and no vision for the future. Instead, he attempted to entrench himself as CEO by giving the board an ultimatum: approve a high-risk, multibillion-dollar acquisitions strategy predicated on guaranteeing his role as CEO for several more years to oversee its integration and his eventual succession. If not, he would leave the company immediately and sell his shares. The board was left with no other choice but to remove him as CEO.

Gildan is a company with strong fundamentals. We are optimistic that with the right leadership and the right long-term strategy, Gildan can grow, innovate and create sustainable long-term shareholder value.

Ineffective leadership

Over the past few years Mr. Chamandy struggled to scale an increasingly complex organization. In the absence of a cohesive long-term strategy, Mr. Chamandy jumped from one opportunistic strategy to another. He tried forays into branded products, retail distribution, international expansion and yarn production, with mixed success, resulting in an eight-year annual revenue growth rate of less than 1 per cent and write-offs and restructurings over that time period exceeding $450-million.

Against that backdrop, it was striking to read Browning West's letter of Dec. 14 asserting that under Mr. Chamandy's leadership Gildan's share price was "poised to be worth $60 to $80 a share over the next two years." That claim is in sharp contrast to Mr. Chamandy's 2023 long-range planning (LRP) presentation to the board on Oct. 30, 2023, in which he stated that organic growth would be capped with an intrinsic value of the share price significantly lower than the range quoted by Browning West.

Mr. Chamandy was chief executive for 20 years, and in his last few years he gradually became more disengaged as CEO as he increasingly focused on outside personal pursuits, including the development of a golf resort in Barbados. His management style was unstructured, with few senior leadership meetings, and he was rarely in the office, averaging just a few days a month even long after the end of the COVID-19 shutdown. Mr. Chamandy never visited the new Gildan manufacturing plant in Bangladesh, one of our most significant investments. In fact, he had not travelled to Bangladesh, an important manufacturing hub for the company, in more than a decade.

High-risk acquisition and succession proposal

In December, 2021, the board and Mr. Chamandy agreed to an orderly three-year succession plan. By the fall of 2023, however, Mr. Chamandy moved to entrench himself as CEO. As the search for a new CEO advanced according to the process and timeline agreed upon with Mr. Chamandy, he presented the board with a plan to make risky and highly dilutive multibillion-dollar acquisitions, arguing that he would then need to remain as CEO for several more years to oversee the integration. This was not, as Mr. Chamandy now claims, a routine annual strategy exercise. This was a formal strategy proposal presented as Mr. Chamandy's best idea for addressing what he viewed as Gildan's limited growth potential.

The board was dubious about these high-risk acquisitions, particularly in light of Mr. Chamandy's inability to answer even the most basic questions about his strategic proposal. The board asked Mr. Chamandy to provide a thorough analysis on his plan, including risks and mitigation. Instead of providing details on his plan, Mr. Chamandy gave the board a simple and clear ultimatum: either support his acquisition strategy and resulting succession plan, or he would immediately leave and sell his stock.

Contrary to his public denials, Mr. Chamandy not only gave the board a direct ultimatum, but he also reiterated it in conversations with the board chair and in a letter to the board chair on Saturday, Nov. 25, 2023, demanding an answer before Monday, Nov. 27.

While the board had originally proposed a three-year transition plan, whereby Mr. Chamandy would retire by Dec. 31, 2024, the ultimatums forced the board to terminate Mr. Chamandy as CEO on Dec. 10, 2023.

Questionable behaviours

Recently, the board has learned of new information regarding behaviours by Mr. Chamandy that took place around the time of his departure and are inconsistent with that of a senior executive. Mr. Chamandy recorded a private and confidential phone call on Nov. 24, 2023, with the chair of the board without the chair's knowledge. Upon his departure, he also violated company policies related to the safeguarding of corporate information. The board of directors is currently investigating these and other matters, including Mr. Chamandy's engagement with certain shareholders prior to his termination.

Time for new leadership

The board's fiduciary duty is to assure that Gildan is positioned in the strongest way possible for future success. The business has grown in scale and complexity, and the challenges and opportunities that lie ahead call for a new leader with fresh ideas, relevant skills, proven leadership ability and undivided commitment to the business.

The CEO search process was thorough and professional. The board hired a leading firm in January, 2022. The external phase of the search, which began in May, 2023, culminated in the board selecting Vince Tyra on Dec. 10, 2023.

Mr. Tyra, who joins Gildan from Houchens Industries, a $4-billion revenue employee-owned holding company, is an accomplished leader with deep experience in the apparel industry spanning distribution, manufacturing and brand building. His proven record involves developing and implementing pragmatic strategies that have enabled the organizations he led to grow, evolve and create value. Mr. Tyra's diverse professional background across apparel, private equity and NCAA (National Collegiate Athletic Association) college sports reflects a consistent theme of effective leadership.

Browning West has falsely attacked Mr. Tyra's record, specifically during his time at Fruit of the Loom, and it is important to set the record straight. In 1999, as Fruit of the Loom faced financial challenges, its board removed the chairman and CEO, and asked both Mr. Tyra, then president of its activewear division, and his colleague, the president of retail, to submit plans to restructure the company. The board embraced Mr. Tyra's plan and named him the sole president of Fruit of the Loom. Mr. Tyra then worked with the new CEO to implement a plan to focus on the core retail business. Those steps laid the foundation needed to stabilize the company and contributed to its eventual sale to Berkshire Hathaway. Far from being part of the problem at Fruit of the Loom, Mr. Tyra was a key part of the solution. The board is resolute in its belief that he will be part of the solution at Gildan, as well.

Conclusion

The past does not equal the future. Mr. Chamandy was chief executive of Gildan for two decades. He was the right leader for much of his tenure, building a successful public company and creating a platform on which to expand. But the true promise of Gildan remains largely unfulfilled, and the board, which has worked with Mr. Chamandy for years, is clear that he is out of the ideas and vision to take Gildan into the future.

Over the past year, Mr. Chamandy repeatedly said that he would, in his words, "go gracefully" whenever the board decided the time was right for the company. However, when that time came, Mr. Chamandy did not go gracefully. He admitted he never intended to leave and, blatantly putting his own interests ahead of those of Gildan, orchestrated his departure to maximize disruption to the company.

Mr. Chamandy has spent weeks telling a false and misleading story about recent events at Gildan. Many well-intentioned investors have bought into that false story. The board will continue to patiently, yet firmly, set the record straight. We look forward to continuing our conversations with shareholders.

Sincerely,

Gildan Activewear board of directors

About Gildan Activewear Inc.

Gildan is a leading manufacturer of everyday basic apparel. The company's product offering includes activewear, underwear and socks, sold to a broad range of customers, including wholesale distributors, screenprinters or embellishers, as well as to retailers that sell to consumers through their physical stores and/or e-commerce platforms and to global lifestyle brand companies. The company markets its products in North America, Europe, Asia-Pacific and Latin America under a diversified portfolio of company-owned brands, including Gildan, American Apparel, Comfort Colors, Goldtoe and Peds, in addition to the Under Armour brand through a sock licensing agreement, providing exclusive distribution rights in the United States and Canada.

Gildan owns and operates vertically integrated, large-scale manufacturing facilities which are primarily located in Central America, the Caribbean, North America and Bangladesh. Gildan operates with a strong commitment to industry-leading labour as well as environmental and governance practices throughout its supply chain, in accordance with its comprehensive ESG program embedded in the company's long-term business strategy.

We seek Safe Harbor.