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Gildan may help large retailers fight Amazon by supplying private label clothing


MONTREAL — Gildan Activewear Inc. is eyeing opportunities to build a private label business for its activewear products as large U.S. retailers shift their strategy to offset the threat from Amazon.

The Montreal-based maker of apparel, including T-shirts, socks and underwear says Walmart, Target and other large retailers are moving to carry more house brand apparel with low prices.

Gildan exited the private label socks business and has never made private label outerwear.

Chief executive Glenn Chamandy said providing private label activewear would complement its strategy to sell branded products such as American Apparel, Comfort Colors and Anvil.

"This icing on the cake that will allow us to basically continue to fill in and add opportunities as we complement all of our other strategies as we go forward," he said in an interview.

The large retailers are moving more to private label products in a bid to attract customers who may shop at online sites like Amazon.

"We're still going to have a combination of selling our brands at the same time as providing selectively private label to them if we choose to do it and that just gives us a different way of achieving our goal."

Chamandy wouldn't say how much revenue these deals could generate, saying the company will consider each opportunity individually based on its available production capacity and generated margins. No shipments are expected in 2018.

"We have so much momentum in our core business right now and our point of sale is so strong that we're completely in a sold-out position right now," he said, adding it is expanding existing plants and building a new one in Honduras.

Walmart didn't respond to a request for comment but published reports last week said it was replacing outside brands for women, kids and plus-size customers with store brands such as Terra & Sky, Time and Tru skinny and Wonder Nation.

Gildan expects sales of the American Apparel brand it acquired last year will double in 2018 as it looks to expand sales of the product globally and adds more distribution facilities for the brand's e-commerce site.

The clothing maker says the iconic brand it acquired last February should add about US$100 million of net sales this year, up from US$50 million in 2017.

"We think that there's a lot of runway left in the brand. Don't forget when the brand was in its heyday it did over $600 million so it's a brand that had quite a big following before they had financial trouble."

Gildan bought the bankrupt California brand for US$88 million in a deal that excluded American Apparel stores and its e-commerce site.

It subsequently decided to use Gildan’s low-cost global production networks to expand its offering while also making some lines of American Apparel in the United States.

Gildan, which reports in U.S. dollars, says its overall net profit decreased 26 per cent to $54.9 million in the fourth quarter.

Excluding restructuring and acquisition-related costs, it earned $67.6 million or 31 cents per diluted share. That matched analyst forecasts but was down from $74.5 million or 32 cents per share in the prior year.

Revenues increased 11 per cent to $653.7 million for the period ended Dec. 31.

Gildan was expected to post $634.6 million in revenues, according to analysts polled in Thomson Reuters.

The growth in revenues reflected a nearly 28 per cent increase in printwear sales to $415.6 million, including US$16.6 million from sales of American Apparel.

Net sales of Gildan-branded clothes such as underwear fell 9.2 per cent to $238.1 million.

For the full year, Gildan earned $362.3 million or $1.61 per diluted share, compared to $346.6 million or $1.47 per share in 2016.

Adjusted earnings grew 8.6 per cent to $386.9 million. That equalled $1.72 per share, up from $1.51 a year ago.

Revenues were $2.75 billion, up from $2.59 billion in 2016.

Gildan says it expects to earn $1.80 to $1.90 in adjusted diluted earnings in 2018 on low to about five per cent higher revenues.

 

Follow @RossMarowits on Twitter.

 

Companies in this story: (TSX:GIL)

Ross Marowits, The Canadian Press

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