MONTREAL—The head of Gildan Activewear says he plans to continue making some lines of American Apparel in the United States, but will also use Gildan’s low-cost global production networks to expand its offerings and pursue the brand’s international growth.
“We’re going to continue to support our core Made in USA business, but we’re also going to offer product where they couldn’t compete before at price points relative to the competitive landscape,” CEO Glenn Chamandy said Thursday, during a conference call about its fourth-quarter and 2016 results.
The Montreal-based maker of apparel, including T-shirts, socks and underwear, recently bought the bankrupt California-based clothing company for $88 million (U.S.) in a deal that excludes American Apparel stores and its e-commerce site.
Founded by Quebec native Dov Charney in 1989, American Apparel rose to prominence after opening manufacturing facilities in Los Angeles and attracting a young clientele with the adoption of sexually provocative advertising. It twice entered bankruptcy protection over the past two years, culminating in its auction to Gildan.
Gildan (TSX:GIL) said it’s still developing American Apparel’s consumer strategy but plans to use social media to drive the brand’s image.
Manufacturing in the U.S. will be contracted out to undisclosed producers and distributed through Gildan’s extensive network. The company said it hasn’t decided which factories in the Caribbean or Central America will make the clothes.
It anticipates sales of Gildan’s highest price line of products will be $50 million to $75 million this year or around $100 million for a full year. But the company foresees opportunities to expand sales in North American and internationally, especially in Europe where fashion-style clothing are a bigger share of the market.
“We have huge interest from all of our international customers to carry this brand,” Chamandy told analysts.
Analyst Brittany Weissman of Edward Jones said that while American-made products may have been important at retail stores, it is not a big factor on the printwear side — which is sold to customers including college campuses.
“I think that product will play very well into a fashion basic (segment), especially in the European market and some of those other international printwear markets where they do have a smaller share,” she said in an interview.
Gildan raised its quarterly dividend 20 per cent for a fifth consecutive year, after posting strong results for the quarter and fiscal year. The company will pay 9.35 cents per share payable April 3.
Gildan, which reports in U.S. currency, earned $74.3 million in the fourth quarter, up from $67.6 million in the same period last year.
The profit amounted to 32 cents per share. Adjusted earnings were also 32 cents per share, up from 28 cents per share in both cases.
Revenue for the three months ended Jan. 1, was $587.9 million, an increase from $543.8 million a year earlier.
For the full year, it earned $346.6 million or $1.47 per share on $2.58 billion of revenues.
Gildan also issued estimates for the 2017 financial year, including adjusted earnings in the range of $1.60 and $1.70 per share — up 9 per cent from last year, at the midpoint. Its tax rate is expected to be 5 per cent.
The company said its branded socks and underwear gained market share in the United States despite a sluggish retail environment.
The top-selling men’s sock brand grew to 22 per cent market share in the quarter, while the share of the underwear market was 9.2 per cent, rising to 10.9 per cent in January.
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