Gildan Activewear hopes to become an outsourcing supplier of choice to major clothing branded companies worried about poor working conditions in Asia.
The apparel company said Thursday that its growing facilities in Honduras can lure companies that are looking to repatriate their production to the Western Hemisphere following a building collapse in Bangladesh last week that killed more than 400 and a recent fire.
?The last thing in the world they want is for their brands to be compromised or tainted by sourcing from suppliers that don?t have proper working conditions,? chief administrative and financial officer Laurence Sellyn said in an interview.
Gildan already supplies T-Shirts to brands such as Nike, Reebok and Addidas following its acquisition of Anvil and hopes to significantly expand that relationship and expand into other products it makes.
It is also talking to Under Armour, which last week said it was going to focus on suppliers that can provide fast service, in addition to low prices. Gildan is the company?s exclusive U.S. supplier of socks and hopes to add other products.
?We see that as a base for significant growth (and) potentially becoming a very material part of our business,? Sellyn said.
Virtually debt-free and producing lots of cash, Sellyn said Gildan doesn?t have to cut corners on safety and is able to make capital investments in good working conditions.
It is spending $15 million over the next two years on its plant in Honduras.
By owning its low-cost manufacturing facilities, Gildan has the advantage of being able to control labour practices, production quality and costs.
Although its wages in Honduras are low by Western standards, he said they exceed local norms.
Even as it seeks to expand this part of its business, Gildan said its very optimistic about the growth potential of its core businesses.
Gildan (TSX:GIL) earned ?record results? for the second quarter of its 2013 financial year and upgraded its outlook for the year as a whole.
?We?re not counting any chicken but we?re feeling very confident and optimistic about all these opportunities that we have,? Sellyn added.
The clothing manufacturer which reports in U.S. dollars said Thursday it earned $72.3 million or 59 cents per share on a diluted basis for the period ended March 31, exceeding its earlier guidance of 54 to 57 cents per share.
Comparable earnings in the same 2012 quarter were $26.9 million or 22 cents per share.
Net sales rose 8.4 per cent to $503 million from $482.6 million in the 2012 period.
Gildan said the growth in earnings was due to significantly lower cotton costs together with higher sales volumes and a more favourable product mix for branded apparel.
That was partially offset by lower selling prices for printwear, higher manufacturing costs and a charge for the discontinuation of Anvil product lines. The company also cited higher selling, general and administrative expenses and higher income taxes.
In its outlook, net sales revenue for its 2013 financial year are now projected to be slightly in excess of $2.15 billion, while full-year adjusted earnings per share are expected to come in at between $2.65 and $2.70 ? the upper end of its previous guidance range of $2.60-$2.70 per share.
Analyst Chase Bethel of Desjardins Capital Markets said the better-than-expected results were driven by strong gross margins, which reached nearly 29 per cent.
?We continue to believe that Gildan?s strong financial position accords the company the flexibility to aggressively pursue growth opportunities while also withstanding macroeconomic headwinds,? the analyst wrote in a report.
Gildan expects more than $100 million of new product lines destined for retailers during the remainder of the year will help its push to grow its branded apparel business, which had $700 million of sales last year.
?We believe we are at a major inflection point in Gildan?s history as we evolve from being the most successful trade brand into a consumer brand with the same brand positioning and competitor strength,? Sellyn told analysts during a conference call.
On the Toronto Stock Exchange, Gildan?s shares hit a new 52-week high at $42.52 before closed at $41.46, up 41 cents in Thursday trading.
Source:http://www.winnipegfreepress.com/business/gildan-activewear-q2-profits-soar-to-us723m-revenue-up-84-to-us523m-205759101.html
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