Newspaper article The Canadian Press

Gildan Stung by Cotton Costs in Q2 but Acquires Youthful, Organic T-Shirt Brand: Gildan Adds Organic Brand with Acquisition

Newspaper article The Canadian Press

Gildan Stung by Cotton Costs in Q2 but Acquires Youthful, Organic T-Shirt Brand: Gildan Adds Organic Brand with Acquisition

Article excerpt

MONTREAL - Gildan Activewear continues to be stung by high fibre costs, but hopes to gain a foothold in a youthful market by acquiring a T-shirt maker that is the largest buyer of U.S.-grown organic and sustainable cotton.

The apparel maker said Thursday it has purchased Anvil Holdings Inc. for US$88 million, giving the Montreal-based company a bigger share of the U.S. screenprint shirt market.

Gildan said the acquisition of Anvil's unique brand will add US$200 million of annual sales, US$17 million in earnings, and help it to expand its dominant 63 per cent share of the U.S. distributor channel to potentially 75 per cent.

"We're going to be selling products that are unique to Gildan, such as the organic, recycled, sustainable-type products," CEO Glenn Chamandy said during a conference call to discuss the company's weak second-quarter results.

"As well, the whole brand is more youthful in terms of some of the styling," he added.

Some of Anvil's administrative and sales functions will be shifted to Gildan's low-cost operations in Barbados, but Gildan hasn't yet decided whether to close Anvil's production facilities.

Industry analysts believe layoffs will result as Gildan shutters these operations and ends production from higher cost third-party suppliers.

The deal was announced as Gildan reported that higher cotton costs contributed to a sharp decline in profits, reported in U.S. dollars, to $26.9 million, or 22 cents per share in its fiscal second quarter.

That compared to $61.7 million, or 50 cents per share, a year earlier.

Adjusting for one-time items, net earnings were $27.8 million, or 23 cents per share, compared to $64.6 million, or 53 cents per share, in the prior year.

The results were better than Gildan's guidance of 20 cents per share.

Sales for the fiscal second quarter were up 25.9 per cent compared with a year earlier, rising to $482.6 million from $383.2 million.

Gildan (TSX:GIL) reiterated its full-year earnings guidance of $1. …

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