Move comes as Ottawa inches closure to ratifying new free-trade deal with Honduras
MONTREAL—Gildan Activewear Inc. plans to sell its popular brand of underwear, socks and activewear at Canadian retailers following the expected ratification of a free-trade agreement with Honduras.
The Montreal-based company’s socks are currently sold at Target stores in Canada, but other Gildan products manufactured in the Central American country are slated to be added at various retailers in 2015.
The agreement with Honduras is moving to final reading in Parliament.
Already Canada’s leading maker of T-shirts used for screenprinting, Gildan foresees also becoming a leading provider of basic underwear, socks and T-shirts to all of the mass market retailers in Canada.
“There’s still a big opportunity for us in Canada,” CEO Glenn Chamandy said in an interview.
“What’s going to be a major thrust for us is being a Canadian (company)—that will really drive our sales in Canada as we go forward.”.
Gildan has Canada’s largest presence in Honduras, operating four plants employing about 24,000 workers.
But critics of the trade deal, including the Council of Canadians, say Gildan’s factories in the northwestern part of the country are noted for “debilitating work-related injuries suffered by workers due to excessively long work shifts and high production targets, and for firing workers for attempting to unionize.”
A Gildan spokesperson denied the charge, saying the company operates within industry standards with few injuries, shifts over four days followed by four days of rest, and one union governed by a collective agreement.
“It’s totally not material given all the programs and given all the focus that we put on ergonomics as well on how we handle the work day,” said Anik Trudel.
Meanwhile, Gildan announced plans to expand its low-cost manufacturing capabilities by setting up a textile facility in Costa Rica.
Construction of its largest textile plant will begin later this year with production ramping up in late 2016 or early 2017.
The facility will have the capacity to make the equivalent of 350 million T-shirts per year.
The plant will make Costa Rica the seventh country where Gildan has manufacturing facilities.
The company is mostly located in the Caribbean and Central America, in addition to Bangladesh and yarn spinning in the southern United States.
The 250-hectare site will be large enough to eventually accommodate three plants and was selected because products can be shipped to the U.S. duty and quota-free.
It is also close to operations in Nicaragua and Honduras and features ports that allow transportation to the U.S. east and west coasts.
The plant will employ more than 1,200 workers, but will lead to the hiring of about 8,000 more employees in lower-wage Nicaragua to sew the material into finished products.
Even before the Costa Rica plant is open, Gildan plans to build another plant at one of its existing facilities to accommodate the growing demand for its retail products, especially underwear.
Chamandy said is looking to have a significant increase in underwear sales.
Underwear making capacity is expected to double original forecasts as it continued to add new retail customers and expand shelf space.
In its financial results, Gildan reported that its net profit grew 9.5 per cent in the second quarter to US$79.2-million, up from US$72.3-million a year ago.
Reporting in U.S. dollars, the company said it earned 64 cents per diluted share, one cent above analyst forecasts and compared to 59 cents per share in the prior year.
Net sales increased 4.9 per cent at US$548.8-million, compared with US$523-million a year ago.
Gildan said the results were boosted by strong growth in sales of underwear to U.S. retailers and increased sales to global lifestyle brands and international printwear markets.
Derek Dley of Canaccord Genuity has a buy rating on Gildan with a US$60 price target on the New York Stock Exchange (NYSE).
“In our view, Gildan should continue to demonstrate growth with its branded initiative, while potential acquisition opportunities along with cost cutting initiatives and capacity expansion plans should support earnings growth over our forecast period,” he wrote in a report.