Gildan bought American Apparel's assets through a bankruptcy auction.

Gildan Activewear expects to keep growing its bottom line by doubling the sales of American Apparel, but it’s also cutting costs as it deals with retailers’ increased focus on private labels.

The Canadian company last year bought the American basics brand out of its second bankruptcy and while it pulled in $50 million in revenue during 2017, Gildan projected that number would reach at least $100 million this year.

Rhodri Harries, Gildan’s chief financial and administrative officer, said during a call with financial analysts that American Apparel will expand internationally this year, including the upcoming launch of a brand web site for the European market.

While Dov Charney founded American Apparel as a brand focused on domestic manufacturing, as its name suggests, Gildan is integrating the business into its global manufacturing structure. Harries said Gildan is “not a U.S.-based business, but rather a global business managed out by Barbados” when discussing the lack of effect lowered U.S. corporate tax rates will have on Gildan. Its factories are primarily in Central America.  

Gildan operates some other basics brands but is mainly focused on socks, a category it distributes in North America for Under Armour. Overall its sales for 2017 grew 6.4 percent to $2.75 billion and net earnings increased 4.3 percent to $362.3 million.

Although sales of branded apparel dropped by 0.6 percent to $928 million during the year, Gildan’s printwear business grew by 10.4 percent to $1.82 billion, and the company said it also benefited from higher selling prices. That’s also related to American Apparel.

Despite this growth, and Gildan’s expectation that sales will grow around 7.5 percent this year, the company in January moved to consolidate its printwear and branded apparel arms, effectively consolidating the business and its operations. This, along with unspecified “acquisition-related costs,” will cost the company up to $20 million. Savings realized from the move will be “initially” invested into areas such as e-commerce and distribution.

At least one executive is leaving the company as a result of the consolidation. Eric Lehman, Gildan’s president of branded Apparel since 2011, will exit at the end of June to “pursue other opportunities.” Michael Hoffman, currently president of printwear, which outperformed the branded segment, will take on a larger role as president of sales, marketing and distribution.

“The combination of the two operating businesses is intended to drive a leaner and more streamlined organization, which is expected to provide operational efficiencies as the company leverages a common infrastructure to maximize the growth potential of its brands,” Gildan said.

Harries said the company’s printwear business is being encroached upon by retailers expanding and relying more on their own private label brands, especially for items like socks and underwear. He said last year there was a “clear shift in focus of some of our mass customers to their own private label programs.”

Retailers such as Amazon, Walmart and Target have all launched and expanded private labels over the last year, many focused on basics and activewear.

Glenn Chamandy, Gildan’s president and chief executive officer, admitted during the call that “it’s a lot easier to sell private label than it is to sell brands…selling your brand strategy is a much more difficult process versus our retailer diving their own strategy.”

For More, See:

Amazon’s Apparel Sales Could More Than Double in Two Years

Walmart Refocuses on Apparel as It Takes On Amazon

At Mass, Private-Label Brands Looking More Like Power Players

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