GILDAN TO EXPAND IN EUROPE
Byline: Brian Dunn
MONTREAL — Having sewn up about 28 percent of the all-cotton T-shirt market in the U.S., Gildan Activewear, based here, is turning its attention on Europe for much of its future growth.
Gildan’s revenues in the current fiscal year are expected to reach $400 million, and Europe is expected to account for slightly less than 10 percent of that total, Greg Chamandy, Gildan’s chairman and chief executive officer, said at the company’s annual meeting here last week. (All dollar amounts have been converted from the Canadian dollar at current exchange.)
In fact by yearend, Europe should be Gildan’s second largest market after the U.S. The more mature American T-shirt market is expected to grow by an estimated 7 percent this year versus a robust 25 percent in Europe, according to Chamandy.
And with new capacity coming onstream this year, he predicted Gildan would surpass Sara Lee’s Hanes unit as the number one supplier of all-cotton T-shirts in the U.S. The company expects to increase its market share in its other recently launched product lines, such as polyester-blend crew necks, fleece pants, hooded sweatshirts and golf shirts.
The vertically integrated company plans to double overall capacity to 30 million dozen units by the end of fiscal 2003, when it predicts sales will surpass $660 million from last year’s $301 million. Europe will account for about 20 percent of that figure, Chamandy predicted.
Gildan won’t have to incur additional costs to service the European market, because most of the infrastructure is already in place, he explained: “Our key competitors in Europe — Hanes, Fruit of the Loom — are the same as North America, so we’ll be using the same strategy. But we feel we have an advantage coming from a multicultural city and we already publish our catalogs in five different languages.”
Gildan expects to achieve 30 percent growth in both sales and earnings as well as a minimum 10 percent return on sales during the current fiscal year. It will achieve those objectives by continuing to expand its core competencies such as low-cost production, strong distribution and focus on brand development, Chamandy said.
The company got off to a strong start, reporting record first-quarter sales and operating profits and a two-for-one stock split as well as reconfirming its positive outlook in both sales and earnings for the remainder of the current fiscal year.
For the first quarter ended Dec. 31, Gildan had net income of $3.1 million, 13.5 percent below the prior-year level of $3.6 million. The most recent quarterly results were adversely affected by a $2 million nonrecurring charge related to the closure of the company’s distribution center in Miami and relocation of its functions to a new facility in Eden, N.C.
Without the charge, diluted earnings were up 40 percent, to 35 cents a share from 26 cents in the earlier period.
Sales in the quarter increased 25.3 percent, to $57 million from $45.5 million. Gross margin improvement was in line with sales growth, up 25.8 percent, to $16.7 million from $13.2 million.
The company indicated it remained “comfortable” with current EPS projections of $3.21 to $3.31 in the current fiscal year, as well as preliminary estimates of about $3.97 for fiscal 2002. It anticipates sales and earnings growth as a result of expansion of sales internationally as well as the cost savings realized from the shift of its distribution facilities.
The two-for-one stock split, effected in the form of a stock dividend, applies to all holders of class A and class B shares of record as of Feb. 22. Pending final regulatory approval, new share certificates will be distributed to shareholders on or about Feb. 27. Gildan went public in June 1998.