American Apparel’s heritage will remain strong under Gildan Activewear’s wing.
On Thursday, Gildan held its fourth quarter earnings conference call and indicated that it will keep U.S. manufacturing at the core of the American Apparel business while incorporating the acquired brand into its fashion basics portfolio.
“American Apparel is a strong brand with a premium positioning in the fashion segment in printwear. We are confident that we can leverage our deep and extensive distribution network, both in North American and internationally, to grow the brand and achieve attractive returns on this transaction,” Gildan Activewear EVP and CFO Rhodri Harries said. “We have quickly begun implementing our integration plans, which include leveraging our manufacturing network and at the same time working on a supply chain to also support made in the USA product.”
Gildan anticipates that total integration will be completed by March. Although the company indicated there may be challenges with starting a new supply chain, some American Apparel inventory was bought before the bankruptcy to support sales and Gildan will begin shipping new product in April and May.
The American Apparel acquisition could also benefit Gildan’s international market presence. To fulfill global demands for American Apparel products and support made in USA initiatives, Gildan will manufacture American Apparel products domestically and overseas.
“We are definitely going to manufacture product in the USA, but at the same time, we think that there is an opportunity to offer product that is more price-centric and helps us support our international growth as we go forward,” Harries said. “We are going to support our core made in USA business, but we are also going to offer product where they couldn’t compete before at price points relative to the competitive landscape.”
Gildan also will place American Apparel as a premium brand in its fashion basics portfolio. As the fashion basics market remains highly competitive today, Gildan aims to keep American Apparel at a slightly higher price point, since the brand will be more consumer driven and fostered by e-commerce activity. In terms of the American Apparel footprint, Gildan will run a small office in LA and use social media platforms to drive the brand image post-acquisition. The company is still working on a consumer branding strategy, as it integrates the brand in the next few weeks.
“We haven’t really completed our retail evaluation in terms of how we are going to bring the product to consumers, but we are going to make sure as we go forward, that the brand is relevant with consumers, which we think will help continue to drive our printwear business,” Harries said. “We definitely will come up with a consumer positioning for the brand in the near future.”
Gildan’s American Apparel plans follow its fourth quarter and full year results. For the fourth quarter ended Jan. 1, 2017 Gildan achieved an 8.1% net sales growth, which was primarily driven by the American Apparel acquisition and organic unit sales volume growth in the printwear category. Sales for fiscal 2016 were $2.59 billion, which were in line with the company’s guidance for the year. Gildan also achieved diluted EPS of $1.47 and adjusted EPS of $1.51, which were slightly higher than its previous guidance for fiscal 2016. Gildan anticipates a 2017 adjusted diluted EPS guidance ranging between $1.60 and $1.70, which will represent a 9% growth over 2016’s consolidated net sales growth.