Gildan Activewear Inc.’s chief executive brushed off concerns Thursday that a recent merger between two of its biggest customers will spell trouble for his business.
Glenn Chamandy positioned the August deal uniting Pennsylvanian wholesale apparel supplier Alphabroder with Illinois-based garment distributor S&S Activewear as a good thing for his business, even though analysts have wondered if the new company will be able to put pressure on Gildan’s margins.
“I think that we’re going to be the beneficiary of consolidation,” Chamandy said on a call with analysts, noting consolidation has been a reality in the market for at least 20 years. “This is not new.”
The deal that combined two major players in the apparel business which Montreal-based Gildan specializes came together as a flurry of changes were taking shape across the sector.
Delta Apparel has filed for bankruptcy protection in the U.S. and Chamandy said Fruit of the Loom is pulling out of the printwear market.
Neither move appeared to worry Chamandy, who argued the changes gave Gildan “a competitive advantage.”
“The market will be more stable with fewer distributors, and I think overall, it’s a win-win for everybody,” he said.
Chamandy’s remarks came as Gildan, which keeps its books in U.S. dollars, reported a profit US$131.5 million or 82 cents US per diluted share in its third quarter compared with earnings of US$127.4 million or 73 cents US per share a year earlier.
On an adjusted basis, Gildan earned 85 cents US per diluted share during the period ended Sept. 29, up from an adjusted profit of 74 cents US per share in the same quarter last year.
Net sales for the quarter totalled US$891.1 million, up from US$869.9 million a year earlier.
The numbers reflect a six per cent increase in activewear sales and the positive response Gildan has seen to its new soft cotton technology.
While the price of cotton has eased from last year, Chamandy said the decrease has been offset by other pressures.
“There’s still inflation in the system,” he said. “So if you look at the labour, transportation, energy. These things are all up.”
Gildan is also without one of its buzziest customers, sportswear company Under Armour. The pair have been winding down their partnership, which resulted in hosiery and underwear sales dropping 18 per cent from last year to US$103 million in the third quarter.
But when the Under Armour phase out is excluded from the company’s calculations, Gildan said its overall net sales for the quarter were up high single digits on a year-over-year basis.