Gildan Activewear Inc. (GIL)
March 12, 2013 11:50 am ET
Laurence G. Sellyn - Chief Financial & Administrative Officer and Executive Vice President
Chris Li - BofA Merrill Lynch, Research Division
Chris Li - BofA Merrill Lynch, Research Division
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Laurence G. Sellyn
Good morning. I think it's -- all right. So by way of introduction, we're a dual-listed public company listed in Toronto and New York. Our corporate headquarters are in Montréal. We report as 2 operating segments: Our Printwear business, which is our historical core business, is run out of Barbados; and our Branded Apparel division, which supplies retailers is headquartered in Charleston, South Carolina. Both operating segments are supported by our global manufacturing, which is headquartered in Honduras. And we have manufacturing facilities in Central America, the Caribbean basin and the Bangladesh. And our new yarn-spinning division that I'll talk about is based in Salisbury, North Carolina.
Although we're a Canadian company, approximately 90% of our sales are in the U.S. We've built a company in the U.S. wholesale distributor channel, selling blank T-shirts, sweatshirts and sport shirts in high volumes to large wholesale distributors who supply approximately 100,000 screenprinters. We currently sell over 700 million T-shirts annually into this channel. We've continuously invested in new manufacturing capacity and used our capacity to drive market share penetration.
We've achieved a 65% share with our Gildan brand, and we acquired a smaller competitor, Anvil, in 2012 bringing our combined share to over 70%. The industry is highly concentrated with the balance being supplied by the 2 national brands.
How have we achieved such a high share? In our view, this is a manufacturing business, and we have made continuing major capital investments in large-scale textile manufacturing and developed best practices in apparel assembly, resulting in better and more consistent product quality, global low manufacturing costs and faster, reliable replenishment, as well as a reputation for corporate social responsibility.
Despite of already having a 70% share in the printwear market, there are still growth opportunities in printwear. The 2 major opportunities are: new high-value products to complement our high-volume basics; and further penetration of national accounts, which supply imprinted programs for retailers. This customer base is currently supplied by smaller higher cost manufacturers.
Our major growth opportunity is the development of Gildan as the consumer brand for basic family apparel sold through mass and other retailers. And we're also continuing to grow in international markets in Europe, Asia-Pacific and Mexico and Latin America.
In Printwear, our volume is historically being driven by Gildan Basics, and our brand positioning for Gildan Basics is that the brand stands for consistent, superior quality and comfort, value for money and we provide the deepest inventory and the broadest color palette.
A new growth opportunity within printwear is the introduction of Gildan performance apparel. This is the fastest-growing segment. We have developed innovative manufacturing processes to meet customer demand for providing enhanced performance attributes, like moisture management and antimicrobial properties. This is a high-volume segment of the margin. It's a high-margin business that's currently mainly supplied by smaller specialty competitors, who outsource their production.
Anvil within printwear has developed initiatives that are complementary to Gildan. It's positioned as a brand appealing to young, eco-conscious consumers and there is market to the brand -- Anvil's market to the brand directly with end-users in colleges.
And also within Printwear, in 2012, we extended our U.S. sock license for New Balance into printwear. Other growth opportunities in printwear are workwear and work uniforms, women's style and sports team uniforms.
The main strategic thrust and growth opportunity is the evolution of Gildan from a leading trade brand -- from the leading trade brand within printwear to becoming a consumer brand. As in printwear, the brand positioning of the Gildan brand in the retail mass market will stand for quality and comfort, durability and value for money. As reflected in our logo, every thread counts.
The success factors in mass retail are the same as in printwear, global low-cost production, resulting in higher margins for retailers and greater value for consumers, enhanced design and quality features, which we are showing in our meetings over the next couple of days and fast reliable service to manage large-scale replenishment programs with retailers.
Our retail strategy has evolved in 4 stages. We began with socks, which do not use the same manufacturing capacity required to support our market share growth in printwear. We acquired 2 small, high-cost U.S. private-label sock manufacturers in 2006 and 2007. And then, we went through a period of integrating these acquisitions and focusing on driving profit improvement. We relocated the manufacturing offshore into new facilities that we were building in Honduras, ramping up new facilities, printing operators and transitioning private-label programs into branded programs. Then in 2011, we acquired Gold Toe, which was a brand acquisition. And now, we are securing new programs for underwear and activewear for retail, as we bring on capacity to supply these products.