Gildan Activewear is a vertically integrated supplier of activewear, men’s and boys’ underwear, and
socks. The company claims to be the leading supplier of activewear to the wholesale imprinted
sportswear market in North America as well as being a leading supplier in Europe. Its core business
is the manufacture of basic activewear which is made in “blank” form and sold to wholesale
distributors.
Gildan’s headquarters are in Canada but most of its manufacturing operations are now in low cost
countries. The company has successfully built up two low cost manufacturing hubs—one in Central
America, comprising operations in Honduras and Nicaragua, and the other in the Caribbean Basin
with operations in the Dominican Republic and Haiti. Almost 60% of its 15,000 employees are located
at its biggest integrated facility, in Rio Nance, Honduras. The facility houses a range of manufacturing
activities, including knitting, bleaching, dyeing, finishing and cutting, as well as sewing. Gildan has
ambitious plans, and in 2008/09 it aims to invest US$160 mn in expanding its capacity at the facility.
When complete, the plant will have the capacity to produce about 51 mn dozen pieces of activewear
and underwear per annum.
Gildan has enjoyed strong revenue growth in recent years. In 2006/07 alone its net revenues rose by
24.7% to US$964.4 mn, having risen each year since 2002/03. However, the company has a number
of weaknesses. For example, its markets are extremely competitive and margins tend to be very small.
The company competes on the basis of price and reliability, and relies on cost reduction and large
volumes to remain profitable. Also, most of its sales are in the hands of a few customers. In 2006/07
one customer alone accounted for almost a quarter of total sales while its top ten customers
represented almost two thirds. To address this issue, the company has acquired Kentucky Derby and
V I Prewett & Son to strengthen its position with large US retailers.
A further weakness is Gildan’s dependence on a few geographical markets. The company is seeking
to diversify geographically and is building up sales in Australia, China, Japan and New Zealand. But
with 88.4% of total revenues generated in the US market alone in 2006/07, the company still has some
way to go.
|
