Gildan Activewear – Branded Turnaround Strategy – 21
April 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Olivier Wiesel (OW)
Former Director, Finance at Gildan Activewear Inc
Agenda:
1. Activewear headwinds and market share losses
2. Competitive landscape for innerwear across Gildan (NYSE: GIL), Hanesbrands (NYSE: HBI), Fruit of
the Loom and private labels
3. Printware basics – market dominance and supply chain advantages
4. Sales and profitability outlook
Contents
Q: Can you give an overview of the basic activewear and apparel industry, highlighting key trends? What are
3
the main drivers and who are the market’s top competitors?
Q: What 2-3 pre-coronavirus industry trends were you monitoring? Were there any differences between
3
regions?
Q: How wide is Gildan’s global distributor network? You referenced its strong presence in the US, but how
4
does that compare to other markets?
Q: How have the industry’s pre-coronavirus trends changed throughout the pandemic? How has coronavirus
4
impacted approaches to strategy across large apparel companies?
Q: Could you give an overview of Gildan’s branded business and the categories it operates in?
5
Q: Why do you think Gildan was unable to preserve its brand or build substantial value to command a price
premium in the same way that Hanesbrands could? The premium isn’t large, but I would say it’s better. What
5
do you think were the company’s pitfalls around brand preservation?
Q: Could you elaborate on the yarn profile of the product types that Gildan uses? What is the margin profile
6
for each product type?
Q: How has Gildan implemented different yarn processing techniques or materials?
6
Q: Gildan’s printwear business accounts for a larger amount of sales and has a higher market share vs its
printwear business, but where do you think management is prioritising resources? Where do you think it
should prioritise resources to grow? Is it efficiencies within printwear and expanding the distributor network,
7
or do you think preserving and expanding brands and improving product quality are more fundamental?
Q: Could you expand on the US capacity limits for yarn imports? Are any other trade barriers preserving
7
Gildan’s US market share?
Q: You said Gildan’s products are performing relatively well on Amazon. What are the dynamics of that
relationship? Amazon has a private label business, especially in basic apparel. How does that compare to
Gildan? Could this be a future business prospect where Amazon partners with Gildan for its private label
8
business?
Q: Would you be surprised if Amazon folded Gildan into its network? It seems there are potential synergies
when considering Gildan’s expensive production capabilities and market share in printwear. Gildan is
somewhat struggling with its long-term goals vs Amazon, who is always opportunistic in increasing revenue.8
Q: Competitors such as Hanesbrands and Fruit of the Loom have pulled back or exited from the basic
printwear market due to low pricing and inconsistent demand. What implications did that have for Gildan?
8
How might it impact the company?
Q: How many other options do companies such as Walmart, Amazon and Target have to roll out their own
9
private label print basics? Who could provide that capacity, other than Gildan?
Q: How would you assess American Apparel’s performance prior to its acquisition by Gildan in 2017? Did
9
Gildan capitalise on this acquisition or did it make strategic mistakes around growth?
Q: Is there anything else that you think the investor community should know about Gildan’s management
10
team or its ability to execute on priorities? Is there anything about Gildan that is commonly overlooked?
Gildan Activewear – Branded Turnaround Strategy
Transcription begins at 00:00:01 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview entitled Gildan Activewear – Branded Turnaround Strategy.
I am Nyree Hinton and I will be facilitating today’s Interview with Mr Olivier Wiesel, former Director of
Finance at Gildan Activewear.
Olivier, before we get started with today’s Interview, please state I agree or I disagree to the following
statement: You understand the definition of material non-public information and agree not to disclose any
such information, or any other information which is confidential, during this Interview.
OW: I agree.
NH: Thank you. Could you start with an overview of your background?
OW: I started my career in investment banking, focus on M&A. I shifted over into corporate, starting at
Gildan Activewear in the apparel and manufacturing space. I started at Gildan as an analyst on the corporate
development side, so responsible for modelling valuations for M&A and the long-term strategic plan of
business. It was a five-year model and strategic document that would go to the board of directors. Grew up in
that group, various projects, large investment into the space and Gildan’s manufacturing footprint, and then
moved into the operations as Director of Finance for Gildan’s US operations. I left Gildan about a year ago
after completing an MBA and shifted sectors. Moved into e-commerce. I’ve been with Shopify as the Director
of Corporate FP&A since March of 2020.
[00:02:14]
Q: Can you give an overview of the basic activewear and apparel industry, highlighting key trends? What are
the main drivers and who are the market’s top competitors?
OW: If I think of Gildan Activewear’s business, my opinion, there are two distinct target markets. One is the
printable space or printwear, and the second is retail. In terms of the printwear space in the US, it’s dominated
by a few brands, a small number of distributors that sell to a large number, in the hundreds of thousands, of
screen printers and to millions of end users, so it’s a tight funnel at the top and expands pretty quickly. The top
competitors in this space would be trade brands like Next Level, Bella + Canvas. You see a distributor that
goes direct with their own private label brands called SanMar, and then some of the retail brands that have
created product specifically for this market like Hanes, Fruit of the Loom, Nike, etc. The second arm or the
second industry where Gildan plays is retail, specifically in basics and innerwear, so that’s more specifically
underwear and socks. This market, Gildan could sell under its brands like Goldtoe or as a private label
manufacturer for retailers such as Walmart. Competitors in this space are mainly the large innerwear brands,
Hanes, Fruit of the Loom, and smaller players that are gaining consumer interest via e-commerce like Bombas
or Pair of Thieves.
[00:04:56]
Q: What 2-3 pre-coronavirus industry trends were you monitoring? Were there any differences between
regions?
Private and confidential 3
OW: I’ll speak to a US trend, it’s the largest market where Gildan plays, and then how, in my opinion, those
change when you look outside of the US and the rest of the world. Firstly, there’s been a shift from what Gildan
would call a basic apparel, basic T-shirt, to a fashion T-shirt in the printwear space. The real difference there is
the yarn that they use, interestingly enough. The basic shirts use an open-end yarn that has more breaks in it,
so when you feel the shirt, it feels rougher because the yarn has more breaks. Ring-spun is a more expensive
yarn to produce. It has less breaks in it and so feels softer to the touch, so there’s a shift between the chunky,
starchy, basic shirts to a softer, more fluid fashion shirt, and one of the responses of Gildan to this trend was to
acquire American Apparel back a few years. That’s number one shift and the competitors in the space that
have grown tremendously over the years are focused on this fashion segment, so specifically talking to Next
Level and Bella + Canvas. The second trend pre-COVID is the distribution of power between distributors and
brands. A couple of things to note on this relationship, so very few distributors in the US that have a far reach
because of their distribution footprint in terms of warehouses across the US to hundreds of thousands of
screen printers. Almost impossible for a brand to reach that scale without having a footprint of these massive
distributors, and the ones I’m speaking about are Alpha Broder and SanMar, the largest, and S&S. These
distributors are consolidating. They’re acquiring smaller regional players and making it harder for brands to
go direct and to, I guess, fortify their position in the distribution space.
More control on pricing, squeeze on margins for brands and also protecting against e-commerce and the shift
of buyer behaviour from going down the street to your local screen printer to getting a T-shirt designed and
made online, so those are the two in the US that come to mind. How that differs outside of the US, Europe and
Asia, the ring-spun T-shirt or the fashion T-shirt is the basic T-shirt. There’s no such thing as a basic T-shirt
outside of the US. The status quo is ring-spun, and that’s because that yarn and that shirt anywhere outside of
the US comes from Bangladesh for the most part, or from China, and there are no duties levied against those
markets outside of the US, whereas in the US, there was a constraint around ring-spun yarn and duties levied
against Bangladesh and China for bringing in that type of product, which didn’t make it economical. Outside
of the US, that is not the case, so the uphill battle for these brands outside of the US is competing on a product
that is already widely adopted, and then, from a distribution perspective, a lot of distributors in Europe have
their own private label brands. There’s one in the US that does this, called SanMar. This is a major competitor
in the printwear space, and in Europe it’s much more common because of the dynamics and the ease of
sourcing from China and Bangladesh, so that dynamic is less at play and the margins of the distributors in
Europe and outside of the US are actually better than those of the brands, whereas in the US, it’s actually the
inverse. The brands carry more margin than the distributors.
[00:11:08]
Q: How wide is Gildan’s global distributor network? You referenced its strong presence in the US, but how
does that compare to other markets?
OW: I believe it’s the 80/20 rule, around there. 80% of the business is in the US, whereas 20% has been
outside. There is a strong focus on expansion outside of the US. My opinion, it’s one of the strategic growth
drivers of the business. A lot of headway made in Asia. I think Gildan is one of the few trade brands, trade
basic apparel brands that actually sells into China, which is just uncommon, and definitely the company is
looking at markets outside of the US and I think one of the things that they’re pursuing is expanding the
manufacturing capability outside of the core Latin American footprint into Bangladesh. Gildan has a
manufacturing hub in Bangladesh. It has for many years, and I think that that’s somewhere where they’ll be
looking to expand.
[00:12:53]
Q: How have the industry’s pre-coronavirus trends changed throughout the pandemic? How has coronavirus
impacted approaches to strategy across large apparel companies?
Private and confidential 4
OW: That’s a great question and my opinion, the core end use of the printwear channel goods is concert
merch, tourist merch, corporate giveaways, marathon races that have T-shirts printed. There’s a ton of end
uses for the printwear space, but a lot of them got constrained during COVID-19 and the lockdowns. Just think
about concerts not existing, sporting events, so obviously, impact there. I think what’s happened though is that
there’s been a widening of the use case for merch, which is interesting. Something just that I anecdotally have
witnessed is local coffee shops, bars, restaurants looking to merch to subsidise some of the losses that they
may have had as they were shut, to support local. I think there’s a big push there and it’s something that will
likely not go away if you think about the adoption, I guess, of merch. Definitely I think COVID-19 and the
lockdowns have probably propelled the e-commerce front of it, as it has in retail in general. What that means
is that people are ordering merch and apparel on their phones or online more than they would have been in
the past, and so taking away some of the business from mom-and-pop screen printers that had, I would say,
more price elasticity because it’s your local go-to place rather than more of a marketplace online, so likely
putting pressure on pricing as you go up the value chain.
[00:16:08]
Q: Could you give an overview of Gildan’s branded business and the categories it operates in?
OW: I think, in this sense, Gildan has changed its branded business over the last few years. The branded
business started with the not need, but it started with a sense of manufacturing efficiencies through hosiery.
It’s very easy to produce hosiery and you could produce a lot of it in a small space, so the idea was to scale
Gildan’s manufacturing footprint and have hosiery be a driver of that and drive economies of scale, so Gildan
acquired a couple of hosiery businesses in the earlier 2010s or between 2008 and 2010. Then the big
acquisition of Goldtoe really spurred the growth of Gildan’s retail business. Goldtoe would be more of a high-
end department store, now Amazon products that consumers know. It’s a staple. Leveraging this and, I guess,
the brand of Gildan in the printwear space, the idea was to take these brands to mass, and specifically
Walmart, Target, Kmart and other large big-box retailers. I think the idea there is that everyone has Gildan in
their drawers with the T-shirts. They just don’t know it yet because it didn’t have really that brand recognition.
Usually, you buy a shirt for the print that’s on it, not the label, so that was the idea, and once we marketed the
brand, people would start to put two and two together that they have this in their drawer. It’s a comfortable
shirt, their favourite shirt, so, “Let’s buy the underwear and socks,” so I guess the positioning for the Gildan
brand was to be the entry point, the price leader, but it was a hard position to be in and there was a shift over
the last few years of the big-box retailers to get into their own private label brand. Really, that was to fight e-
commerce and Amazon, who carried multiple, any brand and consumers could always check the price on
Amazon and compare it the Walmart or Target prices. The idea of creating private label brands in big-box
retailers was to combat this price-checking behaviour, because you could only find the private label brand at
that specific store and nowhere else. In terms of the branded business, there’s been a shift, so holding on to
some of the more known brands like Goldtoe, and transitioning the lower-price-point products and brands
such as the Gildan brand into private label, and actually manufacturing on behalf of these private label brands
from the big-box retailers.
NH: You mentioned that everyone has Gildan in their closet, but they don’t know it yet. It’s a good point. I’m
actually wearing a shirt from Gildan right now.
OW: There you go.
[00:21:14]
Q: Why do you think Gildan was unable to preserve its brand or build substantial value to command a price
premium in the same way that Hanesbrands could? The premium isn’t large, but I would say it’s better. What
do you think were the company’s pitfalls around brand preservation?
Private and confidential 5
OW: Specifically the Gildan brand, Goldtoe does command a premium. American Apparel, from an online
commerce perspective, is a more high-end shirt, commands some premium over competitors. The Gildan
brand specifically in retail, the strategy was to be the entry-price product. It was a mass product. I think
Gildan built the right product, but it was targeting the mass, eight-pack or 12-pack of product. Where I think it
had trouble is just the position between where a private label brand would be from Walmart or Target or the
big-box retailers, and the better-known, staple underwear and socks brands like Hanes and Fruit of the Loom.
As private label became a strategic imperative for these big-box retailers, at that point, there was not enough
shelf space to carry an entry-point private label brand and entry-point Gildan brand, and then Fruit of the
Loom and Hanes, so I think that’s really the reason why the Gildan brand didn’t stick within the shelves of the
big-box retailers. I think it’s doing fairly well online and Amazon. I think that there’s still some sort of demand
or recognition that Gildan shirts are comfortable and Gildan underwear is comfortable. It’s just they didn’t get
the space that’s required to have a sustainable high-profitability business, so it transitioned from brand to
manufacturing for the big-box retailers, which, in my opinion, is probably just as good and sticky.
[00:24:38]
Q: Could you elaborate on the yarn profile of the product types that Gildan uses? What is the margin profile
for each product type?
OW: That’s been my speciality with regards to Gildan. I spearheaded the investment of Gildan’s owned yarn
manufacturing assets in the US. It came out of it. It all started, Gildan used to purchase third-party yarn, had
to pay a margin to the manufacturers, but the real reason that I think that Gildan pursued a strategy to build
yarn facilities and operate them was because of capacity constraints in the US for ring-spun, so that was the
impetus for the whole project, but I’ll talk specifically to those three yarn types. Open-end, OE, is the first and
most basic of the yarns. It’s a short strand of cotton. It’s a more efficient manufacturing process. It’s very light-
touch from a human perspective. It goes from a lower-grade bale of cotton to a rope, it’s called a fibre, into a
can and then from there, it goes into a spinning frame and gets pulled and elongated until it’s a strong yarn.
Gildan owns, I believe, one of the largest open-end yarn manufacturing plants in the world and it’s located in
Salisbury, North Carolina, and the output of that facility is massive. Then there is MVS. MVS is a newer
technology and it falls between OE and ring-spun. It’s a similar process to OE, with a lighter human touch, and
it uses a vortex spinning frame and so there are less breaks, but it’s not the same quality of cotton as the ring-
spun yarn product.
Shifting over to the higher-end yarn, which is ring-spun, it’s the most expensive to manufacturer. It also uses a
higher-end cotton as a raw material. Your cotton has better properties so that less is removed in the cleaning
process, and two types of ring-spun, carded and combed. Combed takes out more of the shorter strands of
cotton. Carded goes right from a carding machine into cans and then hits two, there are actually three
spinning processes that happen for ring-spun vs the one spinning process for OE and MVS. In ring spinning
you have roving, which brings your cotton into a thicker yarn and then it goes into a spinning frame, and
whenever the yarn is being driven in a ring-spinning frame and it breaks, a human has to put back the break.
It’s a very manual process around the ring, so it’s a lot more labour-intensive, and then it goes into winding,
which is the last process before being packaged. Ring-spun, a lot more labour-intensive, cotton is more
expensive, the process is longer and you produce less per square foot of space, but the price that you’re able to
achieve on a ring-spun product carries the same, I would say, margin as it does for an OE product, so it’s just
the market that’s shifting over to ring-spun.
[00:30:25]
Q: How has Gildan implemented different yarn processing techniques or materials?
OW: All three are being done internally. My opinion, around 70% of the yarn requirements for Gildan are
being manufactured internally, with 30% being sourced as flexibility or speciality yarn, so Gildan has about,
I’d say, two or three OE, open-end manufacturing plants, it has about one MVS facility and then it has two or
Private and confidential 6
three ring-spun facilities. It has, in Mocksville, North Carolina, I believe, one of the largest ring-spun
manufacturing facilities in the world, and so the ring-spun product is really fuelling this trend towards fashion
basics, the softer, more styled look. There’s also the basic cuts are being also transitioned into ring-spun in the
fashion world, so Gildan has a basic style in Gildan, style 2000. I believe that even that style, they would offer
the open-end version and the ring-spun version, and you would probably see a shift between the open-end and
the ring-spun version, with the ring-spun version taking the lion’s share over time. I believe too that they will
continue to invest in ring-spun, whether it’s in North America or abroad.
[00:33:01]
Q: Gildan’s printwear business accounts for a larger amount of sales and has a higher market share vs its
printwear business, but where do you think management is prioritising resources? Where do you think it
should prioritise resources to grow? Is it efficiencies within printwear and expanding the distributor network,
or do you think preserving and expanding brands and improving product quality are more fundamental?
OW: That’s a great question. In my opinion, there’s been a shift. A few years ago, you probably would have
heard that retail is the future of Gildan’s growth, or a big part of it, and there was a focus there. There were
acquisitions done in that space to bolster the capability of the business to play in the retail branded segment,
specifically also within big-box retailers. I think that has shifted away from retail, based on my thinking here. I
think that that’s the right call. I think Gildan’s success will come through this transition to fashion, fashion
basics. I think, probably in the early days of this transition, Gildan probably missed on a few opportunities to
protect its base and create a stronghold, thinking specifically of Next Level and Bella + Canvas. I think Gildan
was probably occupied at the time with the retail strategy, so in my opinion, the growth, from what I’ve seen
recently and from the press releases of the business, they’ve taken a stance on back to basics. I think that’s the
right approach for management, in my opinion, to simplify the SKU base and the product offering, and really
double down on the printwear segment. There is growth there as these use cases expand. There are also very
different dynamics around the world that I think Gildan could capitalise on. I would say that the US is unique,
in that it has very large distributor gatekeepers to the printwear market, like I mentioned, Alpha Broder and
SanMar. That’s not the case outside of the US and I wouldn’t be surprised if Gildan would pursue a direct
distribution strategy outside of the US at some point as a growth driver. I think the risk is too high in the US to
do that. Alpha Broder probably is somewhere around upward of 50% of the US business, so to go direct and
risk that is a non-starter in most likelihood, but it’s very different if you look outside of the US.
[00:38:28]
Q: Could you expand on the US capacity limits for yarn imports? Are any other trade barriers preserving
Gildan’s US market share?
OW: That’s another good one. Yes, there are. Firstly, on ring-spun, I think Gildan did a really good job at
acknowledging this shift and this trend, and the investment in ring-spun yarn. Two things happened out of
this. One, no one has the capacity for ring-spun yarn in the US like Gildan does, and in fact, because Gildan
pulled away its volume from other local or US-based manufacturers of yarn, that caused a lot of pain to those
manufacturers. They were big volume. They were a large part of their volumes and, as a result, those
competitors, their capacity has shrunk or has diminished, so Gildan is one of two or three probably largest
yarn manufacturers in the US. What that means is that the runway for Gildan in ring-spun yarn in the US is a
lot longer than it is for other players, if the economics of US ring-spun continue to outperform, bringing in a
finished good from Asia and paying the duties. I guess that’s the economic question. If a ring-spun shirt
produced in Bangladesh with a duty applied to it is cheaper than producing the ring-spun yarn in the US and
having the shirt made in Central America and bringing it back duty-free, that is a risk. Does that answer the
question? I maybe got a little lost.
Private and confidential 7
NH: I know that there is a minimum amount when ordering from China and the prices for basic apparel can
be steep for those starting their own fashion business or label.
OW: Yes, because of those duties, and I guess the second point there, and I remember the second part of your
question, are there any other types of constraints from a duty perspective? Yes, there are, and those are
polyester. Polyester yarn follows a similar behaviour in terms of being dutiable, and so Gildan relied on a US
resource for, not the yarn, because the yarn was produced internally, but for the resin or for the polyester raw
material, which would come similarly as cotton, as a bale of polyester, so there was a constraint. There is a
constraint on polyester yarn, but I believe from a raw material perspective, that can be brought in to the US
duty-free, if I’m not mistaken.
[00:43:41]
Q: You said Gildan’s products are performing relatively well on Amazon. What are the dynamics of that
relationship? Amazon has a private label business, especially in basic apparel. How does that compare to
Gildan? Could this be a future business prospect where Amazon partners with Gildan for its private label
business?
OW: I don’t know a whole lot about the relationship dynamic other than, from what I recall, it was a good
relationship. The Gildan product had velocity, and so it was one that worked well on Amazon. I think the
margin, the price, funny thing about Amazon, it’s not the cheapest retailer, so the price and margin worked
well for Gildan and worked well also for Amazon. I know there are two business models to play on Amazon. I
believe early on, Gildan was able to get into their warehouse and have the goods shipped by Amazon directly,
and so, in my opinion, that relationship will continue to grow. I know American Apparel, having worked on
that acquisition, there was originally a branded strategy to maintain the online commerce presence of
American Apparel, but that’s not really in Gildan’s wheelhouse, and so, from what I’ve seen, the strategy has
shifted to use American Apparel as a fashion brand for Amazon, and that probably came out of the strong
relationship that Gildan and Amazon have in the basics space. From a competitive environment, in terms of
looking at Amazon as a competitor, I think Gildan is probably well-positioned to be the private label provider
for Amazon if they do further expand in that space, just like they are for Walmart. Otherwise, I don’t have a
view on that.
[00:47:18]
Q: Would you be surprised if Amazon folded Gildan into its network? It seems there are potential synergies
when considering Gildan’s expensive production capabilities and market share in printwear. Gildan is
somewhat struggling with its long-term goals vs Amazon, who is always opportunistic in increasing revenue.
OW: It’s not a terrible idea. What I would see, Amazon is probably a direct threat to Alpha Broder and
SanMar, in that they have wide-range distribution capabilities, can get anywhere in a day, so it would be a
huge business for them just to get into the distribution of printwear, having a page for screen printers where
they can order their wares right from Amazon instead of going to various distributor websites. Although, the
distributors maintain very good relationships with these screen printers. The dynamics in terms of those
relationships are pretty interesting, but Amazon, it could be an opportunity there and I agree with your overall
assessment of Gildan’s long-term growth and Amazon’s capability.
[00:49:38]
Q: Competitors such as Hanesbrands and Fruit of the Loom have pulled back or exited from the basic
printwear market due to low pricing and inconsistent demand. What implications did that have for Gildan?
Private and confidential 8
How might it impact the company?
OW: Gildan drove that. Gildan was successful in printwear at the expense of Hanes and Fruit of the Loom.
Gildan was able to build the scale, have the right product, have the inventory, nail the pricing through heavy
cost control and, essentially, take Fruit of the Loom and Hanes out of the market from printwear, and
honestly, I think that the original thinking behind retail is that Gildan would be able to do the same thing to
Fruit of the Loom and Hanes in retail. They’re the same competitors, so did it once, do it again. It was just a
different dynamic, but I would say that Gildan’s success in printwear was at the expense of those two
competitors and that Gildan has built itself as the leading trade brand in that space.
[00:51:29]
Q: How many other options do companies such as Walmart, Amazon and Target have to roll out their own
private label print basics? Who could provide that capacity, other than Gildan?
OW: That’s a tough one. I would say that Gildan sees itself as unique in that sense because of its scale in
producing low-cost, duty-free basic apparel in Central America, short lead times and the ability to make a very
good, consistent product, and also hold the inventory. It’s really hard to say what one can do or not do coming
out of Asia. If you think of H&M, Uniqlo, these are mass basic apparel companies that are able to produce at
scale. I don’t know exactly if there are standalone manufacturers that could do full package into the US at the
same price point and without the long lead times, because of all sorts of reasons, including duties.
[00:53:35]
Q: How would you assess American Apparel’s performance prior to its acquisition by Gildan in 2017? Did
Gildan capitalise on this acquisition or did it make strategic mistakes around growth?
OW: I worked on this one. Pre-acquisition, there was acknowledgement and obviously awareness that the
market was shifting out of basics, out of the open-end product into the fashion and ring-spun product.
Looking at the total printwear space, two brands that were gaining share consistently were Next Level and
Bella + Canvas. American Apparel was as well in the printwear space, but maybe not to the same extent
because they were very focused also on their retail and branded strategy, but just pretty incredible growth of
those two other competitors in the fashion space, so American Apparel had been on the radar from an M&A
perspective for a long time. I think that the acquisition was pretty opportunistic, in that American Apparel was
amidst a bankruptcy. There was a lot of thinking around made in the USA and the implications for the brand,
what the brand identity is in retail vs in the print space. Gildan being a leader in the print space, the main
strategic rationale for the acquisition was to bolster the position in the print space, and Gildan felt like it had
the relationships and the manufacturing scale, the distribution, to capitalise in growing American Apparel as a
print brand. That was always number one from the very beginning. Number two and the cherry on top would
be to continue to capitalise on the brand and the recognition.
There was never a question, I believe, to keep retail as it was for American Apparel, in terms of having retail
locations. I don’t think that was ever in the cards. First of all, not Gildan’s core competitive advantage. Second
of all, it didn’t really work for American Apparel, so why would it work for Gildan? The idea was to build this
brand as a trade brand in printwear and try out retail e-commerce, see where that goes. From a strategic
perspective, I think Gildan was able to capitalise on its intent and I think that American Apparel, I have no
idea where it is, how it’s doing today, but I would imagine that it’s a well-accepted trade brand in that space. It
used to be a fan favourite and I think it will continue to be in the printwear space. It was just never as widely
distributed in the past as it could be with Gildan. From a retail perspective, it was really never a strategic goal
to maintain the brand as it was. I think Gildan took a shot at having a marketing team around a retail team. I
don’t think that really worked out and it isn’t aligned with Gildan’s core competencies, so I think it was hard
for management to really get around that, and so it shifted into a light-touch retail relationship with Amazon
and I have no idea how that’s doing. I would presume it’s doing okay, but again, not the money-maker for
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Gildan in any case.
[00:59:45]
Q: Is there anything else that you think the investor community should know about Gildan’s management
team or its ability to execute on priorities? Is there anything about Gildan that is commonly overlooked?
OW: Great group of people. I know there have been some shifts recently. Decision-making is very centralised
at Gildan. It’s a founder-run business. Glenn Chamandy, who’s an incredible person and leader, is still very
involved, from what I was able to discern, and drives a lot of the big decisions within the business. Something
that’s overlooked is there is a mass amount of capital that has been invested in fixed assets. That said, there’s
an input value there. There’s value in the fixed assets for sure. I think, over time, there will be cost pressures in
Central America. I would probably venture a guess that manufacturing capacity will continue to move outside
of the Central America hub to other parts of the world, and it will always be a game of cost pressures and
labour costs. I think what’s interesting though is that maybe one day there will be the technological leap to
remove some of that pressure, in terms of automated sewing and also seeing that in the ring-spinning process
with an automated ring-spinning machine that is being developed in Germany, so you never know.
[01:02:30]
NH: Olivier, I think that is a great place to conclude the Interview. Thank you very much for your insights.
Clients, thank you for joining Third Bridge Forum’s Interview today. If anyone would like to speak with Olivier
in a private call or meeting, please let your relationship manager know.
Transcription ends at 01:02:42 of the recorded material
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