By Chris Prentice
NEW YORK, Nov 21 (Reuters) - Canada's Gildan Activewear Inc is finalizing plans to build a new textile plant inCentral America, as the maker of Gold Toe socks and other basicapparel aims to expand its operations in the Americas.
The Montreal-based company said on Thursday it plans tospend as much as $350 million in fiscal year to end-September2014 on a series of projects in the Americas. The company isalso looking to cut operational costs and expand its shelfpresence in North America and Europe.
The bulk of the company's operations are in the UnitedStates and Honduras. The new investments in its home region comeas consumers and activists have been pressuring retailers andthe global textile trade about unsafe working conditions inglobal manufacturing hubs including Bangladesh.
Gildan is in the final stages of choosing between two sitesfor its textile plant in the Central America, where apparelmakers can take advantage of lower labor costs while stillsnagging fast, duty-free access to the key U.S. retail market.
"One of the advantage of staying in this hemisphere is speedto market," Gildan's president and chief executive officer GlennChamandy said as he detailed the plans on a call to discussquarterly earnings.
Management declined to give further details but ruled outHonduras as the company aims to diversify its geography.
Other projects include ramping up and modernizingalready-existing plants in Honduras and building a distributioncenter in Honduras, a new sewing facility in the DominicanRepublic and two spinning mills in the United States.
That will add to the three other yarn-spinning mills in theUnited States, as the company takes advantage of lower-cost andreliable energy to make yarn, a semi-fabricated product that isless labor-intensive than clothing manufacturing.
Its Bangladesh textile and sewing facility feedsdistribution centers throughout Asia and will remain the"engine" of growth in the region this year, Chamandy said.
Even so, Gildan warned that retailers will increasingly lookto suppliers in areas with better safety standards and workingconditions, after a building collapse and fires have killedthousands of factory workers in Bangladesh, one of the world'smajor textile hubs.
"As there is more scrutiny in terms of building in thesecountries, there are a lot of reputational risks," Chamandysaid.
"People are going to continue to look to produce more goodsin this hemisphere," he said.
COTTON PRICES, OUTLOOK
Gildan said it expects net revenues to grow to $2.35 billionin fiscal 2014 from $2.18 billion in 2013 as higher sales inprintwear and branded apparel businesses offset inflationarypressures.
Gildan will be "front-loading" its European distributionbusiness after missing out on sales due to capacity constraints,particularly for its fleece products, Chamandy said.
Cotton costs will be relatively stable compared with lastyear, though they are expected to be higher year-over-year inthe first half of 2014 and lower in the last quarter.
Cotton purchased during a recent price spike will hurt thecompany's bottom line, said executive vice president and chieffinancial and administrative officer Laurence Sellyn.
"Higher cotton costs in the first half are not currentlyassumed to be passed through (to customers) ... as cotton priceshave declined significantly from the recent peak," he said.
Spot cotton prices on ICE Futures U.S. have tumbledsome 20 percent from an August high near 94 cents a lb, an echoof the wild price swings that have roiled the cotton industry inrecent years.
The fiber market is still reeling from a price spike in 2011that lifted prices to above $2.20 per lb, their highest sincethe U.S. Civil War, before dropping almost as quickly.
The gyrations prompted waves of contract defaults and drovemills to switch to lower-cost, synthetic alternatives.
- Consumer Discretionary