American Apparel Owner May Turn Permanently to Masks and Gowns

(Bloomberg) -- Like many companies around the globe, Canadian apparel giant Gildan Activewear Inc. pivoted to making hard-to-find personal protective equipment during the pandemic. It's now considering making the temporary business permanent.

Montreal-based Gildan, which usually makes T-shirts, underwear and other basic garments, said April 8 it would start producing non-medical face masks and isolation gowns at its idle Honduras factories to help respond to shortages. Three weeks later, orders keep coming in, and the manufacturer sees opportunities supplying North American customers that have long relied on Asian imports.

“All of a sudden it's turned out to be much bigger than we anticipated,” Chief Executive Officer Glenn Chamandy said in a phone interview Thursday. “This could become part of our business as we go forward.”

The manufacturer was hit hard by the coronavirus crisis, in part because a large chunk of its revenue comes from selling blank garments to printing companies that customize them for concerts or sporting events. First-quarter sales dropped 26% and on Wednesday Gildan predicted a “significant earnings loss” for the current quarter. Its Canadian-listed shares are down 49% this year.

Gildan is planning to make 150 million masks and gowns out of facilities in Honduras and Nicaragua, with a U.S.-based yarn-spinning factory also set to partly reopen for the project. It has been documenting the process on social media, featuring employees who've returned to work, while about 95% of its 51,000 staff stay at home.

The company is selling the equipment to local governments and to retailers supplying health organizations, particularly in the U.S., Chamandy said. The new endeavor sparked a relationship with big uniform companies that traditionally source protective equipment from Asia and weren't aware of Gildan's manufacturing capacity, he said.

Gildan, which also owns the American Apparel brand, has built a global production chain allowing that helps it compete with Hanesbrands Inc. and Berkshire Hathaway Inc.'s Fruit of the Loom. The company spins raw cotton into yarn in the U.S., sends it to Central America to make garments, and ships it back to the U.S., all under five weeks, says Chamandy.

That could be a selling point at a time when the pandemic had stirred international tensions over medical equipment and left governments scrambling to secure supplies in China and fly them back home in time.

“Even though we're in Central America, we're an hour and a half away from Miami-- it's not like being in Asia, which is a completely different hemisphere,” Chamandy said. “I think that's an important part of our success.”

For now, the company is making close to no profit from the equipment, in part because it's giving some away.

“If we decided to make this a venture as we go forward, obviously it would have to have a good economic return,” Chamandy said.

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