Gildan Wins Contract to Make Men’s Underwear for Walmart

(Bloomberg) -- Gildan Activewear Inc. said it won a contract to produce men's underwear for a major retailer, part of the clothing maker's bid to capitalize on companies' growing preference to sell their own lines of apparel.

The Montreal-based company, which also owns American Apparel, said it secured a contract for 2019 to manufacture men's underwear for its “largest mass retail customer.” That customer, according to Bloomberg data, is Walmart Inc. Gildan declined to name the client. A Walmart representative did not immediately respond to a request for comment.

“When you look at 2018 so far, there have been clear signals that retailers are increasingly committed to their private-label strategies and developing their own exclusive brands for greater differentiation on the selling floor,” Rhodri Harries, Gildan's chief financial officer, said on a call with analysts Thursday. “We feel we are well positioned to pursue this opportunity.”

Mass merchants are increasingly promoting their own brands in response to online competition and because of the goods' higher margins. This trend has hurt companies such as Hanesbrands Inc. and Gildan, and it's forcing suppliers to react quickly and seek manufacturing deals to make up for lost business. Under its new contract, Gildan will no longer sell its eponymous underwear -- but shelf space devoted to its products will grow by 50 percent at Walmart. The company didn't disclose financial details of the deal.

Gildan now has four private-label contracts and the company said it hopes to sign more in the underwear and activewear category. Gildan shares fell 0.9 percent to C$39.01 at 12:27 p.m. in Toronto.

--With assistance from Matthew Boyle.

To contact the reporter on this story: Sandrine Rastello in Montreal at srastello@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Jonathan Roeder

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