Gildan products displayed at their annual general meeting in Montreal on January 31, 2008. For Business.Christinne Muschi/The Globe and Mail
Gildan Activewear says Wal-Mart's challenges in stocking shelves at its U.S. stores is hampering sales of the clothing manufacturer's branded underwear and socks.
The Montreal-based company says shoppers at Wal-Mart's U.S. stores are likely turning to competitor brands because the retailer hasn't refilled the empty spots where Gildan's products should be on display.
"They can't get enough goods from the back [storage] to fill the demand of our product in the [display] space that's available to us today," chief executive Glenn Chamandy said Thursday during a call about its third-quarter results. "So, therefore, if the consumer wants to buy something, he's not buying our product."
That contributed to branded sales being about $15-million (U.S.) less in the third quarter than previously anticipated, Mr. Chamandy said. He said there is no shortage of demand, but the difficulty at Wal-Mart – the largest retailer in the United States – is hampering Gildan's ambitious growth plans.
Gildan had expected to grow its share of the U.S. underwear market to 10 per cent by year-end from seven per cent. The original 2015 target likely won't be reached until mid-2016, but next year's target could be set even higher in February.
Mr. Chamandy said Gildan is working with Wal-Mart on some solutions that will take some time to gain traction. But he added Gildan's strategy isn't just built around just one retailer.
Gildan also had a 14-per-cent share of the sock market in September, with men's socks being the No. 2 brand.
Despite lower inventory replenishment and a weaker than anticipated back-to-school period, branded apparel sales grew 1.7 per cent to $234-million in the quarter as Gildan branded volumes increased by about 30 per cent.
The clothing maker ramped up efforts earlier this year to promote its Gildan brand, including commercials featuring country music star Blake Shelton, one of the coaches on The Voice.
Sales were helped by the first delivery of socks and underwear to 1,800 stores of an unidentified major retailer, which analysts believe is Target. Gildan added more than 6,000 retail stores in the quarter as it aims to have its brand lines available in more than 18,000 retail locations by year-end.
Gildan now expects branded clothing sales will grow by only 12 per cent this year, compared with the previous estimate of 15 per cent because of inventory challenges at Wal-Mart and soft retail market conditions in the fourth quarter.
The company's printwear products, which don't carry the Gildan brand, increased 1.1 per cent to $440.5-million. But Gildan says growth will be weaker for the full year because unusually warm weather is expected to reduce sales of high-value fleece and long-sleeved T-shirts.
Gildan is now estimating $2.55-billion worth of sales this year, about $50-million below the previous estimate.
It's also reducing its adjusted profit estimate for the current year by 2 cents to 4 cents a share, from the previous estimate of $1.50 a share.
Third-quarter net income increased slightly to $123.1-million or 50 cents a share with $674.5-million of net sales. Adjusted earnings were $126.4-million or 52 cents a share, which was 1 cent above analyst estimates.