Gildan Activewear is temporarily suspending production at all of its manufacturing facilities until mid-April amid the coronavirus (Covid-19) pandemic.
The move comes as the government of Honduras has extended what was initially a week-long closure of all private enterprises operating in the country to 29 March.
In a statement, the Canadian apparel maker said governments of some of the other countries in which it operates are also issuing similar directives to combat the spread of the virus.
It added the suspension allows the company to respect government recommendations and align production and inventory levels with current demand requirements.
“All other areas of our business, including our distribution centres which service the various regions where we sell our products will remain open for the time being with good inventory availability levels to service our customers, operating with appropriate measures in place to protect our employees, including remote working arrangements for many of our office staff,” it said.
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According to its website, the firm has 25 company-owned manufacturing factories globally, located in Central America, the Caribbean Basin, North America, and Bangladesh.
Meanwhile, Gildan noted it has started to see a “meaningful deceleration” in demand in the imprintables channel given measures that governments, companies and individuals are taking to limit the spread of Covid-19, including the limitation of social gatherings.
“Additionally, although we have not yet seen as significant a deceleration of demand for our products in all the retail channels that we serve, we expect the multitude of recently announced temporary store closures and social distancing measures being recommended by governments and health protection agencies will also continue to slow retail demand,” the firm added.
Due to what it called the “heightened uncertainty”, Gildan is withdrawing its first-quarter and full-year 2020 financial guidance, noting it expects to provide a further update when it releases its first-quarter 2020 earnings results.
It has also, as a precautionary measure, elected to draw down on the remaining available portion of its revolving long-term bank credit facility, positioning the company with close to $600m of liquidity.
Last month, the company reported a drop in fourth-quarter and full-year profit after being hit by falling sales and a charge related to a shift in strategy aimed at simplifying its product portfolio and reducing complexity in manufacturing and distribution.
“Gildan is working diligently across all areas of our business to safeguard our people and the continuity of our business, while maintaining support to all our customers. We have been able to successfully navigate through difficult times over the years and adapt to changing environments, which gives us confidence that our strong business model, financial position and resilience will continue to position us well for long-term success as we emerge from the Covid-19 crisis,” the company said.
Analyst Stephen MacLeod at BMO Capital Markets notes the widespread impacts from the coronavirus have been “acutely felt” by Gildan, leading to the temporary suspension of production at its manufacturing facilities until mid-April, as well as the suspension of 2020E guidance.
“Demand in the imprintables channel has declined materially, as social gatherings that would otherwise stimulate demand have been restricted by governments, companies and individuals to limit the spread of Covid-19 virus (concerts, athletic events, college campus activity, etc.); retail channels are likely to follow.
“Gildan indicated that since its Q4 call, imprintables POS has declined sequentially each week, and is expected to decline 50% this week, with another decline expected to accelerate next week.
“While Gildan has yet to see meaningful deceleration in its retail channels, recently announced store closures and social distancing requirements will undoubtedly lead to slowing retail demand. Gildan has $1.2bn of inventory to meet demand until it can safely re-open its manufacturing facilities.”
