Gildan Activewear enters women hosiery business with $110 million deal for Doris

MONTREAL - Gildan Activewear is entering the women's pantyhose and leggings business with a $110-million deal to buy Doris Inc. that should help expand sales of its own products.

Doris is the third-largest marketer of hosiery in North America and a market leader in Canada with brands such as Secret, Silks and therapeutic socks, TherapyPlus.

Gildan, which makes underwear, socks and T-shirts for both men and women, said Doris gives it a platform for the retail distribution of its Gildan and Gold Toe brands in Canada and broadens its network in the U.S.

"The purpose of the acquisition is not necessarily to become the biggest sheer manufacturer in the world, it's more the fact that it's going to help us round our product line in the North American markets," CEO Glenn Chamandy said in an interview.

Achieving revenue growth targets could raise the acquisition price by up to $10 million.

About 30 per cent of Doris' US$88 million of annual revenues are in the United States, where it is a relatively small supplier. In Canada, it has about 75 per cent of the market, selling sheer pantyhose, leggings and shapewear.

Doris employs about 400 workers, primarily in Montreal, where it produces its sheer goods. The remaining half of its products, including socks, are imported from suppliers in Asia.

Chamandy said Gildan has no plans to change the sheer production, but outsourced products could be transferred to its facilities in Central America and imported duty-free under a trade agreement with Honduras that is set to receive final political approval in Ottawa.

The Doris sales staff in Toronto and the company's relationships with all the major retailers in Canada should also help the sale of Gildan's own brands, he said. Meanwhile, Gildan's experience with the big U.S. retailers provide opportunities to expand sales of Doris brands south of the border.

Chamandy said Gildan should easily double the sales of Doris products and help expand the reach of its own branded underwear, T-shirts and socks.

"We have significant growth opportunities as a company and this is only going to help expedite that growth potential."

Gildan's Gold Toe brand will soon make sheer products, while Doris brands could be expanded to make brassieres, Chamandy added.

Analyst Chase Bethel of Desjardins Capital Markets said Thursday the deal is positive and in line with Gildan's strategy and his expectations for expansion.

"From a strategic standpoint, we view the addition of Doris' brand portfolio as complementary as it enables Gildan to better target the women's branded basic apparel market," he wrote in a report.

Analyst Derek Dley of Canaccord Genuity estimates the deal will add five cents per share to Gildan's earnings before any potential revenue savings.

He raised his target price for Gildan's shares to $66 from $64, adding the company is positioned to make further acquisitions over the next 12 months.

"The acquisition of Doris Inc. allows Gildan to further expand its entire branded products platform through the addition of a new product line, and more importantly, new retail relationships."

Shares in Gildan (TSX:GIL) hit an all-time high of $62.64 in early trading. They were up $1.72, or 2.84 per cent, at $62.01 in afternoon trading on the Toronto Stock Exchange.

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