Gildan Activewear Responds To Prospect Of Border Tax

Investors remain concerned what effect, if any, President Donald Trump's proposed "border tax" would have on apparel and fashion companies.

Benzinga reached out to Gildan Activewear Inc (USA) GIL to ask Sophie Argiriou, the company's vice president, investor communications, exactly that.

Argiriou Gildan noted that the company is monitoring both the president's office and Congressional Republicans for new proposals relating to U.S. corporate tax reform. At this point, there is no change in policy and nothing concrete, but changes are likely to be made as tax reform moves through the legislative process.

Argiriou further noted that 97 percent of all apparel sold inside the United States is manufactured and sourced outside of the country so from a competitive standpoint Gildan won't be at any particular disadvantage versus its peers.

On the other hand, Gildan does have substantial manufacturing operations and investments in the United States with approximately 50 percent of its overall cost structure being of U.S. origin, which is expected to be exempt from tax under the Republicans' proposals.

Specifically, the company invested $400 million in U.S.-based yarn spinning operations where workers convert US cotton and man-made fibers into yarns. In fact, the company happens to be the largest domestic consumer of U.S. cotton.

"We are confident that these commitments are positive factors in our competitive position within the industry," Argiriou added.

Implications Of Proposed Tax

Bottom line, the implications of a proposed border tax are vast with many unknowns, including the impact on the price consumers will ultimately play.

"Given this uncertainty, it is premature to comment on potential implications for our business until more detailed, concrete plans emerge from the new administration, after it consults with Congress," Argiriou. "At this stage, any commentary would be speculative. We are monitoring the situation and we will provide commentary when definite detailed plans for tax reform unfold."