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Gildan Activewear Inc. (GIL - Snapshot Report), the manufacturer and seller of apparel products, recently announced that it has agreed to acquire the New Buffalo Shirt Factory for about $7 million. The deal is expected to be sealed shortly.

This announcement is a crucial move on Gildan Activewear’s part as the company has been focused on increasing sales in the printwear market and New Buffalo with its market leading position in screenprinting and apparel decoration is likely to bolster the company’s position.  

We believe the move is a perfect fit for Gildan Activewear’s long-term strategic goals as it will help the company consolidate its position as supplier of apparel products and enhance its market share in the U.S. distributor channel.

Gildan Activewear through strategic acquisitions and capital investments has been successful in reducing manufacturing costs and produces high-quality products at relatively lower rates. Moreover, it remains focused on generating incremental sales through the retail channel by developing company-owned brands.

Going forward, Gildan Activewear’s investment in cost reduction programs and increased vertical integration, position it well to generate sales and earnings growth. Alongside, lower cotton costs, higher sales volume and favorable product-mix are likely to boost the company’s financials in the upcoming quarters. 

This Zacks Rank #3 (Hold) company expects to generate net revenues of more than $2.15 billion in fiscal 2013. Printwear sales are forecasted to be approximately $1.45 billion, while net sales of Branded Apparel are projected to be more than $0.7 billion. Earnings are projected to be in the range of $2.65–$2.70 per share.

Other stocks to Consider

Until any further upgrade in Gildan Activewear’s Zacks Rank, other well performing stocks in the non-food retail, wholesale sector include Big 5 Sporting Goods Corp. (BGFV - Analyst Report), which carries a Zacks Rank #1 (Strong Buy).  The Gap, Inc. (GPS - Analyst Report) and Cabela’s Incorporated (CAB - Analyst Report), both of which carry a Zacks Rank #2 (Buy) are also worth considering.

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