Gildan Activewear Inc. said Monday it is temporarily halting production at all manufacturing plants until at least mid-April in response to the spread of COVID-19.

Gildan, based in Montreal, has major yarn-spinning manufacturing and other operations in Mocksville, Eden and Salisbury. The latest Mocksville workforce count was over 200, while the company has at least 500 full-time employees in Eden, along with 100 contract workers.

“Our distribution centers and offices in the U.S. continue to remain open for the time being, subject to local government restrictions and guidelines,” Gildan communications director Geneviève Gosselin said. “All

U.S. employees can file for unemployment-insurance benefits or choose to use vacation pay during the lay-off period. The company will pay the employees’ share of benefits.

The affected Gildan employees will join more than 113,000 North Carolinians who have filed for unemployment insurance benefits since March 16.

An executive order signed by Gov. Roy Cooper allows claims to be filed by not only those who have been temporarily laid off, but also experienced a reduction in wages and hours or been furloughed.

The N.C. Division of Employment Security said that at least 87% of the processed claims were COVID-19 related.

“There could be more claims related to COVID-19, in cases where the person filing did not indicate to our system that the virus as the reason for separation from employment,” Commerce spokesman David Rhoades said.

Terry Bralley, president of Davie County Economic Development Commision, said that “we certainly understand Gildan’s actions in these uncertain times.

“We continuously are updating our plant managers of all the state and federal programs employees may qualify for.”

Gosselin said the company is “in the process of reaching out to governments in various countries where we operate to see how we can provide any support regarding the production of masks and other personal protection equipment.”

Hanesbrands Inc., a Winston-Salem based competitor of Gildan, said Saturday it will begin producing U.S.-grown cotton surgical masks at plants in Dominican Republic, El Salvador and Honduras as part of a federal contract to combat a national shortage of face masks resulting from the COVID-19 pandemic. At peak output, the company expects to produce about 1.5 million masks a week.

The announcement came Saturday during President Donald Trump’s media briefing about the new coronavirus and the federal government’s response.

Hansesbrands has joined a cooperative consortium of other major apparel manufacturers led by Parkdale Mills America that are dedicating manufacturing capacity to meet the U.S. need for masks.

Gildan’s production decision was prompted in part by decisions made by the governments in Latin America countries, where it has production plants, to shut down private enterprise activities.

The halt also is a reflection of decreasing demand for its products as retailers have closed temporarily or only sell products online.

“Given the impact of all these factors, the company announced today that it is temporarily suspending production,” the company said in a statement. “This will allow us to respect government recommendations and align production and inventory levels with current demand requirements.

“All other areas of our business, including our distribution centers, 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,” the company said in a statement.

“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.”

Gildan said in its Feb. 20 fourth-quarter 2019 financial report that it “does not project and has not incorporated in its guidance any meaningful impact on its business resulting from the current outbreak of the coronavirus in China.”

At that time, it predicted fiscal 2020 earnings per share in a range of $1.70 to $1.95.

On Monday, Gildan withdrew that prediction and said it “expects to provide a further update when it releases its first quarter 2020 earnings results.”

“Given the unprecedented nature of the COVID-19 situation, which is changing rapidly, the company will continue to monitor and adjust its plans for its business as the situation evolves.”

On March 17, the company acquired the remaining available portion of its revolving long-term bank credit to give it — as of now — nearly $600 million of liquidity.

CFRA analyst Camilla Yanushevsky projects additional ripple effects from Gildan’s production decision.

“Gildan noted a meaningful disruption in demand in the imprintables channel following the cancelation of various sporting and entertainment events,” Yanushevsky said. “Additionally, we expect temporary store closures in the U.S. to slow demand in the retail channel.”

Yanushevsky reduced her fiscal 2020 earnings guidance for Gildan from $1.94 per share to $1.67, and her 52-week share-price target from $31 to $10.34.

Gildan’s 52-week share-price range is from $9.78 to $40.40.

rcraver@wsjournal.com

336-727-7376

@rcraverWSJ

Load comments