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Shares of Gildan Activewear Inc. (GIL) were down 8.5% on Monday afternoon following a successful military coup in Honduras that created political uncertainty.

The Montreal-based t-shirt, sock and underwear maker said the developments had no impact on its operations or employees in the Central American country. Gildan noted that it is currently taking two previously-scheduled weeks of market-related production downtime in its textile and activewear sewing facilities.

However, Rio Nance, Honduras is the core operational base for Gildan’s production, according to RBC Capital Markets analyst Sara O’Brien. It also has a smaller amount of production capacity in the Dominican Republic.

So while Ms. O’Brien does not expect any impact on production flows, she noted that the U.S. government has condemned the Honduran military action.

She told clients:

There is no indication there will be any impact to trade flows, however we view the showcased political risk in Honduras as unfavorable to the stock in the short term.

The analyst also does not expect any new retail wins to be announced in the short term. Along with soft results expected for the remainder of 2009, she sees limited upside for the stock over the next few months.

Source: Gildan Shares Fall After Honduras Coup