Managing director Blair Macnaughton said the textile company is trading ahead of budget for the current year amid an improvement in market conditions that bodes well for the sector."We are bullish for the future. We have a full order book," he said.
Mr Macnaughton welcomed signs that demand for products like the kilts the company makes in Paisley has started to improve in the UK after a long economic downturn, which has put pressure on consumer spending.
"We are not seeing huge improvements but this time, for the first time in four years, we are seeing some growth (in Highlandwear sales)," he said.
The company, which has headquarters in Perth, has also been making good progress in overseas markets. "Sales in the current year to date are something like 200% up in Russia. That's a huge market for us," noted Mr Macnaughton
He said the growth in Russia is being driven by demand from hotels for the high end furniture fabrics the company produces at its plant in Keith, Aberdeenshire.
The strong trading comes after Macnaughton Holdings grew sales by 15%, to £3.9 million in the year to January, from £3.4m in the preceding year. Pre-tax profits more than doubled to £110,000 from £49,000.
Following years in which the textile industry has been portrayed as being in terminal decline, Mr Macnaughton said the company is among a group of Scottish firms that have been doing well after deciding to focus on specialist markets.
"We very quickly realised the only way to go was by niching ourselves," said Mr Macnaughton, who highlighted the Johnstons of Elgin cashmere business as another successful niche player.
Mr Macnaughton said Scottish firms were also benefiting from a willingness to co-operate with each other. "We are all pretty friendly," he said. "We have to go out to overseas markets and share resources. If one of us gets a nice lead that he thinks might benefit one of the others we are always happy to pass it on."
But Mr Macnaughton said the company faced big challenges. In the accounts for the year to January, he wrote: "Too many of the company's overhead costs increased at rates that were greater than the Retail Price Index with suppliers often attributing the inflation busting increases to fuel and climate change costs."
He added: "We also continue to battle against the 'invisible overhead' that is regulation and the coming year sees a number of additional 'red tape' impositions."
Asked what he meant by this, Mr Macnaughton noted the company will be required to automatically enrol employees in a pension scheme from 2014. He said the company will have to find a pension firm to operate the scheme. Complications will arise if employees want to opt out.
Mr Macnaughton said it also faced challenges recruiting people at a time when textiles is not perceived as a sexy industry.