Earnings Transcript for GIL - Q4 Fiscal Year 2024

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Gildan Activewear Inc.'s 2024 Q4 earnings and full-year conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jessy Hayem, Senior Vice President, Head of Investor Relations and Global Communications. Please go ahead.

Jessy Hayem: Thank you. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the fourth quarter and full year 2024, as well as our first-time guidance for 2025. The company's management discussion and analysis and consolidated financial statements are expected to be filed with the Canadian Securities and Regulatory Authorities and the US Securities Commission today and will also be available on our corporate website. In a separate press release issued concurrently today, the company also announced executive leadership nominations and a CFO transition as part of a multiyear succession planning process, which we'll be addressing this morning as well. Now joining me on the call today are Glenn Chamandy, President and CEO of Gildan Activewear Inc., Rhodri Harries, Executive Vice President and Chief Financial and Administrative Officer, and Chuck Ward, President, Sales, Marketing, and Distribution. This morning, we'll take you through the results. Before we begin, please take note that certain statements included in this conference call may constitute forward-looking statements which involve unknown and known risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. We refer you to the company's filings with the US Securities and Exchange Commission and Canadian securities regulatory authorities. During this call, we will also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable IFRS measures are provided in today's earnings release as well as our MD&A. And now, I'll turn it over to Glenn.

Glenn Chamandy: Thank you, Jessy, and good morning, everybody. I'd like to start the call by taking a moment to thank and acknowledge our global team's efforts for their strength and dedication, as well as the loyalty of our customers and the ongoing support from our shareholders. As we highlighted in this morning's release, you can see that Gildan Activewear Inc.'s sustainable growth strategy, or GSG, is clearly driving profitable growth, and we are extremely pleased with our progress. We delivered record fourth-quarter sales of $822 million, which were up 5% versus last year. This growth rate would have been low double digits when you exclude the phase-out of Under Armour. We also delivered record fourth-quarter adjusted EPS of $0.83 a share, up 11% year over year. In our fortieth anniversary year, we concluded on a high note with record revenues of about $3.3 billion, strong adjusted operating margins of 21.3%, and year-over-year adjusted diluted EPS growth of 17%, fully in line with our guidance, all while continuing to return significant capital to shareholders, with a record $889 million returned in 2024. We're also committed to continuing executing on our GSG strategy across all our three pillars

Rhodri Harries: Thank you, Glenn, and good morning, everyone. And thank you for joining us today to discuss our fourth-quarter and full-year results. I'd also like to begin the call by thanking the entire Gildan Activewear Inc. team for their outstanding work and dedication throughout 2024. Echoing Glenn, three years into our GSG, we're extremely pleased with our execution as we continue to reinforce our core competencies and our overall strong competitive positioning. Let me start by going over the specifics of the quarter, and then I will comment on our outlook and guidance for 2025. So let's begin with the fourth-quarter results. We reported fourth-quarter sales of $822 million, up 5% year over year. If we exclude the impact of the phase-out of Under Armour, net sales for the quarter were up low double digits. This was driven by a strong performance in Activewear, up $70 million or 11%, driven by higher sales volumes. We saw positive POS across channels and product lines and continue to capture market share in key growth categories, with a strong market response to our recently introduced products, which feature key innovations, including our soft cotton technology. We also saw continued momentum with national account customers, driven by our competitive positioning and as we continue to benefit from recent changes in the industry landscape. Looking at international markets, sales increased by 20% year over year for the second consecutive quarter. Growth stemmed from positive POS in Europe, our largest market, as well as inventory replenishment by distributors. With our improved in-stock levels, supported by our global manufacturing footprint, we have improved our ability to service these markets. Turning to hosiery and underwear, as expected, this category was down 23% versus the prior year, mainly owing to the phase-out of the Under Armour business. Excluding this phase-out, our hosiery and underwear sales would have been up high single digits year over year, highlighting strong underlying growth as we continue to gain traction with other national account customers. And finally, a quick note regarding our full-year net sales for this category. If we exclude the impact of the Under Armour phase-out, sales for the hosiery and underwear category would have increased by mid-single digits year over year, in line with our full-year Activewear growth. Turning our focus to margins for the quarter, our gross margin was 30.8%, a 60 basis point improvement over the prior year, primarily due to lower raw material costs. As for SG&A, expenses were $78 million in the quarter compared to $88 million in the prior year. If we adjust for charges related to the proxy contest and leadership changes, which were meaningful in the fourth quarter of 2023, adjusted SG&A expenses were $78 million versus $82 million last year. Adjusted SG&A as a percentage of net sales was 9.5%, down 100 basis points, reflecting the positive benefit of the jobs credit introduced by Barbados earlier this year, partly offset by higher variable compensation expenses and higher distribution expenses. As we bring all of these elements together, and after adjusting for restructuring and acquisition-related items in both years, as well as non-recurring items in the prior year's quarter, we generated adjusted operating income of $175 million or 21.3%, up 160 basis points year over year. Briefly commenting again on the full year, adjusted operating margin was 21.3%, up 400 basis points versus the previous year, and in line with guidance. Moving on to taxes, as expected, the company's adjusted effective income tax rate for the quarter was 13.4% compared to 3.1% last year, reflecting the enactment of global minimum tax in Canada and Barbados earlier this year. After reflecting higher net financial and income tax expenses and our lower outstanding share base, we reported GAAP diluted EPS of $0.86 in the fourth quarter, down 3% versus the prior year, whereas adjusted diluted EPS was $0.83 versus $0.75 last year, which represents an 11% increase. Now commenting on the full year, after adjusting for non-recurring items and taking into account the significantly higher year-over-year income tax expenses due to the enactment of GMT, as well as the benefit of our lower outstanding share base, adjusted diluted EPS was up 17%, closing the year at $3, fully within the guidance range we had provided. Note that the net impact of the jobs credit and the higher tax rate related to the enactment of Barbados tax reform and GMT was $0.20 per share for the full year, implying that our year-over-year adjusted EPS growth rate would have been closer to 25% without these impacts. Now turning to cash flow and balance sheet items, looking at the full year, cash flow from operating activities totaled $501 million compared to $547 million in the prior year, with both years impacted by non-recurring items as mentioned earlier. After accounting for CapEx of $150 million and lower year-over-year proceeds from sale and leaseback activities and asset disposals, the company generated free cash flow of approximately $390 million for the full year, essentially in line with the prior year. This cash flow generation, along with our strong balance sheet, enabled us to deliver on our capital allocation priorities and return a record $889 million to shareholders, including dividends and share repurchases of about 18 million shares or 11% of our float in the year. And finally, even with the significant return of capital during 2024, we ended the year with net debt of about $1.6 billion on a leverage ratio of 1.9 times net debt to adjusted EBITDA, well within our target debt range of 1.5 to 2.5 times net debt to adjusted EBITDA. So, overall, in concluding on the results, we accomplished a great deal in 2024 by remaining focused on the execution of our GSG strategy against a somewhat mixed macroeconomic backdrop, which resulted in record revenues, strong operating margins, and putting us in an outstanding position to deliver on our capital allocation priorities, including share buybacks and a 10% increase in our dividend for 2025, that we were pleased to announce this morning. So this brings me to our strategy and outlook. So as Glenn highlighted earlier, we continue to be very pleased with our execution and progress on the three pillars of our GSG strategy. First, our new manufacturing complex in Bangladesh ramped up fully on track, supporting our growth expectations and further lowering our cost structure, and also providing additional diversification and flexibility in our global vertically integrated manufacturing platform. Moreover, on the innovation front, we are just beginning to tap into the largest innovation pipeline in the company's history, with more product launches to come in 2025, as showcased at the Impressions Trade Show last month, where we received great feedback. And lastly, with regards to ESG, we remain fully on track with our next-generation objectives. In this regard, as announced in January, we are pleased to have been included on the Dow Jones Best in Class North America Index for the twelfth consecutive year. More recently, Gildan Activewear Inc. was also included in the 2025 Sustainability Yearbook for the thirteenth consecutive year based on S&P Global's corporate sustainability assessment. So we know we have a strong foundation, a great competitive position, and the ability to return capital to our shareholders. That's why we're excited about the opportunities that lie ahead and about our ability to drive performance toward achieving our three-year objectives for the 2025 to 2027 period, which Glenn also touched on earlier. So now turning to our outlook for 2025, we expect the following

Glenn Chamandy: In a separate communication, we also announced today executive leadership nominations and a CFO transition as part of the multiyear succession planning process, which ensures, in our view, strong continuity as the company drives forward with its Gildan Activewear Inc. sustainable growth strategy. First, Chuck Ward, who is currently President of Sales, Marketing, and Distribution, has been appointed to a newly created role of Executive Vice President and Chief Operating Officer, effective March 1, 2025, and will continue to report to me. As most of you know, Chuck joined Gildan Activewear Inc. in 2011 through the acquisition of Golto, and over the years, he has held several senior roles at Gildan Activewear Inc., acquiring extensive experience which includes leading yarn spinning operations, overseeing supply chain, sales, marketing, distribution, while gaining experience in manufacturing. Separately, after almost ten years in the EVP Chief Financial and Administration role, Rhodri Harries has informed the board of his intentions to retire on January 1, 2026. We also announced that Luca Barelli, who is currently the CFO of Sales, Marketing, and Distribution, will succeed him as Executive Vice President, Chief Financial Officer, assuming his new role responsibilities on March 1, 2025. In order to facilitate a smooth transition, and over the full ten months, Rhodri will retain the Chief Administration Officer function until his retirement. Luca joined Gildan Activewear Inc. in 2012 and has held various roles in financial planning, internal audit, enterprise risk management, before being promoted to his current role as CFO of Sales, Marketing, and Distribution. I would like to express my deep appreciation to Rhodri, who has guided our financial performance over the last ten years. Since 2015, he has been an invaluable partner to me and our team. And though he will still be working together through 2025, I sincerely wish him well in retirement next year. I want to thank him for the successful contribution to our success. I'm also happy to welcome Chuck and Luca to their new roles and congratulate them both. These appointments are a testament to our bench strength and the effectiveness of our multiyear succession planning process. They are all outstanding leaders, and I firmly believe they are both well-positioned to step into their roles and continue driving our GSG strategy and further drive and enhance long-term value for our shareholders. This concludes our prepared remarks this morning, and I'll turn the call over to Jessy.

Jessy Hayem: Thanks, Glenn. This concludes our prepared remarks. And now we'll begin taking your questions. As usual, before moving to the Q&A session, I'd like to remind you to limit your questions to two. We will circle back for a second round if time permits. Sarah, please begin the Q&A session.

Operator: Thank you. Your first question comes from Paul Lejuez with Citi. Your line is open.

Brandon Sheetham: Hey, everyone. This is Brandon Sheetham on for Paul. And, Rhodri, congratulations on the retirement. I just wanted to dig in real quick on your expectations in the first quarter for Activewear and hosiery and underwear. You know, specifically, if you could quantify what you're expecting because Activewear has its easiest comparison for the year in the first quarter. So how should we think about Q1 versus the rest of the year in that context? And, you know, was there any pull forward that may have helped Q4 but potentially hurt Q1?

Rhodri Harries: Morning, Brandon. So if you look at the first quarter of 2025 and we look at how the business is running, I think I would say we feel very pleased about where we are. Obviously, we had a strong quarter in the fourth quarter, and Activewear delivered very well. And even on the underwear side, we also saw some good strength. And as we move into the first quarter of 2025, we continue to see, I would say, good strengths really across the board on the Activewear side. So if you look at our guide for the quarter, it's up low single digits. Excluding the Under Armour impact, which of 2025, it's the last quarter we'll see this, we should be up mid-single digits. If you look at Activewear overall, growth will be across the board. We will see market share gains across the channels, across the product category. All the things that we've been talking about with respect to new products, innovation, strength in national accounts, international, all of these things will be playing through as we move into the first quarter. So we do see good growth on the Activewear side. It was particularly strong in the fourth quarter, up low double digits, so it will moderate back from that. But it is at the first quarter of the year as you think about that. And then on the innerwear side, effectively, we will see, again, the impact of the phase-out of Under Armour, which will impact our numbers there. But look, overall, I think we feel good about the first quarter. And we really feel good about how the whole year looks with revenue growth up mid-single digit. There is a fair amount of uncertainty out there. I think our business is running very well as we look at all of the key growth drivers that Glenn laid out.

Brandon Sheetham: Got it. Appreciate that. And then gross margin in the fourth quarter, can you kind of unpack some of the puts and takes there? I understand that, you know, product cost was a tailwind. But, you know, did you see any pricing pressure at all? Like, I think you all have mentioned there were being aggressive in certain segments to try and gain market share. So I'm wondering if that had any impact. And then, you know, how are you thinking about gross margin for the rest of 2025? You know, could we see any tailwinds there? Thanks.

Rhodri Harries: Yeah. If you look at gross margin in the fourth quarter, we came in at 30.8%. We were up 60 basis points. SG&A was down, and so in total, operating margin up 160 basis points, 21.3%, running at a high level. And we came very much in line with our full-year guide, which was 21.3%. So look, I think from a margin perspective, we're very pleased with how things are effectively playing out. If you look at the gross margin that we saw, you know, we've now firmly moved above the 30% level, and, you know, we'll see that as we move through 2025. So I would say we're very pleased with the evolution of gross margin. That is being driven by everything that we're doing as we look at our, you know, our overall business and all of the things that we're controlling. If you think about the ramp-up of Bangladesh, you think about the modernization of our yarn facilities, optimization of Central America, I mean, it's all playing through. And so I would say we were pleased with what we saw overall in the fourth quarter. And again, as we move into the first quarter, we will continue to see the benefits of all of these strategies that we're unfolding. We do see a gross margin uplift in Q1 2025. On the SG&A side, we should see a bit of improvement. It's not going to be quite as large as we've seen in prior quarters because in prior quarters, we did see the roll-in of the Barbados tax credit. And we will see that in the first quarter of this year. We have other things that we're doing as well. We're investing in distribution to really optimize our supply chain. We effectively bring on new products and really focus on making sure that our customers are very much kept well in stock. And so we've got a few things going on, but overall, I would say we're pleased with the progression of our operating margin again, gross margin, SG&A, and then full year, I think we're very pleased to be able to guide to the 50 basis points up from the 21.3% driven by strong gross margin throughout the quarters. And SG&A well under control.

Brandon Sheetham: Got it. Appreciate it. Thanks, and good luck.

Operator: Thank you. The next question comes from Jay Sole of UBS.

Jay Sole: Great. Thank you so much. And, Rhodri, congratulations on a great ride at your retirement. I wanted to ask about the new product innovation, Glenn, you mentioned it in your prepared remarks. Just talk about how much it's impacting the business, you know, what percentage of sales these new products are impacting, and how big do you think you can get over the next year or two? Thank you.

Glenn Chamandy: Well, I mean, look at it. It's early days still, so we've seen continued performance. You know, our soft cotton technology is really the largest innovation because that covers all of our basic categories. And, you know, that category has been declining over the last couple of years. And we've seen, obviously, you know, Q2, it was up slightly, Q3, it was up slightly, and Q4, we saw, you know, double-digit type growth. So, you know, it takes time to spread the word. I mean, you know, we were in the impression show in January, you know, continuing to market our products. And, you know, it takes time to even cycle inventory through our system. So these things are, I think, you know, still got a lot of legs, let's say, for example, because the product is great. I mean, the reality is that when you lay our new soft cotton technology on our basics, you can't really tell the difference between those products and the fashion products out there in the market. So that gives us really what we think in terms of what we're priced, a very competitive advantage. And look, there's other growth drivers. Comfort Colors, for example, I mean, the brand is up 40% in 2024. It was up in 2023, and we think it's going to be up, you know, significantly in 2025. And that's a brand that's really going after the higher-end category. Right? So its price point is a little bit higher, but it's really doing well. And we're going to continue to take share as we go forward. We have our license to our Champion brand, which we've licensed now, which will roll out in 2025. You know, we see, you know, the great thing is that we have competitors exiting the market. You know, Delta closed down last year with Fruit of the Loom exiting the printwear market. Our international sales have come back mainly because, you know, we've now got product availability through our manufacturing facility in Bangladesh, which is fully ramped up as we planned. And we've fully ramped up by Q2. We're taking more space in underwear with new products. And we have meaningful new Activewear programs of tees and fleece, you know, as we move into 2025. And I would say that maybe to sort of summarize really our 2025 guide, when you look at, you know, our sales of mid-single digits, I would say that for three-quarters of the revenue growth that we have in 2025 is coming from new programs. And I think that we've got a really great slate of new programs for next year that are really solidifying, you know, what we feel comfortable with our growth trajectory. You know, we've taken a really cautious approach still to the market. We think it's flat to low single digits up. And, you know, basically, you know, if you look at where we're positioning, if, you know, we continue to take additional share more than we assume or if the market is slightly a little bit more robust, you know, that could be potentially all positive to our forecast as we move into 2025.

Jay Sole: Glenn, that's really interesting. Maybe if we can just talk about Champion for one more second because this is a brand that, you know, has a long history and at one point, it's, you know, lots of over a billion dollars of sales probably. I mean, what's your ambition with that? What do you see as possible with that brand going forward, you know, now that you have it?

Glenn Chamandy: Well, look, it's still a very strong brand, and it's going to be continuing to be sold in different channels of distribution, but we have the Champion brand for the printwear channel. And, you know, look at our products are going to, you know, schools and jog runs and things like that. So look, it's going to be a good part of our lineup. It's going to give us a niche in an area and product category to help us continue to grow our market share. So if you look at our whole branding, we got Gildan Activewear Inc., which is, you know, sort of our bread and butter. We've got our Comfort Colors brand, which is sort of, you know, a unique position because it's all garment dyed. We got our American Apparel brand. And now we got our Champion brand, which is a little bit more athletic and goes to a more collegiate type approach. So, you know, having a multi-tier brand strategy, none of our brands compete with each other. They're all uniquely different and allow us to, you know, to gain market share as we go forward. I think that's really the key. They're well-positioned, we think that we're going to continue to grow and take share, and we're well-positioned because we've got three-quarters of our sales guidance really in new programs, Champion being one of them.

Jay Sole: Got it. Great. Thank you so much.

Operator: Our next question comes from Mark Petrie with CIBC. Your line is open.

Mark Petrie: Hey. Good morning, and I'll echo my congratulations, Rhodri, Luca, and Chuck. I wanted to ask about the product innovation and specifically the sort of SKU levels in the overall business. I know this was one of the key areas of focus of back to basics and SKU rationalization. And just wondering if you could sort of put into context the SKU levels of today versus, you know, I don't know, several years ago, but also just, like, two to three years ago, when maybe you were at sort of a trough level on SKUs.

Glenn Chamandy: Well, the great thing about what we're doing is we're just improving on the existing SKUs that are in our line. So all of our soft cotton technology, all of our fleece, all of the innovation that we have is really being applied to the existing product line. So our SKUs really haven't changed. I mean, obviously, you know, when we bring in new brands, we'll have a little bit further expansion of our SKUs with Champion, etcetera. And we're always adding a little bit onto our base as we're looking at new opportunities, but we're very mindful of managing, you know, our SKU base as we go forward.

Mark Petrie: Thanks for that. And if I could just have a quick follow-up, just the pace of share buyback looked like it slowed in the last couple of months. Is that the sort of pace we should expect through the balance of the term on the current program? Or what are your sort of criteria in making the short-term decisions on the pace of buyback?

Rhodri Harries: Mark, so if you look at the buyback in 2024, yeah, we were very pleased with our ability to buy back shares. We bought back 11% of the float. We returned $889 million of capital to shareholders. So I think it was a great year, able to increase the dividend at the end of the year. But from a buyback perspective, it was a little bit unique in that effect as we are now, you know, well placed, with our GSG strategy and we're, you know, all the things that we've been planning over the last few years are unfolding very, very well. We were able to effectively take our leverage target up, and now we have the range of 1.5 to 2.5 times. And we're able to benefit from that in 2024 when we were buying back. But we were buying back for the most part. We try to buy it back at a consistent rate for the target for the full year that we have. So we knew that we had a, I would say, strong target for 2024, especially after May. And so we bought at higher rates. But now as we move into 2025, effectively, we'll move back to, I would say, more of a normal type of buyback level that would have been seen in prior years. So for us, that generally runs around 5 to 6% for the full year. And you will see that we generally try to do that on a fairly consistent basis as we move through the year. So effectively, 2024 was a little bit unique, but in 2025 back to, I would say, a historical cadence and a very consistent approach as we go month to month.

Mark Petrie: That's very clear, Rhodri. Thanks a lot. All the best.

Rhodri Harries: Thank you.

Operator: The next question comes from Brian Morrison of TD Cowen. Your line is open.

Brian Morrison: Oh, good morning. Thanks very much. So first question for Chuck and for Rhodri. You're seeing, obviously, the competition is facing some challenges. Chuck, maybe just go into detail on the POS that you achieved in the quarter relative to the industry. And then, Rhodri, within that guidance, you did a good job of overlaying why you're going to get 50 basis points of margin expansion. But I didn't hear you talk about pricing. And the gross margin in Q4 does look a little bit light relative to expectations. I'm wondering if you can specifically just comment on the pricing environment.

Chuck Ward: Okay. Thank you, Brian. I'll start with the POS and then give it to Rhodri. I think, you know, as Glenn mentioned, we saw positive POS for the fourth quarter. It was a strong quarter. We saw it really across the channels and across the categories, which was good from that perspective. On the basic side, Glenn mentioned we were up double digits, and I think that is coming through from one, you know, share gains as some of the competitors he'd mentioned have left the market, but also really our innovation that Glenn talked about with our soft cotton technology. I think it's really getting through the inventory at this point and getting into consumers' hands, and I think it's driving the POS. Again, he talked about, you know, the ring-spun category, we continue to be up in double digits there as well and driven across our ring-spun platform, but including Comfort Colors, which was up 40%. And so we continue to gain share in that area as well. So, you know, we were positive across all channels. I think from a market perspective, we continue to think the market faced some challenges, being, you know, flat to down and us up and taking share. So that's the way. And even in the international markets, Glenn mentioned it. We were up for Q4 and, you know, mid-single digits in international, with Europe strong in high single digits, driven continue to be driven by the continent, as well. So again, across the board, we continue to take share.

Rhodri Harries: Okay. So moving to pricing. If you look at where we were from a price perspective in the fourth quarter, we're generally pretty stable, I would say. And our pricing has been pretty stable as we've moved through 2024 and very definitely as we move into 2025. I mean, a little bit of tactical pricing here and there, a little bit of probably a little bit of also impact of FX because obviously, if you look at international markets, it's been a bit of weakening off of currencies. But, you know, I would say price for us is very stable. And as we move into 2025, I think we feel very good about price. So if you look at, you know, what's driving the business, it's volume growth ultimately. Right? It's on the price side, we have big gaps with our competitors. And if you look at things like cotton, people ask us about cotton. Yes. Cotton has come down as has given a bit of a tailwind. You've got inflation elsewhere. And so, actually, I think one of the unique things is we start 2025 is the stability in pricing that we see as we move through the first quarter and as we forecast for the full year.

Brian Morrison: Okay. Thank you for that. And second question maybe for Glenn. Can you just remind me how much capital you've invested into expanding and modernizing your yarn facilities in the last few years? And elaborate on the larger national account opportunities that you're winning contracts with. Is this for mass merchants being the end market?

Glenn Chamandy: Well, as far as the yarn spinning is concerned, look, we've, you know, we've spent different phases of our yarn modernization. You know, obviously, we were in the yarn spinning. We bought Frontier, and I would say over the last couple of years, you know, we've put in just north of $100 million in modernizing the Frontier facilities, which, you know, we're still in completing, I would say, as we move through 2025, there's some things still to be done. But after 2025, I think they would be fully complete on all of our yarn modernization.

Brian Morrison: If the opportunities like Oh, yeah. Yeah. This is not not count. Where is it going?

Glenn Chamandy: Well, look at I mean, look at the look, there's the market of the screen printers that service really the large mass market retailers, the Walmart, T.J. Maxx, Kohl's, etcetera. Really, those are the type of large screen printers. And those are particularly, you know, a lot of the accounts that Delta serviced in the past. So, you know, we've been able to, you know, which we had very good relationships with a lot of those customers, and that's continuing us to allow us to, you know, obviously take additional market share as APEX exits the market. So look, we're in a good position. We feel that and it's not just from Delta's perspective, but we think to look at the overall broader competitive landscape is weakening. And, you know, Gildan Activewear Inc. continues to make investments in our yarn spinning and our Bangladesh. Everything that we're doing, you know, we're investing, and, you know, it's, you know, history gives you if you look over a period of time, I would say today, Gildan Activewear Inc. is much more positioned, much more has much more of a competitive advantage in our positioning today than we did two, three, four years ago, and then it's continuing to improve. So we're excited about where we are. We've got everything in place. We've got good momentum. And really, the I would leave you with is that we've got good visibility as we've got a lot of new programs. And, you know, the upside for us is really, you know, will the market participate? Because that's really I think they've been one disappointment is that the market's been soft over the last 24 months. There's still a little bit of uncertainty, but I mean, you know, interest rates come down. Hopefully, we'll see the market continue to shine and be an opportunity for us.

Brian Morrison: Very good. Congratulations.

Operator: The next question comes from Martin Landry with Stifel. Your line is open.

Martin Landry: Hi. Good morning. Congratulations, Chuck, on your promotion. And Rhodri, congratulations on your retirement. It's been great working with you for the last years. My first question, Glenn, I want to try to understand where you're at in terms of capacity. So could you tell us what production capacity utilization you're assuming in your guidance for 2025?

Glenn Chamandy: Well, I would say to you, look, we've got, you know, ample capacity. We're not running full. Like we said in the past, you know, we have enough capacity in-house today really to support our guidance for, you know, 2025, 2026, and 2027. And then as we in our capital investments, you know, we included, you know, building out additional capacity to support 2028. So maybe that's just a way to look at it. So and you can quantify that in our mid-single digits in terms of the revenue.

Martin Landry: Okay. So you have the capacity established to get to 2027 revenues.

Glenn Chamandy: Yeah.

Martin Landry: Okay. And is there a margin differential between the different channels that you're selling? You know, it seems like retail is driving a little bit more growth this year than printwear maybe. And is retail a little bit margin diluted? Would that be fair to say?

Glenn Chamandy: No. Look. We try and price our products pretty consistently across the board. So, you know, we always say that we have a consistent margin. There's other areas within profile, you know, fleece versus tees, for example. But if we sell tees across the board, the margin profile is pretty much the same. But we have certain product categories that, you know, have a little bit better margin profile. But overall, regardless of the channel distribution, we're pretty consistent with where we price to market.

Rhodri Harries: Martin, just to add, we did that when we drove back to basics. So the margin percentages are pretty close across the board. Of course, you have different price points. Right? If you look at the products, a fleece is a higher price point than tees, t-shirts. Comfort Colors is a very high-priced t-shirt product that is going very well. So you have different price points. But margins overall are, I would say, pretty well aligned and all driving that strong gross margin performance that we're seeing as we move through 2024 and into 2025.

Glenn Chamandy: Which makes us diagnostic of which channel is really growing.

Martin Landry: Okay. Cool. That's helpful. Thank you.

Operator: The next question comes from Stephen MacLeod with BMO Capital Markets. Your line is open.

Stephen MacLeod: Thank you. Good morning, guys. And congrats, Rhodri, on your retirement and Chuck on your promotion. Look forward to continuing to work with you, Chuck, and it's been great working with you, Rhodri. Appreciate it. Just a few questions here. Just wanted to dive a little bit deeper on capacity and get an update on kind of where you sit on Bangladesh. I think you had previously guided to, you know, the exit rate or run rate exiting 2024 at being 70%. I just wanted to get an update there as well as, you know, what your plans might be for incremental investment in kind of a Bangladesh Phase two.

Glenn Chamandy: Well, we're, you know, what we said previously is that we've accessed around 75%, which we did. We're continuing to ramp up as we speak and, you know, as we move through 2025. The plant is performing well. And what I mentioned earlier is that, you know, in our three-year guide in CapEx around 5%, that includes the build-out of additional capacity in Bangladesh.

Stephen MacLeod: Okay. That's great. And then do you expect to be 100% ramped up sort of, like, kind of Q1, Q2 period?

Glenn Chamandy: Yeah. But probably by the end of Q2, we'll pretty much be close to 100% ramp-up.

Stephen MacLeod: Okay. So all the additional capacity that we have, which I've mentioned earlier, Martin's question would be, you know, really coming out of Central America. So we got still additional Central America, but we're optimizing, you know, Bangladesh because that's where we produce all of our, you know, ring-spun t-shirts, which are, you know, obviously in high demand.

Rhodri Harries: Right. Okay. Maybe when then any dad Steven, sorry, on the on the because you're asking about Bangladesh and the and our capacity. We have all the infrastructure in place, right, for the expansion beyond the first phase that, again, we've done a great job ramping up. So I think that the one thing to keep in mind. From a CapEx perspective as we go forward. And as we think about additional CapEx to support, you know, the further outgrowth that Glenn was talking about. It will be very efficient spend because of everything that we've done today.

Stephen MacLeod: Okay. That's great. The incremental color. Thank you. And then just secondly, just with respect to some of the changes you've seen on a competitive landscape, but I guess more so on the customer landscape. You know, there was some distributor consolidation. I'm just wondering if you've seen any impacts on, kind of the industry or industry behavior in response to those moves.

Chuck Ward: Hi, Stephen. It's Chuck. I mean, I think obviously, over the years, we've seen a lot of consolidation in the distributor channel, and this was just a continuation of that as your point, SNS and Broader combined. You know, we are seeing a competitive landscape among the distributors, but, you know, net-net, we think it's positive for us overall, and we'll continue to be strong partners to the distributor channel and, you know, continue to drive sales through it. And so, again, I think it's just a continuance of what we've seen over the years.

Glenn Chamandy: And, you know, one of the I think the reality is that as we move forward, and the distributors have consolidated a little bit, we're going to also see consolidation of brands within the channel. And, you know, basically, we think we'll be the beneficiary of that because, you know, we're positioned as, you know, obviously, the global low-cost producer and have the significant competitive advantage over any of those other brands. So there are a lot of brands, and particularly, you know, more in the ring-spun category. I mean, you know, in the basics, you know, that market is pretty consolidated, but I think there's more consolidation to happen on the brand side. On the ring-spun category. So look, we're excited about our positioning. We think we're well-positioned to take share, and that's sort of embedded in our guidance as we move forward over the next few years.

Stephen MacLeod: Okay. That's great color. Thanks, guys. Appreciate it.

Operator: The next question comes from Vishal Shreedhar with National Bank. Your line is open.

Vishal Shreedhar: Hi. Thanks for taking my questions. Wanted to get your perspective on the acceleration of growth in international. Seems like momentum is building. You know, Q1 up 0.8 and now Q4 up 20%. Wondering where that's coming from specifically. I know you gave us some color, but is it predominantly the better fulfillment through Bangladesh, or is it the market recovery?

Chuck Ward: Hi, Vishal. Yes. I mean, I think there is some market recovery in there, but it's also largely our Bangladesh capacity and our ability to service the market. We've, you know, as we continue to supply that market, when you think about it, I think we've talked about this many times in the past, but our number one purchase criteria is availability. And we need to make sure the product's available for sale at the time it's needed, and we're doing that. We're in good stock levels there internationally and in North America. And I think that's continuing to drive sales. Also, you know, our innovation. I think our innovation is continuing to push sales there as well. As Glenn said, I think when you look at the innovative basic products, it's better than the others in the market. Seeing share gains, not only in North America but in the international market continuing to drive that. So a combination of product innovation and the supply coming out of Bangladesh.

Vishal Shreedhar: Through 2025, should we expect that cadence to improve even further? Or do you think you've hit run rate?

Rhodri Harries: If you look at 2025, and we do expect growth of the international markets as Chuck said we are very pleased about how we can service the products, the way things are unfolding. I would say though, if you look at our guide, we have been a little bit more conservative than what you've seen the last couple of quarters. So, you know, 20% growth, very strong. Overall in Q3, Q4. We're probably around 11% for the full year in the international in 2024. I would say in our guide, we've been a little bit more cautious because of just the broader macroeconomic environment. We'll see how it turns out. I would say we've tried to sort of play it at a level that does reflect that there's some uncertainty, and we're hoping that things will be better than that as we move through the year.

Vishal Shreedhar: Okay. And just a question on the market share gains. You know, Gildan Activewear Inc. is obviously a large supplier this year, a bit unusual given some of the capacity exits from your competitors. And how should we expect these market share gains to continue to unfold? I mean, at some level, gaining market share becomes more and more difficult. And with the industry generally continuing to perform tepidly, is there a concern there that these trends with the industry and Gildan Activewear Inc. may intersect?

Glenn Chamandy: Well, I would say that two things. One, you know, we still got a lot of runway. Right? Because if you look at as we look at the ring-spun category, you know, we're under-shared there, basically. You know, we have a much lower percentage of share in that category, and we're winning there from three fronts. Winning there because we have really good competitively priced ring-spun shirts equivalent to what's out in the market. Two, our Comfort Colors brand is in that category of, you know, more expensive shirts, and it's winning and taking out a lot of the dollars that would have been spent on traditional ring-spun shirts, and they're now buying our Comfort Colors, garment-dyed, nostalgic look, great product. All innovation that we have associated with that brand. And the third piece is we have our soft cotton technology where people can't really tell the difference between, you know, a ring-spun shirt and a heavyweight shirt. With the only nuance is that typically our basics traditionally and where all the volume is being sold is in the heavier weight category. And there actually is a trend now in the market for people to go from lighter weight to heavier weight shirts. So we're sort of in a really good spot because not only do we have all these heavyweight shirts which traditionally we sold, but now they're softer and feel better and they have the technology we've applied to them. So, you know, we think that we're really doing well. And, you know, we have other technologies that we think are going to continue to drive our market share as we go forward. So spending our energy on building innovation to support our sales, having the availability, making sure we got the availability in, you know, Rhodri touched on it earlier. You know, one of the things in see it a little bit of an expense in the Q1, but we're spending a lot of money now on technology. And we've, you know, we've put in systems for planning, our POS assumptions, our forecasting, we're looking at different systems for distribution to optimize our deliveries to our customers to get products there faster. You know, all these types of things that we're doing to really, you know, are sort of we've got everything in place. We're really looking at all these other areas where just to continue driving our competitive advantage and separating Gildan Activewear Inc. from the competitive landscape. So, you know, we're making the investments that we need to make, and I think that, you know, it's across the board. There's still lots of 2024, you know, to continue to grow. The one thing I would leave you with is that all the work that we've done about the market, and the size of the market and the potential growth in the market has always led to the market growth being in the mid-single digits, the growth in the market. Which we haven't seen over the last 24 months. So, you know, the great thing I think about where we're positioned, we have a lifestyle type product. You know, we think that the market will turn and if it does come back to growth, because we've got a very conservative, I think, outlook flat to low single digits, you know, over the next three years, for us, if we do see mid-single digit growth, you know, we will definitely have upside to what I think our market share because now it's just share, but we're not getting the growth portion of the opportunity. And I'll just leave you with is that as we move into 2025, again, you know, the new programs that I outlined before represent about three-quarters of our guide in terms of the top line. So we're very conservative. We hope that the market will be a little bit stronger. We will take a little bit of share. But I think we're well-positioned and we have a very conservative outlook and, you know, potentially could be some upside to 2025.

Vishal Shreedhar: Okay. Thank you for that. And congrats, Chuck and Rhodri.

Operator: Your final question comes from Chris Lee with Desjardins. Your line is open.

Chris Lee: Good morning, and thanks for squeezing me in. And let me add my congratulations to you, Rhodri and Chuck, very well deserved. I guess, apologize if you answered this already, but can you just comment on what you see in terms of the inventory levels for your customers, both in the wholesale distributor and the national accounts space? And also, are you seeing any sort of destocking or just more cautious just based on what's happening on the macro side? Thanks.

Chuck Ward: Sure, Chris. And I think overall, we feel good about inventories. They're well balanced across the channels. And so I think we're, you know, we're in good shape from that perspective. And, you know, we don't see major destocking on the horizon there. You know, you have different channels that may be a little more cautious on their inventory, but overall, I'd say inventories are well balanced, and we're not factoring in. I don't see a major destocking.

Chris Lee: Got it. Okay. And then just Glenn, just when you said about, like, 75% of your growth is going to come from new programs. I'm assuming you have really good line of sight to those programs. And then my question is, you know, as after you go through Q1 phasing out the UA contract, should we expect sort of consistent mid-single-digit sales growth sort of through the year or is some of the programs more in the back and second half so it's going to be a bit more bumpy through the year just in terms of the mid-single-digit sales growth?

Glenn Chamandy: I'll let Rhodri answer that question. But what I would say to you is look at what I mentioned also meaningful programs in tees and fleece. Obviously, the fleece programs, which are probably larger, a little bit larger than the tee programs, they're more in the back end because fleece is sort of, you know, Q3, Q4 story. But I'll let Rhodri answer the cadence of the sales guide.

Rhodri Harries: Yeah. Look, I think we are going to see a pretty consistent year. So first quarter, we are impacted by the Under Armour phase-out, but would be a mid-single digit ex that. And then as you look at the second quarter, the third quarter, and even into the fourth quarter. Fourth quarter, obviously, will be comping a good quarter or such. Strong quarter in the fourth quarter of 2024. So you'll see a little bit of that. But I would say, yeah, we feel good about the growth through the quarters which, again, will be supported by those new programs, by the market share gains, and then we'll see what the overall market looks like. But I think we're basically set up for a good year. And, again, I think we feel our competitive positioning is very good. Not only for what we control, but also what we see around us. And would say good solid quarters as we move through the year.

Chris Lee: Great. That's very clear. Thanks, and all the best.

Operator: Thank you. This concludes the question and answer session. I will turn the call back to Jessy Hayem for closing remarks.

Jessy Hayem: Thanks, Sarah. Once again, we'd like to thank everyone for joining us and attending our call today, and we really look forward to speaking with you soon. Have a wonderful day.

Operator: This concludes today's conference call. We thank you for joining. You may now disconnect.