Q1 2021 Gildan Activewear Inc Earnings Call
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Good day today's conference is scheduled to begin shortly be spending at the standby. Thank you for your patience again to the east country inches scheduled to begin shortly miss can be needs of standby. Thank you for your patience.
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Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the quarter, one 2021 Gilden Activewear earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask the question during the session.
And you don't need the press star one on your telephone please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to MS. Sophie ours. The are you.
B C VP Investor Relations. Please go ahead.
Thank you Rachel good afternoon, everyone and thank you for joining us earlier of and issued a press release announcing our earnings results for the first quarter 2021, We also issued our interim shareholder report containing management's discussion and analysis and consolidated financial statements. These documents won't.
We filed with the Canadian Securities and regulatory authorities and the U S Securities Commission and are available on the Companys corporate website.
I'm joined here today by Glenn from Andy, Our President and Chief Executive Officer, and Rod Harries, Our executive Vice President Chief financial and administrative officer.
In a moment, Rob will take you through the results for the quarter and of Q&A session. Before we begin. Please take note that certain statements included in this conference call May constitute forward looking statement with the.
On the meaning of the U S Private Securities Litigation Reform Act of 1995.
Forward looking statements involve unknown and known risks uncertainties and other factors, which could cause actual results to differ materially from the future results expressed or implied by such forward looking statements.
Refer you to the company's filings the U S Securities and Exchange Commission on Canadian Securities regulatory authorities.
The company's future results and with that I will turn the call over to Rod.
Thank you Sophie and good afternoon to all and thank you for joining the call.
We hope everyone is staying safe and keeping well.
Pleased with the company's first quarter performance, which reflected the strong start to 2021.
Our back the basic strategy is working and of supporting both our sales efforts on our profitability objectives.
Operationally our strategy is making our business less complex more cost effective and is helping us drive growth and more efficient use of capital.
Further we are encouraged to see reopening of continue the combined with the impact of the U S stimulus and the strong progress of the vaccine rolling the Rollouts of the U S. We are optimistic that these factors will continue to help of economic activity stay on a steady track of recovery.
And finally, given the company's positioning at the end of the quarter. We were pleased to announce in our press release earlier. This afternoon that our board approved the reinstatement of our quarterly cash dividend at the same range, where we left off prior to the temporary suspension of the dividend after the first quarter of last year.
The board's decision to reinstate the dividend payments reflects increased confidence from the strong performance from the quarter and the recovery so far together with the outlook for the company's future cash flow generation capabilities and the reduction of our debt leverage ratio, which I'll cover later.
Turning to the specifics of the quarter, we delivered net sales of $590 million up 28% compared to the prior year quarter with increases in both our activewear and hosiery and underwear sales categories when compared to the first quarter of 2019 overall sales were down approximately 5%.
The poor sales in the quarter totaled 485 million on were up 30% over last year, driven by strong double digit unit sales volume growth in both our on principles and retail channels of distribution.
Together with strong product mix, which more than offset lower average net selling prices and the principles.
The volume growth in the principals reflected the combined impact of year over year of Pos growth and net restocking by distributors, even though inventory levels in the channel remained significantly below 2019 of levels.
If we look at on principles tos compared to pre pandemic levels in the first quarter of 2019 was down on average in the range of 10% to 15%, which was in line with what we saw at the start of the quarter.
Moving to the whole debate underwear category, we generated sales of $105 million. The 21% increase was driven by the strength of our underwear sales with double digit volume growth over both the first quarter of 2020 in 2019.
Yeah.
Looking at gross margin for the quarter, we delivered strong performance, which in our view underscores the power of our back the basic strategy that is driving and is expected to continue to drive positive results going forward.
Our reported gross margin was 32% and adjusted gross margin was 31, 1% up 650 basis points over last year.
On gross margin performance in the quarter was enhanced by an $18 million. One time payment. We received in April from the USDA, even without the 300 basis point benefit gross margin was still strong at 28, 1% up 350 basis points over last year.
This onetime USDA benefit was received under the pandemic assistance per carton users or <unk> program and represents.
Essentially COVID-19 related government support provided to the domestic users of the U S cotton.
Excluding the tax benefit the year over year increase in gross margin was mainly due to the non recurrence of COVID-19 related charges incurred in the first quarter of 2020, lower raw material costs favorable product mix and the positive impact of our back of the basic strategy, partly offset by lower average net selling price.
Yeah.
With respect to SG&A, we kept our expenses for the quarter essentially flat compared to last year, despite generating higher sales.
SG&A expenses were approximately 73 million or 12, 4% of sales compared to approximately 74 million or 16, 1% of sales from the same quarter last year.
The year over year reduction, reflecting cost savings stemming from our back the basics initiatives.
Net by higher variable compensation expenses.
Adding this all up we generated operating income of $114 million compared to an operating loss of $92 million in the first quarter of 2020, which if you recall included a goodwill impairment charge of $94 million.
Adjusted operating income for the quarter was 110 million significantly above the $20 million and we generated last year.
The increase was driven by higher sales and adjusted gross margin and the impact of the nonrecurring of the 21 million trade accounts receivable impairment charge recorded in the first quarter of last year.
Consequently, we reported net earnings close to 99 million of <unk> 50 per diluted share on adjusted net earnings of 95 million of 48 per share.
Excluding the nine pack of benefit adjusted EPS for the quarter was 39 cents up significantly from adjusted EPS of <unk> from the first quarter of last year and 16 in the first quarter of 2019.
So overall, a very strong performance in the first quarter setting us on a good path for the year.
From a cash flow perspective, we generated free cash flow of $38 million in the quarter compared to last year, when we consumed $235 million of free cash flow.
The increase reflected higher operating earnings lower working capital impacts of lower Capex.
Free cash flow in the quarter also included a net cash impact of $30 million from insurance proceeds related to the hurricane damages from the sustained in November of last year, which.
Which is the timing impact related to the replacement of equipment.
The decrease in working capital was largely due to a lower inventory build in the quarter, which was driven in part of benefits of our back the basic strategy, including our SKU rationalization of distribution initiatives, which are allowing us to manage our inventories more efficiently.
At the same time, while our manufacturing ramp up following the disruption caused by the Hurricanes late last year has gone well, we're continuing to ramp back our capacity and stronger than anticipated sales in the first quarter resulted in a lower than planned increase in inventory levels in the quarter.
Consequently, we ended the quarter with inventories of $736 million slightly up from $728 million at the end of 2020 and down 38% compared to approximately $1 2 billion a year ago.
Given our free cash flow, we reduced our net debt position during the quarter to $542 million down from $577 million at the end of 2020.
Our available liquidity at quarter end remained at $1 6 billion, which was where we left off at the end of the year on.
Our external debt leverage ratio decreased to one times adjusted EBITDA down from three five times at the end of 2020.
However for debt covenant purposes, after reflecting adjustments, which exclude the impact of the second quarter of 2020, the company's net debt leverage ratio fell to one one times.
I'd like to highlight that as of April 5th we are no longer required to comply with the restrictions on provisions established in June of last year, when we amended our loan agreement to obtain temporary COVID-19 related covenant relief.
Further on April 20th we repaid the $400 million two year term loan, which was due in 2022, which we secured last year as a precautionary COVID-19 measure.
Finally, as highlighted previously given the strength of our recovery. Thus far we're very pleased to announce this quarter that we of reinstating our dividend at its pre pandemic level.
Regarding other return of capital considerations, we expect that our board will assess the potential reinstatement of our share repurchase program. When we gain further visibility on the COVID-19 recovery outlook, one of the company's debt leverage ratio falls well within its historical target range.
This sums up the key highlights of our results for the first quarter.
And before we open it up for questions. Let me just touch upon the sell through trends that we're seeing currently.
As we move from the first quarter into the second quarter overall on principles Pos is tracking slightly better than during the first quarter down approximately 10% compared to pre pandemic 2019 levels.
In retail channel our sales in all product product categories are tracking above prior year levels.
Although we are encouraged by these trends we are monitoring other broader market dynamics that could affect the pace of the overall recovery.
And that's driven by large gatherings that have historically been a key driver of our principles business have not yet restarted.
And although real things continue and the pace of vaccinations in the U S has accelerated nicely, we cannot predict with accuracy when large gatherings will fully come back.
Further as I'm sure. Many of you are hearing supply chains are being impacted by labor shortages in the U S affecting certain industries, including the entrepreneurs.
And raw material supply is also developing and the impact of backlogs and transportation related issues are factors that we are monitoring.
Consequently, we remain cautious in the near term, particularly with respect to these global factors.
However, as it relates to areas, we have executed on and continue to drive including our back of the basic strategy. We are extremely pleased with progress and are confident that the steps taken to accelerate our strategy last year and the benefits that we're seeing thus far are positioning us well to take advantage of market share opportunities deliver on our profitability Targa.
And create shareholder value over the long term and with that I'll turn it back to Sylvia.
Thank you Rod.
That concludes our formal remarks before moving to the Q&A I ask that you limit the number of questions to start.
Circle back for a second round of questions. If time permits I will now turn the call over back to the operator for the question and answers.
Rachel.
Thank you Sophie and again as a reminder, the asked the question you will need the press star and the number one on your telephone again, just press star and the number one on your Tallis on line and so we draw. Your question just press the pound key the standby, while we compile the Q&A roster.
Okay.
Our first question comes from the line of Paul Lewis from Citi. Sir Your line is open.
Hey, everyone. This is Brandon Cheatham on for Paul.
Thanks for taking my question I was just wondering you know how do you feel about your inventory position now I think last time, we spoke of.
Manufacturing was outpacing the U S. So I'm just kind of curious about the dynamics there.
Sales come back stronger than expected or where there are some impacts from some of the things you mentioned on the supply chain sides of the.
Constricted things there.
Hello This is Glenn.
Of our inventory position is.
You know on shrink size.
Slower than we originally anticipated obviously.
Mainly because of sales were stronger than we anticipated in Q1.
However, we're still running on a good run rate on <unk>.
Relative to 19 levels on.
Our current run rate is around 90% of <unk>.
Ran at 19.
The levels that we're going to continue to ramp up.
It's not it's been challenging on me to say the least because of the things of that Bob mentioned in his commentary.
We're well positioned.
As we continue to execute on our activation strategy.
We're focusing on is obviously less profit less skus less complexity. So it gives us a very good opportunity to zero.
So we should be able to operating debt.
Inventories.
The lower than historical levels.
Proof of our surface as we go forward. So we're non back up to full capacity.
And that will happen as we move through the end of the year.
I think were critical to around 90%.
19 months.
The other.
And then on the on the Labor shortages you know ultimately do you think it's higher wages drive people back or are people just not there and on whats your outlook on that abating.
Yeah.
Is it kind of.
The spend the money from the stimulus package really Josh the Julien that's true.
So.
Yes.
We've taken a range of smaller facilities.
The.
<unk>.
I think that's sort of what.
Yeah, I think if you look at it is really its the wages is effectively the stimulus.
$300 of weak right, we're seeing out there, but it's also COVID-19 as well.
Also I think.
There's a number of factors.
People coming back into the workforce.
Are being impacted with the with the number of impressions number of stresses and so I think ultimately the <unk>.
<unk> will work our way through that and we'll work away from COVID-19 and so ultimately that will abate, but it will take a bit of time and.
We do see these pressures over the next number of months.
And this is mainly on our U S operations.
In terms of our operations are running well.
Well, we have apple people other than the supplies understands that.
This is on a people issue in Central America.
Got it.
Thanks, a lot of good luck.
Thank you our net.
Thank you. Our next question comes from the line of Ken.
Ken from RBC capital Sir Your line is open.
Great. Thanks, and good afternoon in your release you noted some.
Distributor restocking can you maybe give us some context on you know we're in the restocking cycle you're at is it broad based.
Is it just people kind of.
Testing the waters, just some context on where we are in the cycle.
Well typically the inventories on our distributors carry forward inventories.
Normally the increase their inventories.
Does it go into the season.
On the put things in context of our inventories of our plus 40% below levels of 2019, even though we have some restocking. So they were very low at the end of Q4.
And there are still significantly below where we were of 2019 levels.
And I feel from there.
The lower than let's say the normal really normal level of investment there should be at this time of the year. So the.
Starting in that we did have.
The relatively.
Sort of Overstocking of Stockton as required to support the seasonality of the business in Q2.
And then just a quick follow up on that I guess, what our distributors I guess kind of wording of the improved visibility or is it maybe they'll just do a bit more just in time going forward. The mandate was it looks like its picking up I'm just trying to understand if you know it'll be more of a gradual rebuild this time versus some of those large restocking quarters, we've historically seen.
Well I mean look it's hardly sales are strong the starting to improve the one thing we're starting to see is we're starting to see.
Basis basics products come back on our sales have been driven really by fashion T shirts, and fleece, which are actually positive.
And where we really see the drag so far on our minus 15 of non minus 10.
More on the basic side and we're starting to see some.
Those are larger orders typically MCC of floating around and we're starting to see some of that come back. So we think as we go through this market potential in up sales will continue to improve.
We're kind of on.
<unk> inventories were going to say.
Because of the accident.
Q2, and the move into Q3 and Q4.
Yeah.
Great. Thanks very much.
Thank you. Our next question comes from the line of Vishal <unk> from National Bank. Sir Your line is open.
Hi, Thanks for taking my question.
I I guess already thinks of that is in your remarks.
Broad based on inflation.
Mhm the.
Topical of wondering how much latitude kill them thinks it has to increase price if need be and did the kill didn't take any pricing of promo action in the quarter.
Well, we're still taking our price leadership position on the market so the pricing.
As we've been pricing from the last.
The three four quarters.
And yes.
The industry is.
It will take the price increases.
That's also occurring as we leverage our back of the basic strategy of lowering our cost structure.
Manufacturing costs. These are not split inflation are coming down.
As we streamline our operations of our SG&A is.
Is this kind of as a percentage of sales. So the overall, what we're targeting the driver ourselves to what we think is the 18% operating margins.
We will do that the combination of.
We'll see how we get there, but we have room, we think to continue to have a price aggressive.
The offset some of the inflationary cost.
Manufacturing cost savings and the rest of leverage to still achieve our goals as we move into the future, but we also have the opportunity to raise price.
It's required.
We are of a lot of flexibility.
The balance as of this year into next year.
Okay and given that.
There's a lot of growing the core.
Of wholesalers to restock and given that Q2 Pos day.
Tracking God down about 10%.
The subtext, there that children's trend should exceed the Pos in the interim as these wholesalers, we stock keeping the optimism about the large gatherings.
Coming back of call it say in a few months.
Well I don't think that.
We're going to have on opportunities.
The restock inventories in the channel.
Thanks, Ed.
One of them already levels.
It will be pretty similar agenda. This quarter as you are getting of the quarter.
I said before we're running out of range.
90% of 2019 levels from Needham.
He.
Worked it that way and so we're tight on capacity as we move into Q2.
If you look at where we are now on April plus the supply time of thanks to produce goods of in the quarters go on.
Pretty quick right. So we have pretty good visibility on where we are.
On the continued to ramp up as we book through the year and I think that's the more important thing is that we're on.
Comfortable of loose in the market.
We're pretty much tracking in line with the <unk>.
With the market in terms of where capacity currently is and where the market is so that's a good day.
And as we move into Q3, we should be able to continue to take.
Opportunity as the market recovers and the capacity continues to increase on that sort of revenue.
Most of the year.
Thank you.
Yeah.
Thank you. Our next question comes from the line of Chris Lee from data readout on Securities. Sir Your line is open.
Good afternoon, just maybe first question on the gross margin.
Obviously very strong in the quarter can you maybe talk about the gross margin outlook for the remainder of the year.
Do you expect to build on that margin improvement from from Q1.
Yeah look on gross margin, which was very strong if you look at the 31 one of if you took the if you exclude the pass through 'twenty. One I would say, we're very pleased with the margin I think as we go forward through the year there'll be some puts and takes right. So effectively we probably see a little bit stronger mix coming through as we can.
Continue to.
Push forward with the overall recovery.
But at the same time as we as we noted right. It is an environment, where there are some inflationary pressures.
As we get to the back end of the year, we'll have to see what we do with the raw material cost and so you know there are a little some.
Some things that will drive margin up there are some things that we have to work with as well. So I think overall I think what we'd like to do probably as try to hold it.
At levels, which are which are close to where we are Q1.
As we move through the year, we'll see.
Okay. That's very helpful to us and another question I know this is a very tough one to answer because nothing has been decided yet but the concept of the global minimum tax and very topical. These days if it does get implemented it could potentially cause tax rates to rise across the board of I.
I guess my question is you know what of your thoughts on this and what levers. The skill then has to mitigate the impact if it does get implemented.
Yeah.
Well I would say, Chris I think it's very early in the overall discussion of the.
If you look at a minimum tax from a global perspective, I mean, we're like everybody else, we're just monitoring what's going on.
We'll see how that unfolds right now we don't see any significant impact based on what were aware of both.
Bold to monitor the situation as we go forward.
Great. Thanks for the answers and best of luck.
Thank you. Our next question comes from the line of Mark Petrie from CIBC, Sir Your line is open.
Yeah.
Hi, good afternoon. Thanks.
Sorry, Glenn could you just clarify your comment with regards to distributor levels I wasn't clear to me, what youre, referring to but something was about 40% below levels seen previously could you just clarify.
Yes.
On the inventories in the channel of our roughly 40% below.
19 levels I'm pretty much the same flow 20 levels too because the book between 19 and 20.
Okay, Thanks and.
I guess just broadly.
You're not seeing large scale events.
Resume at least just quite yet, but can you just sort of walk us through what youre seeing or hearing with regard to other end markets, including some of the pockets of demand or markets that accelerated or developed through the pandemic.
Well I think both of those markets of alternative.
The online.
The casual and all of them.
No.
These are all of those things that the driven share I think during the pandemic.
Our continuing to drive share I think as we see pickup right now from Q1 into Q2, I think it's a little bit more of the recovery of gatherings of mainly if you look at the Kentucky Derby.
The 3000 beautiful debt.
The people, we're seeing some baseball games with the large crowd so.
Definitely the things are starting to open up.
I think that when the continued to improve as we move through the balance of the year.
I don't see the other part of that business going away I think thats the net net will be.
Discussed last quarters, I think that the overall market.
He is going to expand our universe is going to expense.
As we really have a full recovery of because you don't see the.
We've created new opportunities two channels of <unk>.
Sales.
Online selling itself.
Hopefully net asset recovery.
As you know through the market.
Our opportunity.
Okay and then just the follow up I think it was Christmas question with regards to the gross margin rod. Thanks for the comments for the expectations for for for the balance of 2021, I'm, just thinking back to sort of your 30% gross margin target.
Know that you are sort of pivoting to focus people more on the on the 18% operating margin target, but nonetheless.
Should we think about upside from that gross margin as revenue rebuilds to 2019 type level or what is the lever to see further upside from gross margin today.
Well I think.
The tightened you've said, it's actually Mark and we're really focused on that 80% right. So I think.
That's what where we're really driving to deliver with the back of the basic strategy and I think we get back to 2019 sales levels.
We like our chances to be able to deliver the 80%. So I think as we.
We as we go forward, we will see it.
Income from gross margin, we will also see income from SG&A, but that's what we're really working effectively to to deliver.
And it also goes it's also combined together with the growth in the volume all place together so.
I think look I think we're happy with the progress, we're making with our with our overall strategy I mean, if you look at what back to basics is delivering force.
Both in gross margin and SG&A I mean, we really are seeing very strong benefit.
We will see it I think in both areas as we go forward and that will flow through the operating margins and again, we get back to 2019 levels. I think we feel very good about hitting that 18% plus we're getting leverage out of our topline growth as well.
Of the point of yours.
We're focused more on all of those factors play as well as make sure that we have top line growth.
And we can leverage on low cost manufacturing of these cost savings to achieve our.
Operating margins on gross sales.
That's really what the tax basis is all about.
Yeah understood I appreciate all the comments on our wish all of the best.
Thank you.
Thank you. Our next question comes from the line of Jay sole from UBS. Sir Your line is open.
Great. Thank you so much.
The follow up on some of the margin questions talking about SG&A.
As of yesterday dollars were down pretty significantly versus not just once you of 'twenty, but also once you of 19 as against the second quarter. Obviously, there is the comparisons get a little bit different as of yesterday. It was down so much last year, but how should we think about the SG&A dollars in Q2 versus Q2 of 19, I mean can we really see them down as much as they were in terms of just total dollars.
Versus 2019 or is there going to be more of a kind of bounce back sort of the dollar should be a lot closer to the 2019 level. Thank you.
Well look I mean, I think if you look at the 2019, we haven't really seen the benefit of back to basics really flowing through on the SG&A side. So.
So if you do look at where were running in the first quarter.
I think as we go into Q2, we'll see a little bit of some increase with respect to.
Distribution costs, but look we have the SG&A well under control.
As we work towards that that 12% target so the delta, which you've seen between two.
2019, and where we currently are in in the first quarter I mean, that's that's all back to basics. It's all come out of the system I think we've done a great job on the SG&A side.
To reduce it and so again, we feel very good about our ability to.
To deliver on our target this year.
Got it okay. Thank you so much.
Thank you. Our next question comes from the line of Luke Hannan from Canaccord, Sir Your line is open.
Yeah.
Yes, good afternoon.
First one for me is on the competitive environment Glenn.
Glenn I know you touched on it earlier you're still.
Sort of the price leader in the Incredibles.
And for animals channel, but I'm curious to see are you seeing anything.
From your customers in terms of how they are reacting or are they choosing to compete on price as well or what are you seeing there.
Well look we're continuing to fix the price leadership.
Of course.
We are on the I think the low price of the market.
But at the same time look at the Wii.
There is also other suppliers.
The bill ability of the product in general.
All of the inventory of the marketplaces.
Amongst all of the users of our supplier so.
Who are skeptical too.
Two more questions.
Questions within the title of inventories. So we're taking a strategy of everyday low price, we're going to continue to do it we're seeing market share of growth.
Even though we're down the 10 to 15 of our downturn now.
Now from statistics within the market that we're actually gaining share so I think thats sort of of our strategy.
The consistent approach.
Sure.
The focus on the top line growth part of the market share.
Okay.
And one more from me just you've all seen the headlines on how.
On the on how COVID-19 is playing out overseas. So I am curious to know on on the build out of Bangladesh is there is there do you see any risk on maybe.
There being a labor shortage for it.
Continuing to build out of that facility or do you see any risk maybe on the timeline for that be.
<unk> when that might be completed.
Well right now.
We're still on time of Bangladesh to support 2023.
<unk> started the construction of the project is moving along.
Bangladesh has not had the same type of COVID-19 environment.
Okay.
On the fab.
Much greater percentage of vaccines.
Final question.
The only 8% of population has been the vaccinated already so it's a little bit different environment.
Thanks for getting a little bit.
Worse.
The last month during Ramadan shutdown right now.
Things are improving so.
The environment, there is stable and improving I would say.
As we see it today, obviously there is no crystal ball.
So on so far things feel good and we're on track to support 2023.
We're also with the process of.
On the.
The configuring, our Mexican kind of capacity into Central America, which we dismantled the at the end of last year or so.
Still on track to put incremental capacity in Central America as well.
So we feel that we're in good shape to support the future sales.
As we before.
Okay. Thank you very much.
Thank you. Our next question comes from the line of Stephen Macleod from BMO capital markets. Sir Your line is open.
Okay. Thank you and good morning, and good afternoon guys.
Just a couple of questions you've covered a lot of ground here, but a few things that I wanted to dig in on.
You mentioned in previous quarters, you've talked about sort of your underwear of market share gains and I'm. Just curious if you think that.
Based on how the underlying market performed whether you continue to gain share in Q2 on the underwear side at retail.
Well, we've definitely gained share in the region with revenue.
20, plus percent of nonetheless, the peso.
It's growing very good I mean, I think thats not.
Afterwards.
On track to kind of ex.
The patients.
Yes.
Okay. That's great. Thank you.
And then just I just wanted to clarify some commentary on the gross margin.
Youre clearly well on the way well on the way to exceed your 12% <unk>.
SG&A targeted you talked a little bit about.
The 18% operating margin target, but.
With gross margin expected to continue the trend sort of.
In line with the adjusted Q1 through the balance of this year.
Do you think it's achievable to meet your 30% target in 2022.
Again Steven.
I would say as we get back to the 2019 sales levels I think we feel very good about that 18%. So.
I think as we said earlier right working both of the gross margin and the SG&A.
Effectively we feel very good about it so I think we have.
And because of back to basics is driving both sides of the.
Of the equation.
Bottom line, we do feel good about.
Gross margin.
And the SG&A and as Glenn said earlier about our ability to drive volume that's key.
With the back to basics, we can we get the cost reduction we keep the price is down we get the volume we get the operating leverage we get better gross margin, we've got better SG&A.
Everything works. So we're very pleased with the whole strength on strategy.
Right, Okay, great. Thank you.
Yeah.
Thank you. Our next question comes from the line of Brian Morrison from TD Securities. Sir Your line is open.
Good evening. Thank you a couple of follow up questions. Glenn of Rod are you able to quantify you said the channel is 40% below 2019 2020 levels are you able to quantify that amount.
Just over $100 million.
Okay, and then in terms of the underwear commentary and specifically private label I think last time, you had mentioned that.
The opportunities for somewhat on hold during the pandemic I'm wondering as the social risk.
The restrictions start to ease of the pandemic gets it gets a little less.
In the U S. In particular of Purion, you've seen any progress with respect to opportunities in this vertical.
Well, yes, I mean look we're working with all of our partners for future opportunities show up.
From what I want to say anything concrete but.
We're definitely looking.
Working on future growth opportunities.
The align ourselves to is moving.
The report.
2022.
We're very comfortable that all of the four pillars of our growth.
We are creating.
Early on our North American from their international sales as well as well.
All of our private label on our own brands retail, we think all of them.
These areas are going to seize the growth is the.
Moving to.
Into 2022.
And all the areas.
Okay, and then last question.
Its high level of Glenn just your Pos is tracking down 10% yet the principal driver as you look at tourism or sporting events, there's still very limited. So I just want to understand like what is filling this void is it I understand some of it's going to be online and some of it's gotta be national accounts, but what's filling that void and then in terms of national accounts are you seen more of.
Movement towards on shoring and is this something that could be permanent market share gains.
What's the retail in general retailers are selling more T shirts, probably than they saw.
The pre pandemic.
Because people aren't going to defer some of that is maybe.
The little bit I would say.
As people are looking to buy some reassurance of the year right. So and you have to buy them because theyre staying on lenders more leisure et cetera. So they are looking for places we'll get this volume online of applying on the at retail.
So net net I would say of the overall market has grown because of the onset of all of the online.
People the bias preventive T shirt digital printing is.
Given the opportunity for people to find Onesies and Twosies as they can never get before some of the market is wrong.
On that.
Yes.
As I said earlier.
Covers.
Just on no.
How much will come back on how much of all comer.
On the definitely the attorney.
Opportunistic force us because we are in.
As far as the supply chain.
Yes.
The message of supply I think that's also going to be a key factor to look at a lot of the products. We sell are on once they are in our warehouses.
We carry the inventory.
So taking the risk of goodbye from Asia.
You've derisked this whole thing in all of our shirts, regardless of what.
You are buying on basically we have we of products for every every element of fashion insurance basic shirts, so and the I'll have Terry we label. So it's very easy and the fashion brands basically take one of our products are the label of.
But the random resell the consumer so we're well positioned.
Thank you from the supply chain to continue growing both from a regulatory perspective as well as to support the global lifestyle on a regional partners.
Thanks very much.
Thank you.
Thank you and our next question comes from the line of Jim Duffy from Stifel. Sir Your line is open.
Thank you good afternoon couple of questions from me.
Rob to start revenues in the first quarter relative to the first quarter of 19, activewear down, 2% hosiery and underwear down high teens do you expect that rate of change relative to 2019 will continue to improve.
Was there some benefit from restocking.
It may have made debt.
Artificially high in the first quarter.
And then we did talk a little bit about the restock in the first quarter right. So from a distributor of perspective, we saw above $50 million.
Restock impact in the quarter.
Secondly.
We look at the Q2 I am not so sure that we're going to see that given the way things are unfolding. So I think that's one benefit I would I would call on one difference I would call out of Jim.
Okay, and then a question on the channel partner inventories you guys have spoken about the <unk> market, 40% below 2019 can you comment on where it stands in the retail channel partners, our retail channel partners, yet restock could be upward demand or the Morris Moore Claudia.
Of supply chasing demand in the retail channel for the whole sort of in underwear business.
I would say they're in balance.
Relative to the size of the business, we have there's obviously our underwear business is much larger today than it was.
19 show interest with the more inventory.
To support those larger sales force and balance.
Okay. Thank you.
Thank you there are no further questions at this time I will now turn the call over the back the Sophie. Please go ahead.
Thank you Rachel.
Before we leave you on just a quick reminder, that we won't be holding our Bridgeville annual shareholders' meeting tomorrow at 10, a M Eastern town Eastern time Alright.
With that I'd like to thank you again for joining us today, and we look forward to speaking to you very soon.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
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