Q1 2021 Gildan Activewear Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the quarter, one 2021 Gilda and 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 a question.
During the session you will need to press star one on your telephone and needs to be advice. That's any conference is being recorded if you require any further assistance. Please press star zero and I.
I would now like to hand, the conference over to and he Sophie our XE are you.
B C VP Investor Relations. Please go ahead.
Thank you Rachel and good afternoon, everyone and thank you for joining us earlier.
And a press release announcing our earnings results for the first quarter 2020. One we also issued our interim shareholder report containing management's discussion and analysis and consolidated financial statements.
Documents will be filed with the Canadian Securities and regulatory authorities and the U S Securities Commission and are available on the Companys corporate website and.
Joined here today by Glenn <unk>, our President and Chief Executive Officer, and Rob <unk>, Our executive Vice President and Chief financial and administrative officer and.
Rob will take you through the results for the quarter and a Q&A session will follow before we begin please take note.
Certain statements included interest on all.
All may constitute forward looking statements.
And the meaning of the U S Private Securities Litigation Reform Act of 1995.
Forward looking statements involve unknown and known risks and.
Certainties and other factors, which could cause actual results to differ materially from the future results expressed or implied by such forward looking statements.
We refer you to the Companys filings and the U S Securities and Exchange Commission and Canadian Securities regulatory authorities.
And these future result, and with that I will turn the call over to Rod.
Thank you Sophie and good afternoon and thank.
And for joining the call.
Hope, everyone is staying safe and keeping well.
We're pleased with the company's first quarter performance, which reflected the strong start to 2021.
Our back to basic strategy is working and and supporting both our sales efforts and our profitability objectives.
Operationally, our strategy is making our business less complex and more cost effective and is helping us drive growth and more efficient use of capital.
Further we are encouraged to see reopening to continue and combined with the impact of the U S stimulus and the strong progress of the vaccine Rowley and allowed for the U S.
And we're optimistic that these factors will continue to help economic activities and stay on a steady track and recovery.
And finally, given the company's positioning at the end of the quarter.
We're pleased to announce and our press release earlier this afternoon, and our board approved the reinstatement of our quarterly cash dividend.
Sam right, 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 dividend payments reflects increased confidence from our strong performance and 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%.
Activewear sales and the quarter totaled $485 million and were up 30% over last year, driven by strong double digit unit sales volume growth and both are and principles and retail channels of distribution.
Together with strong product mix, which more than offset lower average net selling prices and and principles.
The volume growth and and principals reflected the combined impact of year over year, Pos growth and net restocking by distributors, even though inventory levels and the channel remained significantly below 2019 levels.
If we look at and principles pls compared to <unk>.
Pandemic levels and 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 three underwear category, we generated sales of $105 million or 21% increase was driven by the strength of our underwear sales.
Double digit volume growth over both the first quarter of 2020 and 2019.
Looking at gross margin for the quarter, we delivered strong performance, which in our view underscores the power of our back to 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.
Our gross margin performance in the quarter was enhanced by and $18 million. One time payment. We received in April from the USDA, even without this 300 basis point benefit gross margin was still strong at 21% up 350 basis points over last year.
This onetime USDA benefit was received under the pandemic assistance for cotton users or packing program and.
And represents essentially COVID-19 related government support provided to domestic users of U S cotton.
Excluding the pack and benefit the year over year increase and gross margin was mainly due to the non recurrence of COVID-19 related charges incurred in the first quarter of 2020, more raw material costs favorable product mix and the positive impact of our back to basic strategy, partly offset by lower average net selling prices.
Okay.
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 for the same quarter last year.
And year over year reduction reflected cost savings stemming from our back to basics initiatives offset by higher variable compensation expenses.
Adding this all up we generated operating income of $114 million compared to an operating loss of $92 million and 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 up to 21 million trade accounts receivable impairment charge recorded in the first quarter of last year.
Consequently reported net earnings close to $99 million or <unk> 50 per diluted share and adjusted net earnings of $95 million or <unk> 48 per share.
Excluding the nine pack and benefit adjusted EPS for the quarter was 39.
Significantly from adjusted EPS of <unk>, and the first quarter last year, and 16 and the first quarter of 2019.
So overall, a very strong performance and 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 and the quarter compared to last year, when we consumed 235 million and free cash flow.
The increase reflected higher operating earnings.
Total working capital impacts and 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 sustained and November of last year.
Which is a timing impact related to the replacement of equipment.
The decrease and working capital was largely due to a lower inventory build and the quarter, which was driven in part by benefits of our back to basic strategy, including our SKU rationalization and 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 and we're continuing to ramp backup capacity and stronger than anticipated sales and the first quarter resulted in a lower than planned increase and inventory levels and the quarter.
Consequently, we ended the quarter with inventories of 736 million.
Lightly 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 and remained at $1 6 billion, which was where we left off at the end of the year.
And our external debt leverage ratio decreased to two 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 and 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 restrictions and provisions established in June of last year, and we amended our loan agreement to obtain temporary COVID-19 related covenant relief.
Further on April 20th we repaid 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 are 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 and we gained further visibility on the COVID-19 recovery outlook and when 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 and principles Pos is tracking slightly better than during the first quarter down approximately 10% compared to pre pandemic 2019 levels.
And retail channels, our sales and all product product categories are tracking above prior year levels.
And though we were encouraged by these trends we are monitoring other broader market dynamics that could affect the pace of the overall recovery.
And that was driven by large gatherings and have historically been a key driver of our and principles business have not yet restarted.
And although re openings continue and the pace of vaccinations and the U S and 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 and the U S affecting certain industries, including yarn spinners.
Total us 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 and 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 to basic strategy. We are extremely pleased with progress and.
And our confidence and 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.
Over on our profitability targets and create shareholder value over the long term and with that I'll turn it back and Sophie.
Thank you Rod.
That concludes our formal remarks before moving to the Q&A I ask that you limit the number of questions to two and we'll circle back for a second round of questions. If time permits and I'll now turn the call over back to the operator for the question and answers.
Rachel.
Susie and again as a reminder to ask a question you will need to press star and the number one on your telephone and again just press star and the number one on your telephone lines and so we draw your question press the pound key.
And while we compile the Q&A roster.
Our first question comes from the line of Paul Lewis from <unk>.
Sir your line is open.
Hey, everyone Who's brand and shoot him on for Paul.
Thanks for taking my question I was just wondering you know how do you feel about your inventory position and now I think last time, we spoke Manny.
Manufacturing was outpacing too so I'm just kind of curious about the dynamic there sales.
Sales come back stronger than expected or where there are some impacts from some of the things you mentioned on the supply chain side.
The constructive things there.
Hello, and with Glenn.
Our inventory position is.
And on screen sizes.
Slower than we originally anticipated and obviously.
Mainly because sales were stronger than we anticipated in Q1.
However, we are still running and a good run rate on a relative to 19 levels. Our current run rate is around 90% of you ran at <unk> 19.
Levels, and we're going to continue to ramp up.
It's been challenging and meant to say the least because of the things that Rob mentioned in his commentary.
And we're well positioned and we.
As we continue to execute on our activation strategy.
We're focusing on and there is obviously less profit less skus less complexity and so it gives us a very good opportunity to serve and so we should be able to operating debt.
Inventories.
And were lower than historical levels.
It's still improve our service as we go forward. So we're not back up to full capacity.
And that will happen.
As we move towards the end of the year.
But I think were critical through Q2 at around 90%.
19 levels.
Got it.
And then on the on the labor shortages.
Ultimately do you think it's higher wages drive people back or are people, just not there and whats your outlook on that abating.
While our outlook is it going to spend the money from December's package really nauseous Julien that's the answer very simple.
That's.
And we paid fair wages and our facilities.
No.
I think thats one.
Yes, I think if you look at it's really it's the wages, it's effectively the stimulus.
$300, a week right and we're seeing out there, but it's also a COVID-19 as well.
And also I think.
Theres a number of factors.
People coming back into the workforce.
And our being impacted with a number of pressure and the numbers dresses and so I think ultimately.
And the stimulus will work our way through that and we will work our way through 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 was mainly in our U S operations.
In terms of our diverse operations are running.
Well, we have apple people other than supplies and other things that could affect us as other people issue and Central America.
Got it.
A lot and good luck.
Thank you our net.
Our next question comes from the line of Ken <unk> from RBC capital Sir Your line is open.
Great. Thanks, and good afternoon, and your release you noted some.
Distributor restocking can you give us some context on where and 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 and the cycle.
Well typically the inventories and our distributors carry on a go forward inventories are.
Normally they would increase their inventories.
And.
And as they go into season.
And to put things in context, our inventories are about 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 in 2019 levels.
And I feel good.
There are lower than I would say.
And normal really normal level of interest that this should be at this time of the year. So the starting and that we did have I think would be relatively.
Our overstocking and Stockton as required to support the seasonality and 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 syncrude visibility or is it maybe they'll just do a bit more just in time going forward demand, obviously looks like its picking up and trying to understand if you know it'll.
And it'll be more of a gradual rebuild this time versus some of those large restock and quarters, we've historically seen.
Rob and look and partly sales are strong and starting to improve I mean, when things were starting to see is we're starting to see.
<unk> basics products come back and our sales have been driven really by <unk>.
Cash and T shirts, and squeeze which are actually positive and pls and where we really see the drag so far on our minus 15, and now minus 10 and is one of the basic side and we're starting to see some.
And larger orders typically efficacy floating around and we're starting to see some of that come back.
We think as we go through this market potential and up sales will continue to improve.
After these total inventories were going to say Oh Wow, we exit.
Q2, and move into Q3 and Q4.
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 guess, you already thinking about it and your.
Remarks.
Broad based inflation.
Okay.
Since the topical and wondering how much latitude killed and things that had to increase price.
And killed and take any pricing and promo action and the quarter.
Well, we're still taking our price leadership position and the market so their pricing.
As we've been pricing and the labs.
Three or four quarters.
And yes, and look at we think the industry is.
It will take price increases.
And this is also occurring as we leverage our back to basic strategies and we're lowering our cost structure.
Our manufacturing cost and are not speculation or coming down.
As we streamline our operations our SG&A is.
This is coming down as a percentage of sales. So overall, what we're targeting is to drive ourselves to what we think is the 18% operating margins and.
And I will do a combination of.
And you'll see how we get there, but we have grew and we think to continue to have a price aggressiveness.
And the offset some of the inflationary cost.
And with our manufacturing cost savings and our street and leverage to still achieve our goals as we move into the future.
And so have the opportunity to raise price.
Higher.
We have a lot of flexibility.
Okay.
After this year and the next year.
Okay.
And given that.
And there there's a lot of growth core.
A full force to restock and given that Q2 Pos.
Tracking down about 10%.
The subtext, there that children's trend and should exceed Pos and the interim at these wholesalers, we stock keeping optimism about large gatherings.
Coming back and call it side and a few months.
Well I don't think that.
And we're going to add on opportunities.
So restocking inventory and channel.
Uh huh.
And our O&M inventory levels will.
And we'll be pretty similar agenda this quarter and they are.
And any of the quarter and.
And like I said before we're running at a ramp mode.
And 90% in 2019 levels.
Work it that way and so we're tight on capacity as we move into Q2.
And if you look at where we are now in April plus the supply time, it takes to produce goods and the quarters Glenn pretty.
Pretty quick right. So we have pretty good visibility and where we are.
And we're going to continue to ramp up as we move through the year and I think that's the more important thing is that we're very comfortable.
All day.
We're pretty much tracking in line with the with.
With the market in terms of work capacity currently is and where the market Pls and so that's a good day.
And as we move into Q3, we should be able to continue to take.
Opportunities and markets and recovers and our capacity continues to increase and Thats, where we are.
And as we move through the year.
Thank you.
Thank you. Our next question comes from the line of quickly from data readout and Securities. Sir Your line is open.
Good afternoon, and just maybe first question on the gross margin.
And obviously very strong and the quarter can you maybe talk about gross margin and I'll look for the remainder of the year.
Do you expect to build on that margin improvement from Q1.
And look on gross margin.
It's very strong and I. If you look at the $31. One if you took if you exclude the pass through $28, one and 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 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 <unk>.
Raw material costs and so there are a little.
And some things that sales will drive margin up there is some things that we have to work with as well. So I think overall I think what we'd like to do probably and 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 Russ and meet and another question and 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.
Get implemented it could potentially cause tax rates to rise across the board.
My question is what are your thoughts on this and what levers that Gilda and has to mitigate the impact if it does get implemented.
Yeah.
Well I would say, Chris I think it's very early and the overall discussion.
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 we're aware of.
Both monitoring situation as we go forward.
Great. Thanks for the answers and best of luck.
Yeah.
Thank you. Our next question comes from the line of Mark Petrie from CIBC, Sir Your line is open.
Hey, good afternoon. Thanks.
Sorry, Glenn could you just clarify your comment with regards to distributor levels. It wasn't clear to me, what youre, referring to but something was about 40% below levels seen previously could you just clarify.
Yes, so the inventories and the channel or roughly 40% below.
19 levels and pretty much the same flow 'twenty levels to be considered moving to connect and 'twenty.
Okay, Thanks and.
I guess just broadly.
And youre 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.
Yeah.
Well I think both of those markets with alternative and that makes the online.
And as casual and home.
Leisure and all those things have driven each share I think during the pandemic.
Our continuing to drive share I think as we see it pick up right now from Q1 into Q2, I think it's a little bit more of the recovery of gatherings and mainly if you look at the Kentucky Derby and it was 103050.
And 50000 people and we're seeing some baseball games with a large crowd so.
Definitely things are starting to open up.
And I think that will continue to improve as we move through the balance of the year.
I don't see the other part of that business going away.
Net net what we discussed last quarter and I think that the overall market.
And is going to expand our universe is going to expand.
We really have a full recovery because you don't see.
We've created new opportunities and new channels of sales through online and salvage so.
We are hopeful that as the recovery comes and goes.
And our markets.
Our opportunity.
Yeah.
Okay, and then just a follow up I think it was Christmas question with regards to the gross margin.
Thanks for the comments for the expectations for <unk> for the balance of 2021.
Just thinking back to sort of your 30% gross margin target and.
And I 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.
And as revenue rebuilds too.
2019 type level or what is the lever to see further upside from gross margin today.
Alright, thank you.
You said its actually Mark and we're really focused on that 18% right. So I think.
That's what we're really driving to deliver with our back to basic strategy and I think we get back to 2019 sales level, we like our chances to be able to deliver the 18%. So I think.
As we as we go forward.
We'll see it come.
And gross margin, we will also see it come from SG&A, but thats, where we are really working effectively to to deliver.
And it also goes it's also combined together with the growth and the volume. It's all place together. So I think look I think we're happy with the progress that we're making with our with our overall strategy I mean, if you look at what back to basics is delivering force.
<unk> and gross margin and SG&A.
And we really are seeing very strong benefit and.
And we'll see it I think in both areas as we go forward and that will flow through to operating margin and again, we get back to 2019 levels I think we feel very good about hitting that 18%.
Moving to leverage that for topline growth as well because I think that's the point.
And focus more on all of those factors play as well as make sure that we have top line growth.
And we can leverage our low cost manufacturing cost savings to achieve our operating.
Operating margin and gross sales.
That's really what the tax basis.
Yeah understood I appreciate all the comments and wish you all 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.
To follow up on some of the margin questions talking about SG&A.
And yesterday dollars were down pretty significantly versus not just <unk> 'twenty, but also once you have 19 as we get into the second quarter, obviously theres the comparisons get a little bit different because yesterday was down so much last year, but how should we think about the SG&A dollars and Q2 versus Q2 of 19, I mean can we really see them down as much as they were in terms of just total dollars.
<unk> 2019 or is there going to be more of a bounce back. So the dollars will be a lot closer to the 2019 level. Thank you.
And I think if you look at 2019, we hadn't really seen the benefit of back to basics really flowing through and the SG&A side.
And you do look at where we're running and the first quarter.
I think as we go into Q2, we'll see a little bit of.
And some increase with respect to dish.
Distribution costs, but look we have the SG&A well under control.
As we work towards that 12% target.
So that delta, which you've seen between two.
2019, and 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.
And to reduce it and so we I mean and again, we feel very good about our ability to and.
And 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.
Yeah. Good afternoon, just first one for me is on the competitive environment Glenn.
Glenn and I know you touched on earlier and you're still.
Sort of the price leader in the 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.
And look we're continuing to take the price leadership and competitive.
And <unk>.
R&D I think the low price and the market.
But at the same time and look at it we.
There is also other suppliers and others.
<unk> product and we think that.
And in general the inventory and the marketplaces.
Amongst all user and all suppliers. So people are skeptical to.
Two more.
<unk> was entitled inventories, So, we're taking our strategy and everyday low price and we're going to continue to do and we're seeing market share growth.
Even though we're down in the 10 to 15 and were down 10 now.
Hello from statistics within the market and we're actually gaining share so I think thats sort of our strategy growth.
The consistent approach and.
And.
And focus on top line growth and market share.
Okay.
And one more for me just you've all seen the headlines on how.
And 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.
Theyre being a labor shortage for.
Continuing to build out that facility or do you see any risk maybe on the timeline for that.
And when that might be completed.
Well right now.
And we're still on time and Bangladesh to support 2020 three.
It's hard to construction of the project, which is moving along.
And most asked US not have the same type of COVID-19 environment. It does.
Okay.
And they've had a much greater percentage of vaccines.
Final question.
And like eight.
And 8% of the population has been and that's actually and are ready.
So a little bit different environment.
Things were getting a little bit.
Worse.
Last month during Ramadan and shutdown right now and.
And.
Things are improving so well.
Sure.
The environment, there is stable and improving I would say.
As we see it today.
And obviously there is no crystal ball.
And so, but so far things feel good and we're on track to 2020 three.
We're also in the process.
We.
And.
Configuring, our Mexican capacity into Central America, which dismantles at the end of last year's zone.
We're still on track to put incremental capacity and Central America as well.
And so we feel that we're in.
Shape to support future sales growth.
As we go forward.
Okay, and 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 and 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 and Q2 and the underwear side at retail.
And we definitely gained share and retailer.
20% to <unk> so.
And it's growing very good and <unk>.
And.
<unk>.
Contract and kind of expectation.
Okay. That's great. Thank you.
And then just.
Just wanted to clarify some commentary on the gross margin.
Youre, clearly well and the way it well and the way to exceed your 12%.
SG&A target and you talked a little bit about.
The 18% operating margin target, but.
With gross margin expected to continue to trend sort of.
And 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, Steve and M&A.
And 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 boats that gross margin and the SG&A.
Effectively we feel very good about it.
I think we have and.
And because of that.
And the basics and driving both sides of.
And the equation.
Bottom line, we do feel good about gross.
Margin.
And SG&A and as Glenn said earlier about our ability to drive volume that's key.
And with the back to basics, we can we get the cost reduction we keep the prices down and we get the volume we get the operating leverage we get better gross margin and we got better SG&A.
Everything works.
Very pleased with and we'll start on strategy.
Right, Okay, great. Thank you.
Thank you. Our next question comes from the line of Brian Morrison from TD Securities. Sir Your line is open.
Hi, Good evening. Thank you a couple of follow up questions.
And Rod are you able to quantify you said the channel is 40% below 2019 2020 levels are you able to quantify that amount.
Yeah.
So sir 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.
Opportunities for somewhat on hold during the pandemic I'm wondering as the social risk.
Restrictions start to ease or the pandemic gets gets a little less.
And the U S and particular, a pure and you've seen any progress with respect opportunities and this vertical.
Well, yes, and we look we're working with all our partners for future opportunity and show.
And for what I understand and concrete but.
We're definitely looking.
Working on future growth opportunities.
To align ourselves too much.
Reported.
2022.
And we're very comfortable and all of the four pillars of our growth.
And we're creating.
And our North American footwear international sales as well as.
And with both our private label and our own brands and retail.
All of these areas, we're going to seize growth has been moving through and <unk>.
And to 2022.
And in all areas.
Okay, and then last question and its and its high.
High level, Glenn just your Pos is tracking down 10%, yet the and principal drivers and 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 got to be national accounts, but what's filling that void and then in terms of national accounts are you seeing more.
Movement towards onshore and and and it's just something that could be permanent market share gains.
Yeah.
Looking at retail and general retailers are selling more T shirts and they saw.
Pre pandemic.
Because people are going to defer some of that is maybe that would have been a little bit I would say.
People are we going to whitestone and assurance of year right. So and we have to buy them because they are staying home and theres more leisure et cetera. So they're looking for places and we'll get them buying them online for buying and that at retail and restaurants.
So, but net net I would say is the overall market has grown because of the onset of volume online accounts.
And people with a bias <unk> digital printing.
And as an opportunity for people to find Onesies and Twosies and if they can never get before so the market is wrong.
And as I said earlier when it recovers.
And we just don't know how much will come back and how much it will cover by this separately and will be very.
And our opportunistic for us because we would then and as far as the supply chain.
And just where domestic to domestic supply I think that's also going to be a key factor and looked at a lot of the products and we sell and outlines our warehouses.
We carry the inventory.
So taking the risk to go price on Asia.
And you've de risked this whole thing and all of our shirts, regardless of what plan.
You are buying and basically we have we have products for every every outlet we have fashion sure. Its basic shirts, so and they all have takeaway label. So it's very easy for any fashion brands basically take one of our products and we're able to put their brand and resell it to consumers. So we're positioned I think.
Why change and continued growing both from a weighted perspective, and as well as to support our global lifestyle and our retail 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, and 19, activewear and down 2% hosiery and underwear down high teens do you expect that rate of change relative to 2019, we will continue to improve.
Was there some benefit for restocking.
And that May have made that.
Artificially high and the first quarter.
And then.
We did talk a little bit about the restock in the first quarter right. So from a distributor perspective, we saw above $50 million.
Restock impact and the quarter.
Effectively.
If we look at 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. Our one difference I would call out June.
Okay, and then a question on the channel partner inventories and you guys have spoken about the <unk> market, 40% below 2019 can you comment on where it stands and retail channel partners.
Our retail channel partners, yet restock could be upward demand or are there more and more quarters, you think of supply chasing demand and the retail channel for the hosiery and underwear business.
And I would say the inbounds.
Relative to the size of the business, we have because obviously our underwear business is much larger today than it was.
And 19, install and physical and Martin story.
And to support COVID-19 larger sales puts and balance.
Okay. Thank you.
Thank you and there are no further questions at this time I will now turn the call over to back to Sophie. Please go ahead.
Thank you Rachel and before we leave you off just a quick reminder, that we will be moving our virtual annual shareholders' meeting tomorrow, and 10 am eastern and South Eastern time, alright, so without.
I'd like to thank you again for joining us today, and we look forward to speaking to you very soon.
And a good evening.
This concludes today's conference call. Thank you for participating you may now disconnect.
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