Q3 2023 Gildan Activewear Inc Earnings Call
Yeah.
Speaker 1: Ladies and gentlemen, thank you for standing by and welcome to the third quarter 2023 Gildon Active Wear earnings conference call. Please be advised that today's conference call is being recorded. All lines have been
Ladies and gentlemen, thank you for standing by and welcome to the third quarter 'twenty twenty-three Gilden Activewear earnings conference call.
Please be advised that today's conference call is being recorded at.
All lines have been placed on mute to prevent any background noise.
Speaker 1: After to speak as remarks, there will be a question and answer session.
After the Speakers' remarks, there will be a question and answer session.
Speaker 1: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw a question again.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again press the star one.
Speaker 1: I would now like to hand the conference over to Jesse H.M. Vice President Head of Investor Relations. Please go ahead.
Now I'd like to hand, the conference over to Jessie Hey, I'm, Vice President head of Investor Relations. Please go ahead.
Speaker 2: Good morning, everyone. Earlier, we issued a press release announcing our results for the third quarter of 2023. We also issued our interim shareholder report with the Canadian Securities and Regulatory Authorities and the U.S. Securities Commission, which are available on our corporate website.
Good morning, everyone earlier, we issued a press release announcing our results for the third quarter of 'twenty 'twenty. Three we also issued our interim shareholder report with the Canadian Securities and regulatory authorities and the U S Securities Commission, which are available on our corporate website.
Speaker 2: Joining me on the call today are Glenn Schamendi, President and CEO of Gilden. Rod Harrys, our Executive Vice President and Chief Financial and Administrative Officer, and Chuck Ward, President Sales Marketing and Distribution.
Joining me on the call today are Glenn <unk>, President and CEO of Gilden, Rod Harries, our executive Vice President and Chief financial and administrative officer, and Chuck Ward, President sales marketing and distribution.
Speaker 2: This morning, Rod will take you through the results for the quarter and a question and answer session will follow.
This morning, Rod will take you through the results for the quarter and a question and answer session will follow.
Speaker 2: 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.
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.
Speaker 2: We refer you to the company's filings with the U.S. Securities and Exchange Commission and Canadian Securities Regulatory Authorities. During this call, we will also discuss certain non-GAB financial measures. Reconciliation to the most directly comparable IFRS measures are provided in today's earnings release as well as our MDNA. And now, I'll turn it over to Rod.
We refer you to the company's filings with the U S 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 I FRS measures are provided in today's earnings release as well as our M. DNA and now I'll turn it over to.
<unk>.
Speaker 3: Thank you, Jesse. Good morning, all, and thank you for joining us today.
Thank you Jessie good morning, all and thank you for joining us today.
Speaker 3: This morning we reported our third quarter results, which unfolded largely in line with our expectations.
This morning, we reported our third quarter results, which unfolded largely in line with our expectations we.
Speaker 3: We resumed our sales growth trajectory and delivered operating margin, which is back within our target range.
We resumed our sales growth trajectory and delivered operating margin, which is back within our target range.
Speaker 3: that testament to the fact that our competitive position remains very strong even in a challenging environment. Driven by our industry leading vertically integrated manufacturing platform and our continuous focus on optimizing our operations.
A testament to the fact that our competitive position remains very strong even in a challenging environment driven are driven by our industry, leading vertically integrated manufacturing platform and our continuous focus on optimizing our operations.
Speaker 3: So we ended the quarter with net sales of 870 million, up 2% year over year, and operating margins of 18.1%. With GAP, EPS, and adjusted EPS of 73 cents and 74 cents for respect to...
So we ended the quarter with net sales of $870 million up 2% year over year and operating margins of 18.1% with GAAP EPS and adjusted EPS of <unk> 73 cents in 74 cents respectively.
Speaker 3: We generated operating income of $305 million and free cash flow of $265 million, which allowed us to be active on our capital allocation priorities, or more specifically our share buyback program, where we have repurchased over 3.5% of our float your to date through the end of the third quarter.
We generated operating income of $305 million and free cash flow of 265 million, which allowed us to be active on our capital allocation priorities or more specifically our share buyback program, where we have repurchased over 3.5% of our float year to date through the end of the third quarter.
Speaker 3: As communicated in today's press release, we are updating our guidance for revenues and EPS, which are now expected to be at the lower end of our previously communicated range.
As communicated in today's press release, we are updating our guidance for revenues and EPS, which are now expected to be at the lower end of our previously communicated ranges.
Speaker 3: I'll provide more details on our guidance a little further, but more importantly, I will also provide details on why we remain confident in our ability to maintain growth momentum and strong operating margins as we move through this uncertain environment towards 2024 and beyond. Now let's-
I'll provide more details on our guidance a little further but more importantly, I will also provide details on why we remain confident in our ability to maintain growth momentum and strong operating margins as we move through this uncertain environment towards 'twenty 'twenty four and beyond.
Now, let me turn to our third quarter results.
Speaker 3: Net sales for the third quarter came in at 870 million, up 2% with active wear sales, essentially flat at 744 million, while Hozery and Underwear sales were up 16%.
Net sales for the third quarter came in at $870 million up 2% with activewear sales essentially flat at $744 million, while hosiery and underwear sales were up 16%.
Speaker 3: Looking at Act of War, there are several puts and takes to highlight.
Looking at active war there are several puts and takes to highlight.
Speaker 3: Firstly, we benefited from healthy POS levels for active wear overall, particularly in fleece and ringsbone products. In fact, we benefited from strong fleece shipments, which were driven by both double digits fell through trends and seasonal replenishment.
Firstly, we benefited from healthy P O S levels for activewear overall, particularly in fleece and ring spun products. In fact, we benefited from strong fleece shipments, which were driven by both double digit sell through trends and seasonal replenishment.
Speaker 3: Now within fleece, we did see some of the trade down we had described in Q2, but all in all, it was a strong quarter for our fleece category.
Now within fleece, we did see some of the trade down we had described in Q2, but all in all it was a strong quarter for our police category.
Speaker 3: We also saw strong shipments of ringspin products as we continue to grow share in this category.
We also saw strong shipments of ring spun products as we continue to grow share in this category.
Speaker 3: Elsewhere, we did see some offsetting factors in active wear with lower shipments of basic t-shirts and the unfavorable impact of some targeted price actions in certain channels. Although overall, the pricing environment remains relatively stable.
Elsewhere, we did see some offsetting factors in activewear with lower shipments of basic T shirts, and the unfavorable impact of some targeted price actions in certain channels, although overall the pricing environment remains relatively stable.
Speaker 3: Finally, international markets perform well below our expectations, with sales down 23% during the quarter due to lower demand and price pressures across all international markets.
Finally international markets performed well below our expectations with sales down 23% during the quarter due to lower demand and price pressures across all international markets.
Turning to the hosiery and underwear category. This was a bright spot for the quarter and we saw increasing momentum and good sell through data in.
Speaker 3: Turning to the Hoeserian Underwear category. This was a bright spot for the quarter, and we saw increasing the momentum and good sell through data. In particular, we are excited with the rollout of our new and expanded Underwear programs in the Mass Retail channel, which are driving market share gain.
In particular, we are excited with the rollout of our new and expanded underwear programs in the mass retail channel, which are driving market share gains further in hosiery, we continue to see strong demand for our products.
Speaker 3: Further in Hozary, we continue to see strong demand for our products. Thus, overall, a solid quarter for the Hozary and Underwear category, despite ongoing industry wide week.
Overall, a solid quarter for the hosiery and underwear category, despite ongoing industry wide weakness.
Speaker 3: So on the whole, and despite the challenging environment, we are pleased with the sales performance we were able to deliver in the quarter as travel, tourism, large events, and the everyday use and replenishment nature of our products continue to drive underlying demand.
So on the whole and despite the challenging environment. We are pleased with the sales performance, we were able to deliver in the quarter as travel tourism large events in the everyday use and replenishment nature of our products continue to drive underlying demand.
Turning to margins.
Speaker 3: Gross margin came in at 27.5% of sales in the third quarter, down 220 basis points versus the prior year. As anticipated, the lower gross margin was primarily driven by a higher raw material and manufacturing input costs, as well as slightly lower net selling price.
Gross margin came in at 27, 5% of sales in the third quarter down 220 basis points versus the prior year as.
As anticipated the lower gross margin was primarily driven by higher raw material and manufacturing input costs as well as slightly lower net selling prices.
Speaker 3: However, as expected, we saw a sequential improvement of 170 basis points to our gross margin from Q2 to Q3, as pressure stemming from the flow through of peak cotton costs in the first half of 2023 abated.
However, as expected we saw a sequential improvement of 170 basis points to our gross margin from Q2 to Q3 as pressure stemming from the flow through of peak cotton costs in the first half of 'twenty twenty-three abated.
Speaker 3: This will continue to be a tailwind for us as we move through Q4 and importantly as we move into 2020.
This will continue to be a tailwind for us as we move through Q4, and importantly, as we move into 2020 four.
Turning to SG&A expenses for the third quarter were $82 million and were flat year over year.
Speaker 3: Turning to SNA, expenses for the third quarter were 82 million and were flat year over year.
Speaker 3: As a percentage of sales, SNA was down 20 basis points to 9.5%. Primarily driven by the benefit of sales lever.
As a percentage of sales SG&A was down 20 basis points to nine 5%, primarily driven by the benefit of sales leverage.
Speaker 3: Looking at our S-GNA performance so far this year, we continue to be pleased with how the team is managing S-GNA in this difficult, inflationary environment, and we expect this performance to continue as we move forward.
Looking at our SG&A performance. So far this year, we continue to be pleased with how the team is managing SG&A in this difficult inflationary environment and we expect this performance to continue as we move forward.
Speaker 3: Consequently, summing up these elements for the third quarter, we generated operating margin of 17.8% of sales and adjusted operating margin of 18.1% of sales, putting us back within our target 18 to 20% rate.
Consequently, summing up these elements for the third quarter, we generated operating margin of 17.8% of sales and adjusted operating margin of 18.1% of sales, putting us back within our target 18% to 20% range.
Speaker 3: And after reflecting net financial expenses of 21 million and factoring in continued share repurchases, we reported GAAP and adjusted deluded EPS for the quarter of 73 cents and 74 cents respectively.
And after reflecting net financial expenses of $21 million and factoring in continued share repurchases, we reported GAAP and adjusted diluted EPS for the quarter of 73 cents in 74 cents respectively.
Moving onto cash flow and balance sheet items.
Speaker 3: Cash low from operating activities total 305 million versus 66 million in the prior year. Mainly due to significantly lower working capital investments this quarter, which included the impact of working towards ending 2023 with healthy but below 2022 inventory level.
Cash flow from operating activities totaled 305 million versus 66 million in the prior year, mainly due to significantly lower working capital investments this quarter, which included the impact of working towards ending 2023 with healthy, but below 20 twenty-two inventory levels.
Speaker 3: Furthermore, after capital expenditures of 43 million in the third quarter, we generated 265 million of free cash flow compared to the use of 7 million in the prior year.
Furthermore, after capital expenditures of 43 million in the third quarter, we generated 265 million of free cash flow compared to the use of $7 million in the prior year.
Speaker 3: On the CapEx front, the progressive ramp up of our new Bangladesh facility is underway, which will continue through 2023 and into 2024. And we continue to expect an exit capacity rate around 25% at the end of 2023.
On the Capex front, the progressive ramp up of our new Bangladesh facility is underway, which will continue through 2023 and into 'twenty 'twenty four and we continue to expect an exit capacity right around 25% at the end of 2023.
Speaker 3: Finally, we enter the quarter with net debt of 1 billion and a net debt to EBITDA leverage ratio of 1.6 times well within our 1 to 2 times targeted debt level.
Finally, we ended the quarter with net debt of 1 billion and a net debt to EBITDA leverage ratio of one six times well within our one to two times targeted debt levels.
Now turning to the outlook for the full year, we continue to expect year over year revenue growth in the fourth quarter as we cycle, an easier comparative period and benefit from the full rollout of our new retail programs. However, even though P. O S trends have progressively improve through 'twenty 'twenty twenty-three across both our activewear and <unk>.
Speaker 3: Now turning to the outlook for the full year. We continue to expect Euro-VU revenue growth in the fourth quarter as we cycle an easier comparative period and benefit from the full rollout of our new retail programs. However, even though POS trends have progressively improved through 2023 across both our active wear and hosiery and underwear categories, and trends remain in positive territory into Q4, we are seeing some softness in certain markets stemming from the macro environment.
Hosiery and underwear categories and trends remain in positive territory into Q4, we are seeing some softness in certain markets stemming from the macro environment.
Speaker 3: As such, we are tilting our guidance towards the lower end of previously provided ranges for revenue and EPS.
As such we are tilting our guidance towards the lower end of previously provided ranges for revenue and EPS.
Speaker 3: Accordingly for 2023, we now expect revenue for the full year to be down low single digits versus the prior year. This compares to prior guidance of revenues being flat to down low single digits.
Accordingly for 2023.
We now expect revenue for the full year to be down low single digits versus the prior year. This compares to prior guidance of revenues being flat to down low single digits.
Speaker 3: There is no change to our full-year adjusted operating margin guidance, which is expected to be slightly below the low end of our current 18 to 20% annual target range.
There is no change to our full year adjusted operating margin guidance, which is expected to be slightly below the low end of our current 18% to 20% annual target range.
Speaker 3: We now expect adjusted deluded EPS to be at the low end of the previously provided range of $2.55 to $2.65.
We now expect adjusted diluted EPS to be at the low end of the previously provided range of $2 55 to $2.65. Excluding the impact of assumed share repurchases of 5% of our outstanding public float in 2023.
Speaker 3: including the impact of assumed share repurchases of 5% of our outstanding public float in 2020.
Speaker 3: And again, we continue to expect strong, full-year free cash flow generation above 425 million after capital expenditures, which are expected to be at the lower end of our 6 to 8% target range.
And again, we continue to expect strong full year free cash flow generation above 425 million after capital expenditures, which are expected to be at the lower end of our 6% to 8% target range. So no change to these metrics or to our attention to remain active on share buybacks as we finished the year and head into 'twenty 'twenty four.
Speaker 3: So no change to these metrics or to our attention to remain active on share bybacks as we finish the year and head into 2024.
Speaker 3: So, in closing, and as we head toward the end of the year, I would like to leave you with a few thoughts.
So in closing and as we head towards the end of the year I would like to leave you with a few thoughts.
Speaker 3: 2023 has been characterized by normalizing inventory and replenishment patterns. Following the multi-year volatility related to the pandemic.
Twenty-three has been characterized by normalizing inventory and replenishment patterns following the multiyear volatility related to the pandemic.
Speaker 3: But unfortunately, we are seeing end user behavior impacted by inflationary pressures and uncertain macroeconomic conditions.
Fortunately, we are seeing end user behavior impacted by inflationary pressures and uncertain macroeconomic conditions.
Speaker 3: Consequently, while our year-to-day top-line girls is not where we originally hoped it would be when we started the year, we have demonstrated again how our company can remain resilient, out-gen, and financially strong in any environment.
Consequently, while our year to date topline growth is not where we originally hoped it would be when we started the year. We have demonstrated again, how our company can remain resilient alger and financially strong in any environment.
Speaker 3: Further, we are incredibly excited with the opportunities that lie ahead.
Further we are incredibly excited with the opportunities that lie ahead disc.
Speaker 3: Despite the tough environment, we have resumed our growth trajectory and we are making great strides in our GST strategy. Accelerating the pace of product innovation, optimizing our manufacturing platform to strengthen our competitive cost structure, and progressing on our ESG targets, all of which support our long-term growth opportunities which remain intact.
Despite the tough environment, we have resumed our growth trajectory and we are making great strides in our G. S. G strategy accelerating the pace of product innovation, optimizing our manufacturing platform to strengthen our competitive cost structure and progressing on our ESG targets, all of which support our long term growth opportunities which remain intact.
Speaker 3: Furthermore, we remain encouraged by market share gains in key categories, and our strong margins in cash flow generation, and our overall balance sheet strength, which are allowing us to deliver on our capital allocation priorities. Our focus on the long-term vision for our company, and on creating value for our stakeholders, remains unwavering, and we thank you for interest and support and guilt.
Furthermore, we remain encouraged by market share gains in key categories, and our strong margins and cash flow generation and our overall balance sheet strength, which are allowing us to deliver on our.
Capital allocation priorities are focused on the long term vision for our company and on creating value for our stakeholders remains unwavering and we thank you for interest and support in gilden.
Speaker 3: This concludes my former remarks and with that I will turn it back over to you.
This concludes my formal remarks, and with that I'll turn it back over to Jesse.
Speaker 2: Thank you, Rob. Before moving to the Q&A session, I've asked you to limit the number of questions to two, and we'll circle back for a second round of questions if time permits. Desiree, you may begin the Q&A session.
Thank you Rob before moving to the Q&A session I ask that you to limit the number of questions to Chew and we'll circle back for a second round of questions if time permits.
Deseret you may begin the Q&A session.
Speaker 1: Thank you. The floor is now open for your questions. To ask a question this time, please press star than the number one on your telephone keypad. We'll fast-ford you some moment to compare.
The floor is now open for your questions to ask a question at this time. Please press Star then the number one on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
Okay.
Your first question comes from the line of Paul Lajoie with Citigroup. Your line is open.
Speaker 1: Your first question comes from the line of Paul Lesway with Citi Group. Your line is...
Speaker 4: Hey, thanks guys. Can you talk a little bit more about the international markets where you saw weakness and any more specifics on where that was, what categories, and I'm curious if that is what's driving the change towards the low end of the range. And then specifically, how did your outlook change, if at all, within the US market, within each of your two segments?
Hey, Thanks, guys can you talk a little bit more about the international markets, where you saw weakness.
Any more specifics.
And where that was what categories and I'm curious.
If that is what's driving the change towards the below the low end of the range and then specifically how did your outlook change if at all within the U S market within each of your two segments. Thanks.
Speaker 3: So I'll just handle the, what's written is the change to the low end of the guidance. And I'll certainly go over to Chuck to give a view on what's going on in the markets. But if you do look at what we've said on the guidance, yes, the answer is international did play into that. So if we look at the fourth quarter and what we're seeing.
I'll just add on the western and the change to the low end of the guidance that I will turn it over to Chuck to give a view on what's going on in the market, but if you do look at what we've said on the on the guidance. Yes. The answer is international did play.
So we look at the fourth quarter and what we're seeing we do still see good growth, but I would say it that way to think about it is this mid single digit type growth rate for Q4, we will get the benefits of the retail programs. We are seeing market share gains we have easier comps.
Speaker 3: We do still see good growth. So I would say, probably the best way to think about it is it's a bit single digit type growth for Q4. We will get the benefits of the retail programs. We are seeing a marty's share gains. We do have to use your comps.
Speaker 3: So then we have to be a little cautious as we look at the market on a go for basis driven by some softness that we are seeing in certain areas. And international is displaying into that very definitely.
We have to be a little cautious as we look at the market on a go forward basis, driven by some softness that we're seeing in certain areas in international is.
Is playing into that very definitely we're also being careful on pricing well I think as we go into the fourth quarter and that is really an international so we use the lower prices in international we see some pockets somewhere around a different market overall actually pricing is staying relatively stable as we finish up the year.
Speaker 3: We are also being careful on pricing as well. I think as we go into the work, and that is really an international we look at it. So we do see lower prices than international. We see some pockets somewhere around different markets, but overall actually pricing is being relatively stable as we finish up the year as we move into 2024. But is it international is playing in with and I'll turn it over to give you some color?
Area as we move into 2020 reward.
National is playing in Whit I'll turn it over to Jeff gave you some color.
Thank you Rod.
Speaker 5: Good morning, and I guess we'll start first with Q3 and the international question. I mean, overall, as we look internationally and I'm going to bring it down to Europe and Asia as we think about Europe , we were up low single digits from a POS perspective, but we did see destocking during the quarter.
Good morning, and I guess, we'll start first with Q3 and the international question I mean overall as we look internationally.
I will break down Europe, and Asia as we think about Europe, we were up low single digits from a Pos perspective, but we did see destocking during the quarter continues.
Speaker 5: you know continues to be a challenging market uh... in Europe obviously there's you know current geopolitical economic environment challenges
Continues to be a challenging market.
In Europe, obviously, there's.
Current geopolitical and economic environment challenges.
Speaker 5: But the fundamentals of the market we think are still there and we're starting to see the POS come back, but we did see destocking.
But the fundamentals of the market. We think are still there and we're starting to see the Pos come back.
But we did see Destocking during Q3, and we're seeing sequential improvement as we go into Q4.
Speaker 5: Q3 and we're seeing sequential improvement as we go into Q4. Asia also was down high single digits of double digit as well and again I think that's on
Asia also was down high single digits low double digit.
As well and again I think thats all inflationary pressure.
Speaker 5: Now as we think about Q4 as Rod mentioned and we think about international and we are seeing improvement in the PLS, but we think it will be a contingent, be a challenging market. We're also seeing some challenges obviously in national counts that service larger retailers, you know, as they also face sort of the macroeconomic conditions that we see. And that's the way we're looking at the key.
Now as we as we think about Q4 as Rod mentioned and when you think about internationally. We are seeing improvement in the past, but we think it'll be continue to be a challenging market. We're also seeing some challenges obviously in national accounts that serves large retailers.
You know as they also face sort of a macroeconomic conditions that we see and that's the way we're looking at the Q4.
Speaker 4: And then specifically in the U.S. business, what will change there in terms of your outlook?
And then specifically on the U S possess what changed there in terms of your outlook.
Speaker 3: If you look at the U.S. business, the U.S. business is holding up pretty well tall as we go to the board. As we said, we see positive POS from an active work perspective. We see positive POS from an underwear to hoesers.
If you look at the U S business actually the business is holding up pretty well Paul It's Lee.
Whereas we said we'd see positive Pos.
From a credit perspective, we see positive Pos underwear and hosiery. So we again, we feel very good about that really we know we're taking share and we know that the programs that we're focusing on doing very well in the marketplace. So.
Speaker 3: So we feel very good about that. Really, we know we're taking share and we know that the programs that we're focusing on are doing very well in the marketplace. So.
Overall U S is holding up now we are seeing probably a little bit more destocking in the fourth quarter than we had anticipated.
Speaker 1: The third quarter, we did see some desocking. We saw it in basics. Wasn't quite as much as we anticipated, but as we go into the fourth quarter, we'll probably see some catch up on that and we'll see a little bit more desocking. So those are the things that we're thinking about from a US perspective, but overall, I could say we're very, very pleased with how we're performing in this market because we can see our market share is growing and effectively we're very well positioned in all of the different channels that we're still needing to. Thank you. Good. Next question comes from the line of Chris Lee.
The third quarter, we did see some destocking, we saw in basics wasn't quite as much as we anticipated, but as we go into the fourth quarter will policies with cash on that and we'll see a little bit more destocking. So those are the things that we're thinking about from a U S perspective, but overall I would say, we're very very pleased with how we're performing in that market.
Because we could see our market share is growing and effectively we're very well positioned in all of this suggests that we're selling to.
Speaker 6: Thank you for coming.
Thank you good luck.
Speaker 1: Next question comes from the line of Chris Lee with Desch Gardens. Your line is...
Next question comes from the line of Chris Lee.
<unk> Your line is open.
Speaker 7: Good morning everyone, it may be just a follow up question on the POS trend in particularly the US for active wear. I remember last quarter you mentioned that in July was a mid single digits. Is it possible to buy some guidance, well, color in terms of how that trended in August and September and then also how that is trending so far in Q4? Thanks.
Hi, Good morning, everyone, maybe just a follow up question on the Pls trend in particular in the glass for Activewear I remember last quarter, you mentioned that in July was up mid single digits.
Is it possible to provide some guidance level color in terms of how that trended in August and September and then also how that is trending so far in that in Q4. Thank you.
Speaker 8: Chris it's plan I look at to to your to Rod's point and then our POS overall act of where is running mid single digits positive so we're really in Q3 similar to what we discuss with you in our last conference call so we really basically for the full quarter finished around mid single digits and that was driven by you know double digit fleece and ringspan bros
Chris It's Glenn I'll look at tier two tier to rods point I mean, our P. O S. Overall activewear is running mid single digits positive. So we're really.
In Q3, similar to what we discussed with you in our last conference call. So we really basically for the full quarter.
<unk> finished around mid single digits and that was driven by you know double digit fleece in ring spun.
<unk>.
Speaker 8: And the overall market, particularly in our distributor channel, was probably down double digits. So we're taking share. And I think that's really the point is that we're really performing well in a really tough environment. So we're on four cylinders. And we're pretty excited about.
And the overall market, particularly in our distributor channel was probably down.
Double digits, so either we're taking share and I think that's.
That's really the point is that we're really performing well.
In a really tough environment. So we're on all four cylinders and we're pretty excited about.
Speaker 8: you know, our share momentum. And, you know, one of the things I think is important for us in this type of environment is to focus on what we can control. So, we're focusing on, you know, taking share, our availability is great. We're doing quite well in all of our product categories. We're focusing on our operating margins where, you know, we can see that the margin improvement in Q3 will continue to improve as we move into Q4 as we discuss.
We know our share momentum and one of the things I think is important for for US in this type of environment is to focus on what we can control Sophia we were focusing on taking share our availabilities are great.
We're doing quite well in all of our product categories.
We're focusing on our operating margins, where we can see that the margin improvement in Q3 will continue to improve as we move into Q4 as we discuss.
Speaker 8: our costs are under control and we have very good visibility as we move into Q4.
Our costs are under control and we have very good visibility as we move into Q4.
Speaker 8: We had really great cash flow, and that's another big focus for the company is to continue driving strong cash flow and continue to buy back shares. We've seen this the 5%, and maybe we'll be in a position even to buy back more as we move into the later half of the year. And...
We had really great cash flow and that's another big focus for the company is to continue driving strong cash flow and.
It will continue to buy back shares like we have received in this two 5% and you know maybe it will be in a position to even the buyback more as we move into <unk>.
The later half of the year.
And.
Speaker 8: Despite the environment, we're reinvesting in low costs, you know, in developing our low costs positioning with continued investments in Bangal Dash, as well as investments in our yarn spinning operations, which...
Despite the environment, we're reinvesting in low cost.
In developing our low cost positioning with continued investments in.
Bangladesh as well as investments in our yarn spinning operations, which.
Speaker 8: We're focusing on, you know, really focusing on value and innovation. So we've got a lot of innovation that we're going to bring to the market in 2024. And we think we're going to enhance our value proposition.
We're focusing on really focusing on value and innovation. So we're we've got a lot of innovation that we're going to bring to the market in 2024, and we think we're going to enhance our value proposition.
Speaker 8: And, you know, we're working on supporting a new program as well. So all these things together, I mean, the market conditions are weak.
And we're working on supporting and new programs as well. So all of these things together I mean, the market conditions are weak.
Speaker 8: But more importantly is we're focusing on what we can control and just making sure that we stick to our knitting and deliver strong operating results for Q4 and as we move into 2020-24.
But more importantly, as we know we were we're focusing on what we can control and just making sure that we.
We stick to our knitting and <unk>.
Deliver a strong operating results for Q4 and as we move into 2024.
Speaker 7: But that's very helpful. Thank you, Glenn. And maybe my second question is switching gear to the tax rate. There seems to be a potential for a 15% global minimum tax potentially for next year. Just want to get maybe your latest thoughts around that. And if it does happen, what are some of the ways that Gillian can offset some of the impact? Thank you.
Okay. That's very helpful. Thank you Glenn and maybe my second question is switching gear to the attach rate.
There seems to be a potential for a 15% global minimum tax potentially for next year just wanted to get maybe your latest thoughts around that and if it does happen what are some of the ways that you then can offset some of the impact. Thank you.
Speaker 3: At first, the top of the question is a lot of focus on low minimum tax. We are closely monitoring developments to as it has been in fact.
<unk> set up mobile ads and there is a lot of focus on both net of tax we are closely monitoring developments too as it is.
The impact as we go forward.
Speaker 3: I think as you look at all the minimum tax, you have to take a look at and understand the specific implementation details that are occurring in the various countries, including the countries where we operate. And we are monitoring the impact of other incentive programs which are under review and certain jurisdictions around the world, which are effectively being put in place to support investment and local activity.
As you look at Goldman Goldman Sachs, you have to take a look at and understand the specific implementation implementation details better.
Recurring in the various countries the countries, where we operate.
So monitoring the impact of other incentive programs, which are under review in certain jurisdictions around the world, which are effectively being put in place to support investment in local activity. So as we go forward here I think we will get more clarification more clarity on that as we move into the into the fourth quarter and we have to.
Speaker 3: So as we go forward here, I think we'll get more clarity on that as we move into the fourth quarter. And we have to look at all of this together to be able to assess the impact for 2024 and beyond. So we're monitoring it and we do very definitely expect news here. So we finish up the year and we get into the early part of next year.
All of this together to be able to assess the impact for 2024 and beyond so we're monitoring it and we do very definitely expect news here as we finish out the year, we'll get into the early part of next year and I think really you have to look at the complete impact of the whole package.
Speaker 3: I think really you have to look at the complete impact so old package.
Speaker 3: in order to assess what's going to unfold. So we are affecting monitoring. And you know, as Blanc said, we're focusing on the things that we can control and we think we're doing very, very well. And then some of these other things that are unfolding, we'll see how the impact is by things.
In order to assess Westland to control. So we are monitoring and like Glenn said, we're focusing on the things that we can control and we think we're doing very very well and then some of these other things that are unfolding, we'll see how the impact is but I think that's just a linear interpretation of effectively.
Speaker 3: A sort of a linear interpretation of effectively a 15% tax rate is probably pretty conservative based on what we're seeing unfolding in the empirical series session. Thank you. That's helpful. Thanks.
15% tax rate is probably pretty conservative based on what we're seeing unfolding and in <unk>.
Great. That's helpful. Thanks, Thank you Ron all the best.
Speaker 1: Next question comes from J-SOL with UBS. Your line is...
Next question comes from Jay sole with UBS. Your line is open.
Speaker 9: Great, thank you so much. I'm just wondering if you can elaborate a little bit more on the ringspun business in the quarter. It sounded like it was quite positive and there's some market share gains. You maybe give us a little bit more of a deal of what you're seeing in that business since driving the strong trends that you're seeing for a building.
Great. Thank you so much.
Just wondering if you can elaborate a little bit more on the ring spun business in the quarter. It sounded like it was quite positive and there's some market share gains maybe.
Maybe give us a little bit more idea about what youre seeing in that business, that's driving the strong trends that youre seeing for Goldman.
Speaker 5: Sir, Jay, I think we continue to perform well in that market and we continue to take share. You know, we're we have a quality product at a good value price and we continue to see that we're taking share for our competitors in that area. So as Glenn mentioned, we're up double digits in that area and we'll I think we'll continue to do that as we go forward.
Sure Jay I think we continue to perform well in that market and we continue to take share.
Where we have a quality product at a good value pricing, we continue to see that we're taking share from our competitors in that area. So as Glenn mentioned, we are up.
Double digits.
In that area and we'll I think we'll continue to do that as we go forward.
Speaker 8: And look, we know we're competing with, you know, competitors that have very high cost structures.
Because we know we're competing with.
You know competitors that have very high cost structures.
Speaker 8: And as we continue to reinvest in our low cost manufacturing, we're widening the gap in our cost position that will continue allowing us to continue taking more share. So we're in a great position. We're investing heavily in our low cost manufacturing, particularly in our Bangaldaish facility, which will be dedicated to 100% of ring spun type products and will be utilized to support all of our future growth. So.
And as we continue to reinvest in our low cost manufacturing you know we're widening the gap on our on our cost position that will continue allowing us to continue taking more share. So we're in a great position, we're investing heavily in our low cost manufacturing, particularly in our Bangladesh facility, which will be no dedicate.
Due to a 100% our ring spun type products and we will be utilized to support you with all of our future growth. So we're pretty confident that we're going to continue to take share as we move into the future.
Speaker 8: We're pretty confident that we're going to continue to take sure as we move into the future.
Speaker 9: God, okay. And then maybe if I could ask one more, just unmodeling the fourth quarter. Is it possible to just tell us a little bit about how gross margin trends will continue to improve and sort of how you're thinking about SGN $1 growth and 4Q. Thank you so much.
Got it Okay, and then maybe if I could ask one more just on modeling the fourth quarter is it possible.
You can tell us a little bit about how gross margin.
Trends will continue to improve and sort of how youre thinking about SG&A dollar growth in <unk>. Thank you so much.
Speaker 3: Okay, Jay, if you look at Gross Margin and we look at how it's going to evolve in Q4, we do see improvement. We saw improvement.
Okay. Jay if you look at gross margin and when we look at how that's going to evolve in Q4, we do see improvement we saw improvement at while effectively if you look sequentially from Q2 to Q3, we saw a 170 basis points of improvement driven by the lower fiber costs, and we said that will be <unk>.
Speaker 3: well effectively if you look sequentially from q2 to q3 we saw 170 basis points of improvement driven by the lower fiber costs
Speaker 3: and we said that will be a tailwind as a Q4 and very definitely we do see that. So effectively we see sequential improvement in gross margin as we move into Q4, as we continue to see those lower fiber costs and effectively the tailwind that we're gonna see in Q4
And as of Q4, and very definitely we do see that so effectively we see will see sequential improvement in gross margin as we move into Q4 as we continue to see those lower fiber costs and the effectively the tailwind that we're going to see in Q4 is.
Speaker 3: probably even stronger than what effectively we saw from a sequential basis between Q2 and Q3.
Probably even stronger than what are effectively we saw from a sequential basis between Q2 and Q3. If you look at our SG&A effectively we do have our SG&A dialed in very well, we've got it well under control and I think if you look at effectively what we see we would expect spending on a dollar basis to be pretty.
Speaker 3: If you look at S-GNA effectively, we do have a S-GNA dialed in very well.
Speaker 3: got it well under control and I think if you look at effectively what we see, we would expect spending on a dollar basis to be pretty consistent sequentially with what we saw in, in Q3. So overall our operating margin is moving to the high end of that range, right? We've effectively been talking about that for some time that we expected that that occur in the back half of the year.
Consistent sequentially with what we saw in.
In Q3, so overall, our operating margin is moving to the high end of that range right. We've effectively been talking about that for some time that we expected that to occur in the back half of the year and we can see that coming and it effectively will put us in a strong position in the fourth quarter and entered pool will put us in a very strong.
Speaker 3: and we can see that coming and effectively will put us in a strong position in the fourth quarter and then it will put us in a very strong position as we move into 2024.
<unk> as we move into 2024 and as Glenn said, we have good visibility on our on our cost structure on our fiber costs as we move into 'twenty four and so we do feel very good about how we're set up so high end of the range in Q4, and then as we move into 'twenty four we're going to continue to benefit from that.
Speaker 3: And as Glenn said, we have good visibility on our cost structure, on our fiber costs, as we move into 24. And so we do feel very good about how we're set up.
Speaker 3: So high end of the range in Q4 and then as we move in 24, we're gonna continue to benefit from that as we move in the next year.
As we as we move into next year.
Speaker 1: Our next question comes from the line of Mark the Tree with C-I-B-V. Your line's open.
Our next question comes from the line of Mark Petrie with CIBC. Your line is open.
Speaker 10: yeah thanks uh... so just to follow up with regards to the de-stocking commentary could you just talk a little about about the behavior that you're seeing at distributors broadly uh... both around price and inventory levels
Yeah. Thanks, So just to follow up with regards to the Destocking commentary could you just talk a little bit about the behavior that you're seeing at distributors broadly.
With around price and inventory levels.
Yeah.
Speaker 8: Well, the price is pretty consistent and sort of really nothing on price at the level. It's through the Q3.
Well the price is pretty consistent and so there's really nothing on price at the distributor level through Q3.
Speaker 8: And inventory levels are in good shape. I mean, we anticipated a little bit more stock destocking. And again, that's one of the reasons why our sales were a little higher than we anticipated.
And inventory levels are in good shape I mean, we.
We anticipated a little bit more stock Destocking and again, that's one of the reasons why our sales were a little higher than we anticipated.
Speaker 8: But we also expect, you know, destocking in Q4, which is, seasonally, what happens. It's the lowest quarter of the year as we move in, you know, because...
We also expect Destocking in Q4, which is seasonally what happens it's the lowest quarters of the year as we move in deal because typically distributors carry inventory in Q4 to serve as Q1.
Speaker 8: Typically distributors carry inventory in Q4 to service Q.
Speaker 8: one and that both those quarters being the lower end of our quarters, you know, it's normal that we get to stocking. So I think we've got it filed in. The inventories are in very good shape.
One and both those quarters being the lower end of our quarters.
Normal that we got Destocking. So I think we've got it dialed in the inventories are in very good shape.
Speaker 8: Service levels are good and POS is for us is pretty strong. So I think we got proof well laid out right now.
Served as a service levels are good and <unk> is for US is pretty strong. So we're I think we've got pretty well laid out right now.
Speaker 10: Okay, thanks. And based on your expectations for 2024 and sort of the macro environment and what you see at inventory levels at distributors today or should be or are embedding in your guidance for Q4, would you expect destocking to be a headwind in 2024 or stable?
Okay, Thanks, and based on your expectations.
For 2024, and sort of the macro environment and what you see it in for inventory levels at distributors today or should be or are embedding in your guidance for Q4 would you expect destocking to be a headwind in 2024 or or or stable.
Speaker 3: no we don't march we don't expect that destocking to be a headwind in in twenty twenty four we expect it to effectively have a stable environment and of course
No we don't Mark we do not expect the destocking to be a headwind in 'twenty 'twenty four we expect it to effectively have a stable environment and of course.
Speaker 3: you know if you look at uh... twenty twenty two to twenty twenty three that was a big headwind force in twenty three because we had all of that uh... restocking that was occurring effectively in the first half of
If you look at our 2022 to 2023 that was a big headwind for us in 'twenty three because we had all of that restocking that was occurring effectively in the first half of 'twenty, two which is very difficult for us to comp in the beginning of twenty-three. That's obviously why we saw that the weaker quarters in Q1 in Q2.
Speaker 3: 22 which is very difficult for us to comp in the beginning of 23 that's obviously why we saw that the week of quarters in Q1 in Q2 Now we've got all of that behind us and so we do see a very stable environment from an inventory perspective as we move into 2024 on on the printware side and I would say that puts us in a very good position as we allow that POS and the market share gains to really destroy our
Now, we've got all that behind that behind us and so we do see a very stable environment from an inventory perspective, as we move into 2024 on the print wear side and I would say that puts us in a very good position as we allow that P. O S and market share gains to really just to drive our performance.
Speaker 10: Yeah, got it helpful. Thank you. A second question, just with regards to the shelf space, wins that you guys have had in retail in 2023. Carries, just to view sort of on opportunities that you see in the market today for sort of continued momentum, just given how dynamics in the category have evolved and you know, private label, you know, being a general winner. Thanks.
Yes got it helpful. Thank you.
Second question, just with regards to the shelf space.
Wins that you guys have had in retail in 2023.
I'm curious just your view sort of on opportunities that you see in the market today for sort of.
<unk> momentum just given how dynamics in the category have evolved and private label being.
Being a general winter thanks.
Speaker 8: Well, we're going to continue to leverage obviously our shell space. You know, obviously we rolled those programs out. They were off to a late start, so we didn't really get...
Well look we're going to continue to leverage obviously, our shelf space.
Obviously, we roll those programs out there were they were off to a late start so we didn't really get.
Speaker 8: What we anticipated, the full benefit of those programs and the rollout. So I think that that's maybe one...
While we anticipated the full benefit of those programs in a rollout. So I think that that's maybe one positive thing as we move into 'twenty four as we really get the full impact of all of the shelf space that we will have in 2024 and like anything else, we obviously obtained new programs.
Speaker 8: Positive thing as we move into 24 as we really get the full impact of all the shell space that we will have in 2024
Speaker 8: And like anything else, we obviously have obtained new programs you know, in retail and as well as with our GLB customers.
In retail.
Matt as well as with our <unk> customers. So.
Speaker 8: You know, overall, look, we're well positioned to move into 2024 with, you know, the full rollout of these underwear programs, some active wear wins in the Miner GLB programs, and continued taking market share as we move into 2024 and our wholesale, core wholesale business. So...
Overall look at where we're well positioned.
To move into 2024 with the full rollout of this as underwear programs, some activewear Windsor and the <unk> programs.
And continued taking market share as we move into 2024, and our wholesale core wholesale business. So overall.
Speaker 8: Overall, you know, we're still cautiously optimistic.
We're still cautiously optimistic.
Speaker 8: But more importantly, like I said earlier, is we're going to continue to focus on what we control and that's going to be our operating margins. And as we move into 2024, we've got great visibility on maintaining really strong operating margins and strong pre-catchable as we move into next year.
But more importantly, you know like I said earlier, we're going to continue to focus on what we control and that's gonna be our operating margins and.
As we move into 2024, we've got great visibility on.
Maintaining really strong operating margins and strong.
Free cash flow as we move into next year.
Okay.
Speaker 1: Our next question comes from the line of Vichar Shridhar with National Bank Financial. Here's the line.
Our next question comes from the line of MS. Shar <unk> with National Bank Financial Your line is open.
Speaker 11: Hi, thanks for taking my questions. In the past, it threw a gilded history, it used period of weakness to build this business.
Hi, Thanks for taking my question.
In the past.
Given the history of these periods of weakness.
And to build this business and acquired brands.
Speaker 11: Is that something that's on the radar for Gilden as you look at us? Here competitors maybe struck us.
Is that something that's on the radar for Gilden as you look at some of your competitors may be struggling a bit.
Speaker 8: Well, right now, look at it, historically we bought some brands in our channel, you know, Anvil, we bought all-style, but you know, we bought these brands for the value of their inventory or working capital pretty much, right? So...
Well right now look at if.
Historically, we bought some brands in our channel.
Anvil, we bought all style, but we bought these brands for the value of their inventory or working capital pretty much right. So and then we leveraged our low cost manufacturing and had a significant return on investment so.
Speaker 8: And then we leveraged our low cost manufacturing and had a significant return on investment. So...
Speaker 8: You know, I wouldn't say we'd never not look at something, but I think right now we're well positioned. We're focusing on organic growth.
I wouldn't say, we would never not look at something but I think right now we're well positioned we've we're focusing on organic growth.
Speaker 8: Our back-to-basics is working on all four cylinders and moving into a GST strategy where we're gonna start seeing, you know, good top-line growth for taking share.
Our back to basics is working on all four cylinders and moving into a gesture strategy, where we're going to start seeing good topline growth, we're taking share in a weak market.
Speaker 8: in a weak market. We've got our Bangaladesh facility coming along, which is going to give us, we think, a significant competitive advantage in driving our Riggs-Bunk category and allowing more capacity to be freed up for expanding our fleece business.
We've got our Bangladesh facility coming on long, which is going to give us a we think a significant competitive advantage and driving our rigs bond category and allowing more capacity to be freed up for expanding our fleece business.
Speaker 8: So we're in relatively good shape. So I would never say never. I'm at the right price. We'll always look at everything, but I mean at this point in time, we think we can drive significant EPS growth on an organic basis.
So we're in relatively good shape, so I would never say never I am at the right price, we'll always look at everything but I mean at this point in time, we think we can drive significant EPS growth on an organic basis.
Speaker 11: Okay, and over the last several years, Gilden has put in a lot of work on efficiency, and we've seen that come through in the panel, just wondering if there's any major initiatives that we should contemplate.
Okay and over the last several years Goldman is putting a lot of work on efficiency and we've seen that come through in the P&L. Just wondering if theres any major initiatives that we should contemplate in 2024.
Speaker 8: Well, that's built into our DNA, right? I mean, when there's, we're constantly optimizing our operations. Last quarter, we optimize.
Well, that's that's built into our DNA right I mean wonders we're constantly.
Optimizing our operations last quarter, we optimize.
Speaker 8: you know some of our sewing facilities of you know we recently in the process of optimizing some of our yarn spinning facilities um you know there's sort of we're always looking at ways to maximize our cost and you know back to basics is was the strategy it's sort of put us in this position but it's that's our DNA right is making sure that we optimize everything we're doing so
Some of our sewing facilities, we recently in the process of optimizing some of our yarn spinning facilities.
There's sort of we're always looking at ways to maximize our cost.
Back to basics is is was the strategy to sort of put us in this position, but it's that's our DNA right is making sure that we optimize everything we're doing so.
Speaker 8: a cost competitiveness and is the most important skill set that we have, which has allowed us to achieve.
Our cost competitiveness and and is the most important skill set that we have which has allowed us to achieve.
Speaker 8: you know these high operating margins and then the one area where i think that we have a really big focus which were you know going to bring to the market in uh... twenty four is innovation
These high operating margins and then the one area, where I think that we have a really big focus, which we're going to bring to the market and twenty-four is innovation.
Speaker 8: We've been spending a lot of energy on a complete cycle of innovation, probably the largest innovation cycle, and since we actually started the company to be honest with you, which we're going to cover, you know, all of our fabrics, our garments, the construction of our garments, et cetera. So...
We've been spending a lot of energy on a complete cycle of innovation and probably the largest innovation cycle and since we actually started the company's ability to be honest with you.
Which we're going to cover all of our fabrics are garments. The construction of our garments et cetera. So you know as.
Speaker 8: As we move into next year, I think we're not only going to be positioned on the low end of the cost curve, but we're also going to be separating ourselves from our competitors in terms of the innovation we're going to be able to bring to the market by leveraging our low-cost manufacturing.
As we move into our next year I think we're not only going to be positioned on the low end of the cost curve, but we're also gonna be I think separating ourselves from our competitors in terms of the innovation, we're going to be able to bring to the market by leveraging our low cost manufacturing so.
Speaker 8: You know, we're in a relatively good position and I think we're excited about 2024.
We're in a relatively good position and I think we're excited about our about 2024.
Thank you.
Yeah.
Speaker 1: Next question comes from the line of Martin Landrie with Stifle. Your line is open.
Next question comes from the line of Martin Landry with Stifel. Your line is open.
Hi, good morning.
Speaker 12: If we look at your guidance for your early guidance implies that your Q4 operating margins is going to be in or around 20%. I was wondering, next year as you mentioned, you're going to benefit from
If we look at your your guidance for.
In Q.
Full year guidance implies that your Q4 operating margin is going to be.
In or around 20%.
And I was wondering I mean next year as you mentioned youre going to benefit from lower cotton costs. So is it is it is this a good run rate.
Speaker 12: low cotton costs. So is it, is this a good run rate, you know, for next year, and is it, is there a potential for you to perhaps maybe even exceed your high end of your, you know, historical range of 18 to 20 percent next year given, given fiber costs are going to be so low?
For next year and is it is there a potential for you to perhaps maybe even exceed your high end of your.
Historical range of 18% to 20% next year, given given fiber costs are going to be so so low.
Speaker 3: Martin, the answer to that is yes, there is the potential we could exceed the high end of our range. I mean, I think if you look at how we're performing, where our margins are going to here, as we finish up the year, as we move into next year, if you think of all the things that Glenges covered, as far as optimization of our facilities and everything that we're doing, they're very definitely the potential that we could go to above our range in 24.
Martin on the answer to that is yes. There is the potential we could exceed the high end of our range I mean, I think if you look at how we're performing.
Where our margins are going to here as we finish up the year as we move into next year. If you think of all the things that Glenn just covered far as optimize further optimization of our facilities and everything that we're doing are theyre very definitely is the potential that we could go to the above our range and in 'twenty four.
Speaker 12: Okay, and maybe the other side of the coin, assuming that everybody benefits from lower fiber costs. Next, you.
Okay, and maybe theater side of the coin.
Assuming that everybody benefits from lower fiber costs next year.
Speaker 12: Is there a risk that the industry becomes more promotional and you need to discount to move products? How do you think about that?
Is there a risk that the industry becomes more promotional and you need to discount to move out to move products. How do you think about that.
Speaker 8: Well, one of the things that I would say to you is that it's not necessarily lower cotton costs that's driving our operating margins, it's normal.
Well like you know what are the things that I would say to you is that you know it's.
It's not necessarily lower cotton costs, that's driving our operating margins it's normal.
Speaker 8: cotton costs in relation to our selling prices. So we never raised selling prices to reflect the peak of cotton.
Cotton costs in relation to our selling prices. So we never raise <unk>.
Selling prices to reflect the peak of cotton.
Speaker 8: And now, you know, selling the old cottons come down, but it's cottons come down to where we really set price. So I would say that there's still lots of inflation. Wages are continuing to go up, both in North America and particularly in Central America. Energy's going up.
Now.
Selling mail cottons come down, but its gardens come down to where we really set price. So I would say that there's still lots of inflation.
Wages are continuing to go up both in North America, and particularly in Central America energy is going up.
Speaker 8: So, you know, it's not like there's not still a big, you know, headwind of inflation. It's still there, it belongs with you. And, you know, so partly what's driving our operating margins is more the alignment of our pricing and cotton, as well as our ability to optimize all of our facilities, our cost rupture.
So there's it's not like there's not still a big.
Headwind of inflation, that's still there be honest with you.
And.
So partly what's driving our operating margins as more of the alignment of our pricing and cotton as well as our ability to optimize all of our first fills facilities our cost structure.
Speaker 8: And even though we're going to be at the, you know, the higher end of our operating margins and maybe pass it, we're also investing, you don't heavily on innovation. So typically we've taken...
And even though we're going to be at the higher end of our operating margins and maybe pass. It. We're also investing heavily on innovation. So typically we've we've taken.
Speaker 8: You know, a lot of our cost savings from our manufacturing and put into price and drove market share by price.
A lot of our cost savings from from a manufacturing and put into price and drove market share by price. We're already the price price leader I M. R gap in pricing relative to our fashion competitors is significant right. So our focus right. Now is really is to take our low cost model.
Speaker 8: Where are we to price, price leader? Our gap in pricing relative to our fashion competitors is significant, right? So our focus right now is really is to take our low cost model, leverage our operating margins, and also to reinvest an innovation to put a little bit of money back into our products basically to help us gain more market share. So I think we're in a good position as we move into 24 on all fronts.
Leverage our operating margins and also to reinvest in innovation to put a little bit of money back into our products basically.
To help us Jay and gain more market share. So I think we're in a good position as we move into 'twenty four on all fronts.
Okay. That's helpful. Thank you and good luck.
Yeah.
Speaker 1: Our next question comes from the line of Brian Morrison with TD Securities, your line.
Our next question comes from the line of Brian Morrison with TD Securities. Your line is open.
Speaker 4: Good morning. First question for Glenn, I joined the call late and I know you don't give 2024 guide, but I wanna make sure I'm summarizing this properly. So you're looking for a flat pricing environment. You're looking for market share games and active where you expect retail growth and then obviously the work-modied prices. So you're looking for higher revenues next year, higher operating margin and growth excluding your NCIB. Is that correct?
Hey, good morning.
First question for Glen I joined the call late and I know you don't give 2020 for guidance, but I want to make sure I'm summarizing. This profit properly. So you are looking for a flat pricing environment. You are looking for market share gains in activewear, you expect retail growth and then obviously lower commodity prices. So you are looking for higher revenues next year higher operating margin and growth excluding your NCI.
Is that correct.
Yes, that's correct.
Speaker 8: Okay, so that takes me to the next question for Rod. Rod, if we... Go ahead. Sorry, I qualify that. Is that the only differences we'll definitely looking at.
Okay. So that takes me and our next question for Rod.
Got it.
Go ahead sorry.
Qualify that as at the only differences will definitely looking at.
Speaker 8: A new shelf space, we're looking at definitely taking market share, but the only thing that we don't know is really what the overall macro environment will be at the end of the day because, you know, your core business could...
The new shelf space, we're looking at definitely taking market share, but the only thing that we don't know is really what the overall macro environment will be at the end of the day, because you know what your core business could.
Speaker 8: you know, we don't know what the core volume would be basically if there's a recession or something on. So giving things equal the answer is yes.
We don't know what the core vote.
Volume would be basically if there's a recession or something else, so, but giving things equal the answer is yes.
Speaker 11: That's great. Good cloth again.
That's great.
Good clarification Glenn.
Speaker 11: Rod, that leads me to my next question. So in terms of if pricing is flat, I wanna know what you...
Rod that leads me to my next question. So in terms of if pricing is flat I want to know what you think.
Speaker 11: the EPS impact was from the elevated cotton prices this year. If cotton is 25% to 30% of your cost structure, I estimate it's got to be at least 20% to 30 cents of EPS this year, is that fair?
EPS impact was from the elevated cotton prices. This year, if cotton is 25% to 30% of your cost structure I estimate it's got to be at least 20 to 30 cents of EPS. This year is that fair.
Speaker 3: If you look at the impact overall, I mean it's probably not far off the range. If I think about it, Brian , I mean it has had a big impact on effectively our cost structure. Other things have had impacts as well, though. Inflation as well as impact at us, we had...
Yes, if you look at the AR at the impact overall, I mean, it's probably not far off the range. They are as I think about it Brian I mean, it has had a big impact on effectively our cost structure. Other things have had impacts as well, though inflation as well as has impacted us we had we.
Speaker 3: We had the impact, you know, if you look at the pandemic, you had the inflationary cost that were up effectively that
The impact that you know if you look at the pandemic you had the inflationary costs that were up effectively that we saw the run off of all of that so it has had a significant impact as we've moved through the year and as we say we feel that that's behind us now.
Speaker 3: you know we saw the runoff of all of that so it has had a significant impact as we've moved through the year and uh... as we say we feel that's behind us now
Speaker 3: And as we go into 24, we are well positioned. And if you, you know, the one thing we do, because
And as we go into 'twenty four we are well positioned and if you. The one thing we do control our.
Speaker 3: We've got really our arms around, is our cost structure and we feel very good about that as we head into 20.
We've got really our arms around is our cost structure and we feel very good about that as the as we head into 'twenty four.
Speaker 11: Yeah, I guess I appreciate that, but I want to understand that the tailwind all things being constant is the tailwind going to be your starting base is not $2.55 of EPS. It's really closer to $2.75 to $2.85.
Yes, I guess I appreciate that but I want to understand that the tailwind.
All things being constant is the tailwind going to be youre, starting basis, not $2.55 of EPS, it's really closer to $2 75 to $2 85.
Speaker 11: Yeah, look, our tail will, yeah, if you look at effectively or starting a base level is, yes, the answer is it's strong. It's as we move to 24. Okay, and then Story Blend, I didn't understand your comment, or pardon me, Rod, the comment on GMT when you said, it was conservative. Are you thinking that it might be above or below the 15th?
Yes look our tailwind it yeah. If you look at the effectively are starting have a base level is yes. The answer is it's strong it's a as we move to <unk> to 'twenty four.
Okay, and then sorry, Glenn I didn't understand your comment pardon me Rod I caught the comment on GMT when you said.
It was conservative are you thinking that it might be above or below that 15%.
Speaker 3: i'm thinking when you look at the whole uh... you know but unfolding of gm t plus other things that other countries are looking at i think very definitely there effectively if the potential that it's below fifteen percent for us if you look at it in a combined
I'm thinking when you look at the whole.
Ill unfolding of G. M T plus other things that other countries are looking at I think very definitely there effectively is the potential that it's below 15% for us if you look at it on a combined basis. If you look at the total impact.
Speaker 3: basis if you look at the total impact uh... in twenty four will see people are still working on their legislation and so i think you have to really monitor closely as you head into uh... twenty four and some of that will actually leak into three as you you go to the end of twenty three some of that will leak into twenty four as well i don't
In 'twenty four we will see people are still working on their legislation and so I think you have to really monitor it closely as you head into the.
24, and some of that will actually leak into sorry, as you know you go to the end of 'twenty three some of that will leak into 24 as well.
Speaker 3: I'm not sure that all legislation will be in place as we finish the year. It'll roll in in the very early part of the new year, but the answer is yes.
I'm not sure they're all legislation will be in places we finished the year it'll it'll roll in in the very early part of our.
Of the new year, but the answer is yes.
I appreciate the clarity.
Speaker 1: Next question comes from the line of Stephen McLeod with BMO Capital Markets. You're lining.
Next question comes from the line of Stephen Mccleod at BMO capital markets. Your line is open.
Speaker 4: Great, thank you, good morning. Just a couple things I wanted to follow up on. The first one is just on ring spun. You know, you talked about some revenue gains there. I'm just curious, are you seeing any price sensitivity in ring spun or is it more that you're seeing, maybe with your pricing differential, your offering is more attractive to price sensitive consumer. Just try and understand the dynamic on what's driving ring spun.
Great. Thank you and good morning.
Just a couple of things I wanted to follow up on the first one is just on ring spun.
You talked about some some revenue gains there.
I'm just curious are you seeing any price sensitivity in ring spun or is it more that youre seeing maybe with your pricing differential you're.
You're offering is more attractive to <unk>.
Price sensitive consumer I'm, just trying to understand the dynamic on whats driving ring spun.
Speaker 5: Hey, good morning. I guess overall, again, I think as we look at our product, I mean, I think we have a very...
Hey, good morning, I guess overall again I think as we look at our product I mean, I think we we have a very good quality product at good values, we were talking as we and we saw through the pandemic. We saw some of our fashion competitors raise price.
Speaker 5: good quality product and good values we were talking as we and we saw through the pandemic we saw some of our fashion competitors race price uh... pretty significantly above where we were and and create a large gap uh... which drove more and more trial for us and an opportunity for us to gain share during that time since that point in time we have seen
Pretty significantly above where we were in and create a large gap, which drove more and more trial for us and an opportunity for us to gain share during that time since that point in time, we have seen prices by some of the fashion competitors come back down, but even with them, bringing prices back down we're still gaining share and at <unk>.
Speaker 5: by some of the fashion competitors come back down, but even with them bringing prices back down, we're still gaining share and outperforming them despite where the gap may be. So we think we'll continue to gain share in the ring spun category and again, as Glenn mentioned, we're able to capitalize on the investments we're making in our vertical integrated manufacturing to continue to do that, especially as we bring up Bangladesh. So I think we're well positioned. Okay.
Forming them.
Despite where the gap may be so we think we'll continue to gain share and in the ring spun category and again as Glenn mentioned, we're able to capitalize on the investments, we're making our vertical integrated manufacturing to continue to do that especially as we bring up Bangladesh. So I think we're well positioned.
Okay, that's great. Thanks Chuck.
Speaker 5: And then just coming back to the 2024 outlook, I mean, it sounds like you've had a lot of positive commentary around just the outlook and the on what you can control. But just as it relates to fiber costs.
And then just just coming back to the 'twenty 'twenty four outlook I mean, it sounds like you've had a lot of positive commentary around.
Just the outlook in the.
And what you can control.
But just as it relates to fiber costs.
Speaker 12: Do you have, is it fair to say that you have most of your fiber cost visibility sort of already lined up for 2024 or do you have kind of six months visibility and then beyond that kind of depends on what the market.
Do you have is it is it fair to say that you have most of your fiber cost visibility sort of already lined up for 2024 or do you have kind of six months visibility and then and then beyond that kind of depends on what what the market does.
Speaker 8: I would say that we have very good visibility in our cost structure for the full 2024.
I would say that we have very good visibility in our cost structure for the full of 2024.
Speaker 13: Okay, that's great. Okay, thanks a lot. That's great. Thank you guys.
Okay. That's great. Okay. Thanks, Glen that's great. Thank you guys appreciate it.
Speaker 1: Our next question comes from the line of David's words with Morningstar. Your line is open.
Our next question comes from the line of David Swartz with Morningstar. Your line is open.
Yeah. Thanks for taking my question.
Speaker 14: Can you give us a little bit more information about the ramp up of the Bangladesh facility and how that fits into your production cycle and also if your plan to change it all because of the relative weakness of the international business and the possibility of higher wage rates in Bangladesh? Thank you.
Can you give us a little bit more information about the ramp up of the Bangladesh facility and how that fits into our production cycle and also if your plans have changed at all because of the relative weakness of the international business and the possibility of higher wage rates in Bangladesh. Thank you.
Yeah.
Speaker 8: Well, we're continuing to ramp up our Bangaladesh facility. We really is going to be roughly about 25% of its running capacity by the end of our Q4 of 2023. Then we're going to continue to ramp up the plan and our objective is to have a 75% by Q4 2024.
But we're continuing to ramp up our <unk>.
Odessa facility, we really is going to be roughly about 25% of its running capacity by the end of our Q4.
2023, and then we're going to continue to ramp up the plan and our objective is to have 75% by <unk>.
Q4, 'twenty 'twenty four.
Speaker 8: So, but that's for the, you know, that's an exit rate. So if you take the average as we, you know, it starts at 25 and ends at...
So, but that's desperately.
That's an exit rate. So if you take the average has a vision that would start to twenty-five and ends at.
Speaker 8: you know, 75, I mean, you can just get probably more of a 50% impact to, and that's what we really need to support the growth of our, you know, our rings fund product categories and as well as the big underwear programs we have. So we're, we're pretty much aligned. And then the exit rate will continue to support 2025 as we move forward. Regarding the,
75 of them you can discount is probably more of a 50% impact too.
And that's what we really need to support the growth of our you know our ring spun product categories and as well as the big underwear programs. We have so we're we're pretty much aligned.
And then the exit rate will continue to support our 2025.
As we move forward.
Regarding the.
Speaker 15: The wages, I mean, wages I think are pretty much in line in all of the areas, particularly in Bangladesh, I mean, wages are not a big factor of our overall cost structure in any of our operating margins on markets anyway. So we don't really see that as an issue. Thank you and good luck.
The wages I mean wages are I think are are pretty much.
In line and all of the areas of particularly in Bangladesh I mean, our wages are not a big factor of our overall cost structure and any of our operating margins our markets.
Anyway. So it's we don't really see that as a as an issue.
Thank you and good luck.
Thank you.
Speaker 1: And we have another question. Comes from the line of sub-bat hat can with RBC capital markets. Your line.
And we have another question comes from the line of Labatt, Ken RBC capital markets. Your line is open.
Speaker 16: Great, thanks and good morning. Just to want to get a little bit more color on the commentary around the innovation. I guess is this innovation more around to re manufacturing the products at Laura Cos is this sort of new market product that you can talk a little bit about and what is included in these new launches.
Okay, great. Thanks, and good morning, just wanted to get a little bit more color on the commentary around the innovation I guess is this innovation more around to re manufacturing the products at lower cost is sort of new to market products that you can talk a little bit about kind of what is included in these new launches.
Okay.
Speaker 8: Well, it's really about the innovation of the types of material that we put into our products.
Well, it's really about the innovation of the types of material that we put into our products.
Speaker 8: We've significantly improved.
We've significantly improved.
Speaker 8: a lot of our fabrications as well as we redesign the fit and look and feel of a lot of our products. So it's an imprintability is another big aspect that we're looking at.
A lot of our fabrications.
As well as we redesigned the fit and look and feel of a lot of our products. So it's in the printed ability is another big aspect that we're looking at.
Speaker 8: to support the digital printing market.
To support.
The digital printing market. So it's a combination of various <unk>.
Speaker 8: So this combination of various innovation ideas that I think are really going to separate us from what's out there today in the market will be presenting a lot of these at Long Beach in a couple of months.
Innovation.
It is that I think are really going to separate us from what's out there today in the market.
We'll be presenting a lot of these at our long beach in a couple of months.
Speaker 8: And we hopefully be hosting a investor conference sometime in the new year to help showcase, you know, really where we're going and the leverage we have from our vertical integration and all the great things we've got going on.
And we hopefully will be hosting a investor conference sometime in the new year.
To help showcase.
But really where we're going and the and the leverage we have from our vertical integration and another great things, we've got going on.
Speaker 16: Great and then I just want to follow up there some discussion earlier around sort of the distributor inventory levels expected to be sort of flat and then You know your ship in following POS as well as market share capture I guess
Alright, Great and then I just wanted to follow up there is some discussion earlier around sort of the distributor inventory levels expected to be sort of flat and then.
Your ship and following Pos as well as market share capture I guess.
Speaker 16: What is your sort of expectation on market share capture at this point? I'm guessing POS probably follows the macro. So I'm extending on not sure if you had any commentary there, but is it kind of the new innovation or things like that are leading to some expectation of market share capture? Or how are you thinking about that for the top line?
What is your sort of expectation on market share capture at this point I'm asking Pos ill probably follow the macro to some extend in I'm not sure. If you have any commentary there but.
Or is it kind of the Lora, the new innovation and things like that are leading to some expectation of market share capture or how are you thinking about that for the top line for next year.
Okay.
Speaker 8: Well, look at it. I mean, you know, right now in the traditional basic category or the open end t-shirts, we've already had a quite large market share. So, you know, we're continuing to, optimize on that. But the real big opportunity for us is to capitalize, obviously, on the ring fund and the flee segments, which is really where all our focus is.
Okay.
Right now in the traditional basic category or the open N T shirts, we've already had a quite a large market share. So you know, we're we're continuing to optum.
Optimize on that but the real big opportunity for us is to capitalize obviously on the ring spun in the flu segments, which is really where all our focus is.
Speaker 8: And, you know, we don't have a larger share there. So that's the area that we're seeing all these market share gains. It's a combination of, you know, taking share in the ring spun as well as the development of fleece because the one thing about fleece is to growth category. There's more sweatshirts being sold on a year over your basis. The category is up, you know, it's almost up.
And we don't have a larger.
A larger share of their so that's the area that we're seeing all of these market share gains it's a combination of.
Taking share in the ring spun as well as the development of fleece, because the one thing about fleece, it's a growth category.
Theres more sweatshirts being sold on a year over year basis. The category is up it's almost up now.
Speaker 8: You know, we said double digits, but it's almost a really high double digits, be honest with you, it's doing very well. And it's a growing category. So those are the two big focuses for us. And we have what we think is competitors with very high cost ruptures in these two areas that will allow us to continue taking sure. Great. Thanks.
We said double digits, but it's almost liberty are high double digits to be honest with you it's doing very well.
And it's a growing category.
So those are the two big focuses for us.
And we have what we think as competitors with very high cost structures. In these two areas that will allow us to continue taking share.
Great. Thanks, very much for the color.
Okay.
Speaker 1: There are no further questions at this time. Ms. Hayam, I turn the call back over.
There are no further questions at this time, Ms. Han I'll turn the call back over to you.
Okay. Once again, we'd like to thank everyone for joining us. This morning, and we look forward to speaking to you soon have a great day.
Speaker 2: Okay, once again we'd like to thank everyone for joining us this morning and we look forward to speaking to you soon. Have a great time.
Speaker 1: This concludes this concludes today's conference call. You may now
This concludes this concludes today's conference call you may now disconnect.
[music].