Q4 2023 Gildan Activewear Inc Earnings Call

Rhodri J. Harries: While our revenue growth during 2023 was hindered by an industry-wide soft-demand environment driven by the challenging macroeconomic backdrop, we have nonetheless continued to drive market share gains in key product categories, and this positions us well as we move forward, leveraging our strong capabilities in the target markets that we serve. So for 2024, we expect the following. Revenue growth for the full year to be flat to up low single digits, and adjusted operating margins slightly above the high end of our 18 to 20 percent annual target range. CapEx to come in at approximately 5% of sales. Adjusted diluted EPS in the range of $2.92 to $3.07, up significantly between 13.5% and 19.5% year over year; free cash flow above 2023 levels driven by increased profitability, lower working capital investments, and lower capital expenditures than in 2023.

Yeah.

Jamie: Good morning, My name is Jamie and I will be your conference operator today.

Jamie: I would like to welcome you to the Q4 2023 Gil Dan.

Jamie: Where earnings conference call.

Jamie: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Jamie: If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question Press Star one again.

Jamie: <unk>.

Jamie: I would now like to turn the call over to Jessie Haim Vice President head of Investor Relations you May begin your conference.

Rhodri J. Harries: Further, the outlook that I just laid out is underpinned by some key assumptions, including the following. Our outlook assumes that POS trends continue to improve compared to 2023, reflecting potential for recovery in various markets, as well as overall growth opportunities. Our SOC license agreement with Under Armour is expiring in late March, which is expected to have a minimal impact on our profitability.

Jessie Haim: Thank you Jamie good morning, everyone earlier, we issued a press release announcing our results for the fourth quarter and full year 2023, as well as our first time guidance for 'twenty 'twenty four.

Jessie Haim: The company's management discussion and analysis and consolidated financial statements are expected to be filed with the Canadian securities and regulatory authorities and the U S. Securities Commission today and will also be available on our corporate website.

Jessie Haim: Joining me on the call today are Vince Tyra, President and CEO Gil Dan Rod Harries, our executive Vice President and Chief financial and administrative officer, and Chuck Ward, President sales marketing and distribution.

Rhodri J. Harries: Excluding the impact of this agreement, and on a comparable basis, our outlook implies full-year revenue growth in 2024 would be more in the low to mid-single-digit range. We also assume continued share repurchases in 2024, further demonstrating our belief in the strength of our business and our commitment to optimizing capital allocation. And we expect to maintain our debt leverage ratio within our target range of one to two times. Finally, as discussed last quarter, the timing of the potential enactment of legislation related to the Global Minimum Tax, or GMT, in Canada remains uncertain.

Speaker Change: This morning, we'll take you through the results for the quarter and a question and answer session will follow.

Speaker Change: 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 Change: We refer you to the company's filings with the U S Securities and Exchange Commission and Canadian Securities regulatory authorities.

Rhodri J. Harries: We have nonetheless incorporated into our guidance the estimated impact of the implementation of draft GMT in Canada and Barbados, retroactive to January 1st, 2024, as well as certain expected refundable tax credits, which will reduce our SG&A. I also want to provide you with an update on the current quarter. While we expect positive POS trends across the board in 2024, POS has been somewhat mixed so far in Q1, with good strength in certain important activewear areas, such as in fleece and ringspun products, but with more variability in other areas, such as with underwear in the hosiery and underwear category. Moreover, and more importantly, with respect to Q1, we expect the higher levels of customer replenishment that we saw in Q4 will impact the level of restocking that will take place in Q1.

Speaker Change: During this call. We will also discuss certain non-GAAP financial measures reconciliations to the most directly comparable I F. R. S measures are provided in today's earnings release as well as our M. D N a.

Speaker Change: And now I'll turn it over to Vince.

Vince Tyra: Thank you Jessie good morning, everyone and welcome I've been looking forward to engaging with you all and I'm thrilled to address you today on my first earnings call as the newly appointed CEO Gil Dan Activewear.

Vince Tyra: As for the results we delivered a solid Q4, thanks to the outstanding operational execution by our highly skilled team of employees across our global footprint. In fact, 2023 was a year of strong progress on Gil Dan sustainable growth strategy. Despite an overall challenging macroeconomic backdrop and tough year over year comparative periods.

Vince Tyra: This foundation together with a solid balance sheet is in a enviable puts us in an enviable enviable position enhance upon it as we go forward.

Rhodri J. Harries: As such, we currently expect Q1 net sales to be down low single digits and expect Q1 adjusted operating margin to come in around the low end of our 18% to 20% target range. So, in conclusion, I'd like to leave you with a few thoughts. Following the multi-year volatility related to the pandemic, we saw normalizing inventory and replenishment patterns as we move through 2023. But it was a challenging year overall, given the impact of the macroeconomic environment, and we are pleased with the progress we achieved.

Vince Tyra: In my early weeks with the company I witnessed firsthand the incredible talent and dedication of the Guild and team.

Vince Tyra: Been a participant in this industry for several decades as an operating executive and in other capacities and Gil Dan's powerful manufacturing engine is truly a key differentiator.

Vince Tyra: Look forward to leveraging Gilda and strengths our incredible team and my experience to drive this organization's long term growth and create value for shareholders.

Vince Tyra: So closely with the leadership team and the board to find opportunities to further leverage our strong foundation and drive strong and durable growth in the future finally, as I've been onboarding with a great company I've had the opportunity to visit with hundreds of employees in Montreal in Honduras and have recently met with many of our key customers during the recent industry trade shows.

Rhodri J. Harries: As we begin 2024, we feel that Gildan is well positioned to continue to win in our markets regardless of the macroeconomic backdrop. However, end-user behavior continues to be affected by inflationary pressures, weighing on buying patterns, still leading some of our customers to place orders closer to their needs and manage their inventory and replenishment levels more tightly. That said, we expect demand for replenishment-type products to continue to normalize as we move through the year, given the nature of the products we sell. Furthermore, our in-stock levels are in great shape, we have significant flexibility in our manufacturing system, and a healthy balance sheet. We also remain encouraged by market share gains in key growth categories such as fleece and ringspun and are incredibly excited about our recent product innovation. As introduced at the Impressions Trade Show in January 2024, these products feature softer fabric and enhanced printability based on our new proprietary soft cotton technology, which is expected to further enhance our competitive positioning.

Vince Tyra: In Las Vegas, Nevada in long Beach, California, which is fueling my excitement for the future.

Vince Tyra: It was great to reconnect with many familiar faces in the industry as well and gain their perspective on our company as well as the industry and I'm personally looking forward to sharing my views with you in the months ahead, as we leverage our strong capabilities and innovation to create further opportunities going forward I look forward to taking your questions. A little later during the Q&A session and with that.

I will turn it over to Rod.

Vince Tyra: Okay.

Rod: Thank you Vince good morning to all and thank you for joining us today.

Rod: I'd like to start the call by thanking the entire gilden team for everyone's excellent work and dedication through 2023, leading it to us leading us to a strong finish to the year we.

Rod: We delivered sales growth of 9% in the fourth quarter adjusted operating margin at the high end of the company's targets target range double digit EPS growth and we generated robust cash flow, allowing us to execute on our capital allocation priorities.

Rod: We are now two years into the gilden sustainable growth strategy or <unk> strategy and we're pleased with the progress made across our three key strategic pillars, but also excited to capitalize and further enhance all of the work that has been done in 2023 as we enter 2024 I will expand on this shortly along with our outlook for 2024, but for now.

Rod: Now, let's shift our focus to the fourth quarter results.

Rod: Net sales for the fourth quarter came in at $783 million up 9% with activewear sales at $644 million up, 8% and hosiery and underwear sales at $139 million up 11%.

Rod: The increase in activewear sales was fueled by higher volumes, driven by Pos as well as higher levels of customer replenishment in the prior year.

Jessy Hayem: Consequently, you can see we're continuing to leverage the GSG strategy to drive organic growth and remain confident in our ability to drive shareholder value into the future. We thank you for your interest and support in our company. This concludes my formal remarks, and with that, I will turn it back over to Jesse. Thank you, Rod.

Rod: We specifically benefited from healthy P. O S levels and continued strong performance in key growth categories, such as fleece and ring spun T shirts, which translated into favorable mix versus last year.

Rod: Finally, our international sales were down 24% in the quarter. Despite some P. O S recovery is difficult macroeconomic conditions in these markets led to a lack of inventory replenishment compared to the prior year.

Operator: Before moving to the Q&A session, I'd ask you to limit the number of questions to two, and we'll circle back for a second round of questions if time permits. Finally, please note, as the purpose of today's call is to discuss Gildan's results for the fourth quarter and year-ended December 31st, 2023, we will only address questions relating to our financial results and guidance and related operational matters. Jeanne, you may begin the Q&A session. If you would like to ask a question, press the star followed by the number one on your telephone keypad.

Rod: Turning to the who's who in underwear category. The sales increase was fueled by higher volumes driven by a combination of P. O S with pockets of strength, notably in global lifestyle brands as well as the continued rollout of programs in the mass retail channel.

Rod: So despite continued industry weak demand for men's underwear and socks, we continued to achieve a solid performance in this category.

Rod: Wrapping up on sales overall were very pleased with the performance that we delivered in the quarter in the context of what continues to be an uncertain environment for consumer spending as we move from 'twenty to 'twenty three to 'twenty 'twenty four.

Rod: Turning to the margins for the quarter adjusted gross margin came in at 32% up 110 basis points year over year, primarily due to lower raw material costs slightly offset by lower net selling prices.

Paul Lawrence Lejuez: Your first question comes from the line of Paul Lejuez with Citigroup. Your line is open. Hey, thanks, guys. Just a couple quick ones.

Rod: As fully expected we saw a sequential improvement of 270 basis points in our adjusted gross margin as pressure from the flow through of peak cotton costs subsided significantly in the fourth quarter.

Rhodri J. Harries: On the GMT, I'm curious what tax rate you guys are assuming and also the assumed SG&A offset that you've got built into guidance. And then can you also talk about the pricing environment? You mentioned lower costs but also lower prices. So what are you seeing from the competitive landscape, the expected decreases or a year on the pricing side, and any sense of magnitude that you can share and how it might differ by category? Thanks.

Rod: And as we've previously called out this will continue to be a tailwind as we move through 2024.

Rod: Moving on to SG&A.

Rod: Expenses were 88 million or 11, 3% of sales, including CEO separation costs and related advisory fees on shareholder matters.

Rod: On an adjusted basis as a percentage of sales SG&A was up 30 basis points to 10, 5% as the impact of higher year over year expenses more than offset the benefit of sales leverage.

Rhodri J. Harries: Okay, Paul, I'll start, and I'll turn it over to the team to answer the question on pricing. But if you look at what we've assumed on the tax side, as I indicated in the comments, we've assumed the enactment of the global minimum tax, and that will occur retroactive to January 1st, 2024. Currently, there's draft legislation out there, it hasn't been enacted yet, but it's our expectation that it will be enacted in Canada this year.

Speaker Change: Our overall SG&A performance in 2023, we continue to be pleased with how the team managed SG&A in this inflationary environment and we expect this performance to continue as we move forward.

Speaker Change: So summing up these elements in the quarter, we generated an operating margin of 22, 8% of sales.

Speaker Change: Now as part of an annual impairment testing requirements and given improved profitability projections related to our hosiery sales, we recorded a 41 $41 million reversal of prior hosiery related impairment charges.

Speaker Change: Adjusting for this as well as for restructuring costs in both years and an insurance accounting gain in 2022, we generated adjusted operating margin of 19, 7% up 90 basis points over last year at the high end of our target range of 18% to 20% and in line with our expectations.

Rhodri J. Harries: And so what we've assumed from a tax perspective is that in parallel with the enactment of GMT, our effective tax rate will move up to just below 18%. That will be the consequence of GMT rolling through Canada and other jurisdictions. However, there are other benefits that we expect to see related to tax reform that are expected to yield credits that will flow through our SG&A line. And the simplest way to think about that is that the quantum of those credits will probably reduce our SG&A as a percent of sales by about 80 basis points. So that will effectively bring down the net impact of GMT on our P&L.

Speaker Change: Further after reflecting net financial expenses of $21 million and factoring in continued share repurchases, we reported GAAP diluted EPS and adjusted diluted EPS of <unk> 89 cents and 75, respectively.

Speaker Change: Turning to cash flow and balance sheet items cash.

Speaker Change: Cash flow from operating activities totaled 239 million with free cash flow coming in at 203 million driven by higher adjusted net earnings together with lower working capital investments and lower Capex.

Speaker Change: This strong finish yielded full year cash flow from operating activities of 547 million and free cash flow of $392 million.

Rhodri J. Harries: It will also boost our operating margin. And so that is reflected in our EPS guidance. If we move to the question on pricing and what we've assumed in the price environment, effectively, if you look at prices overall, we do see stability as we move into 2024. We've seen it in 2023, and we do see it as we move into 2024.

Speaker Change: The significant increase in free cash flow in 2023, which albeit came in a little lower than previously anticipated.

Speaker Change: It reflected lower capital expenditures as well as lower working capital investments versus the prior year. When we were working hard to bring inventories to hire a more optimal levels and during the pandemic.

Speaker Change: The progressive ramp up of our new large scale Bangladesh facility is underway, which will continue through 2024 and as up as planned we exited 2023 at a capacity run rate of around 25% and continue to expect an exit rate of about 75% at the end of 'twenty 'twenty four.

Jay Daniel Sole: There are pockets where we do see real competitiveness in pricing, I would say. And if you think about our national accounts business there, I would say it's very competitive. And then if you look at the international markets as well, we've seen some price pressure there, although we do see that abating, I would say, as we move into 2024, and partly because, from our perspective, we're going to be very strong on the product side. But overall, we are expecting, I would say, a stable price environment with a little bit of, I would say, downward pressure overall on net prices, but very manageable Thank you. Your next question comes from the line of Jay Sole with UBS. Your line is open. Great, thank you so much. I have two questions.

Speaker Change: Finally, and importantly, we ended the year with very satisfactory inventory levels and in a strong position to service our customers as we move through 2024.

Speaker Change: Moving onto our M C I b.

Speaker Change: A robust buyback activity this quarter underscores our strong cash flow generation and commitment to delivering value to our shareholders.

Speaker Change: In fact in 2023, we repurchased approximately 11 5 million shares under our N CIB program or close to 7% of our public float returning a total of $492 million of capital to shareholders for the year, including dividend payments.

Speaker Change: And given the strength of our free cash flow.

Speaker Change: Even with this significant return of capital during 2023, our net debt finished at $993 million at year end with a net debt leverage ratio of 1.5, well within our one to two times targeted debt levels.

Speaker Change: This brings me to a few thoughts on our G. S T strategy and our outlook for the year ahead.

Speaker Change: We've made strong progress on our three key strategic pillars, optimizing our capacity fostering innovation and implementing our next generation ESG strategy.

Vincent J. Tyra: First, for Vince, as you've gotten acclimated to the company, what do you see as the biggest long-term growth opportunities, you know, just from a sort of a big picture qualitative perspective? And then, secondly, for Rod, when we think about the fiscal 24 margin guidance, how are you thinking about gross margin versus SG&A within that guide? Thank you. Thank you, Jay, for this event. And yeah, I mean, obviously, that's a great question.

Speaker Change: We have also successfully executed on several components of the financial framework, we laid out.

Speaker Change: While our revenue growth during 2023 was hindered by an industry wide soft demand environment driven by the challenging macroeconomic backdrop, we have nonetheless continued to drive market share gains in key product categories and this positions us well as we move forward leveraging our strong capabilities in the target markets that we serve.

Speaker Change: So for 'twenty 'twenty four we expect the following.

Speaker Change: Revenue growth for the full year to be flat to up low single digits.

Speaker Change: Adjusted operating margin slightly above the high end of our 18% to 20% annual target range.

Vincent J. Tyra: I think that's getting developed; I can talk about my initial impressions from the first, you know, month or so here. But in terms of nailing down the long-term strategy, I think that'll come as 2024 develops. Certainly, my experience with the industry is helping, hopefully, to shortcut that timeframe. But with that being said, I mean, I think the reasons I'm here, or what I've been able to validate in terms of what we have and the manufacturing capacity and the agility of that capacity. Obviously, the brands that we have, when you think about American Apparel and Comfort Colors and Gildan itself, are powerful in this industry. And we're reenergizing the American Apparel brand, as most know. But you know, the leadership team; there's a number of things that go into it.

Speaker Change: Capex to come in at approximately 5% of sales.

Speaker Change: Adjusted diluted EPS in the range of $2.92 to $3.07 up significantly between 13, and a half of 19, 5% year over year.

Speaker Change: Free cash flow above 20, twenty-three levels, driven by increased profitability lower working capital investments and lower capital expenditures than in 2023.

Speaker Change: Further the outlook that I just laid out is underpinned by some key assumptions, including the following.

Speaker Change: Our outlook assumes that P. O S trends continued to improve compared to 2023.

Speaker Change: Reflecting potential for recovery in various markets as well as overall growth opportunities.

Speaker Change: Our sock license agreement with under armour is expiring late March which is expected to have a minimal impact on our profitability.

Speaker Change: Excluding the impact of this agreement and on a comparable basis, our outlook implies full year revenue growth in 2024 would be more in the low to mid single digit range.

Vincent J. Tyra: But I think we'll be focusing on what our capabilities are in manufacturing, obviously, looking at how we can enhance the GSG, which I think is a pretty strong approach. I mean, this back to basics, that I've kind of watched and looked and seen what happened in the last couple years has led to the GSG and, and what's happening internationally, I think is going to give us some nice opportunities. And the end of probably the biggest surprise I saw and just being in Honduras for a week was just how much innovation is going on inside the plant and what it avails us in terms of long-term opportunities. Okay, thanks, Vince.

Speaker Change: We also assume continued share repurchases in 2024 further demonstrating our belief in the strength of our business and our commitment to optimizing capital allocation and.

Speaker Change: And we expect to maintain our debt leverage ratio within our target range of one to two times.

Speaker Change: Finally, as discussed last quarter, the timing of the potential enactment of legislation related to global minimum tax or GMT in Canada remains uncertain.

Speaker Change: We have nonetheless incorporated into our guidance the estimated impact of the implementation of draft GMT in Canada in Barbados retroactive to January one 2024, as well as certain expected refundable tax credits, which will reduce our SG&A.

Speaker Change: I also want to provide you with an update on the current quarter.

Rhodri J. Harries: And so if I go to the second part of your question, Jay, on gross margin SG&A, and maybe I'll also talk about it from an operating margin perspective. But look, we think we're in very good shape as we move into 24. If you look from a gross margin perspective, if you look at where we were in Q4, our gross margin came in just a little above 30%, and that was in line with what we had anticipated. And we have been saying all through 23 that effectively, we expect to see the tailwind associated with fiber costs really kick in as we get into Q4 and as we move into 2024. You may recall that it caused pressure in the early part of 23. We did not price for that.

Speaker Change: While we expect positive Pos trends across the board in 2024.

Speaker Change: POS has been somewhat mixed so far in Q1 with good strength in certain important activewear areas such as in fleece in ring spun products, but with more variability in other areas such as with underwear in the hosiery and underwear category.

Speaker Change: Moreover, and more importantly, with respect to Q1, we expect the higher levels of customer replenishment that we saw in Q4 will impact the level of restocking that we will take that will take place in Q1.

Speaker Change: As such we currently expect Q1 net sales to be down low single digits and expect Q1, adjusted operating margin to come in around the low end of our 18% to 20% target range.

Speaker Change: So in conclusion I'd like to leave you with a few thoughts.

Speaker Change: Following the multi year volatility related to the pandemic, we saw normalizing inventory and replenishment patterns as we move through 2023.

Speaker Change: But it was a challenging year overall, given the impact of the macroeconomic environment and we are pleased with the progress we achieved.

Speaker Change: As we begin 2024, we feel like gilden is well positioned to continue win to win in our markets regardless of the macroeconomic backdrop.

Rhodri J. Harries: We knew it was effectively gonna flow through. And now we're seeing it in Q4, and you can expect our gross margins to stay strong as we move through 24. And we'll continue to improve upon that, right? Because there are other things that we do from a manufacturing perspective. We continue to optimize our structure. We have Bangladesh ramping up, which we're incredibly excited about. And so we believe that we have gross margin very well under control as we move into 24. The same thing from an SG&A perspective.

Speaker Change: While we expect continued momentum in the <unk> principles market and user behavior continues to be affected by inflationary pressures weighing on buying patterns still leading some of our customers to place orders closer to their needs and managing their inventory and replenishment levels more tightly.

Speaker Change: That said, we expect demand for replenishment type products to continue to normalize as we move through the year given the nature of the products we sell.

Speaker Change: Furthermore, our in stock levels are in great shape, we have significant flexibility in our manufacturing system and a healthy balance sheet.

Rhodri J. Harries: I think we're very disciplined on SG&A. We've been very focused on effectively making sure that the front end of our business is very efficient in the way that we operate. And if you look at our SG&A performance full year in 23, we came in just around 10%, which is around our target. And as we move into 24, we'll be looking to continue to run at those levels, maybe improve upon them a little bit, and then we'll also get the benefit of the refundable tax credits flowing through. And so you can see SG&A on a full year basis should look good on a comp basis versus 23.

Speaker Change: We also remain encouraged by market share gains in key growth categories, such as fleece in ring spun and are incredibly excited with our recent product innovation.

Speaker Change: As introduced at the impression straight show in January 2020 for these products feature softer fabric and enhanced printer billety based on our new proprietary soft cotton technology, which is expected to further enhance our competitive positioning.

Speaker Change: Consequently, you can see we're continuing to leverage the GST strategy to drive organic growth and remain confident in our ability to drive shareholder value into the future.

Jay Daniel Sole: And then when you look at overall gross margin, that's why we've given the guidance that we expect it to be slightly above the 18 to 20% range, higher than the 20%, because of what we're seeing in gross margin in SG&A. So overall, we feel we're very well positioned. Things are well under control, and we're excited about what we see for 24. Got it. Thank you so much.

Speaker Change: We thank you for your interest and support in our company. This concludes my formal remarks, and with that I'll turn it back over to Jesse.

Jesse: Thank you Rod before moving to the Q&A session I'd ask you to limit the number of questions to two and we'll circle back for a second round of questions if time permits.

Jesse: Finally, please note as the purpose of today's call is to discuss <unk> results for the fourth quarter and year ended December 31, 2023, we will only address questions relating to our financial results and guidance and related operational matters.

George Doumet: Your next question comes from the line of George Doumet with Scotiabank. Your line is open. Yeah, good morning, guys. Rod, can you help us understand the moving parts embedded in the Q1 guidance of low of down low single digits? And how should we, how should we think of the recovery towards the flat up low single digits? Is that just going to be linear, or a little bit more about it? Now, if you look at Q1, we have called out that it would be down low single digits. And I gave some color in the script, right?

Genie: Genie you may begin the Q&A session.

Genie: If you would like to ask a question press star followed by the number one on your telephone keypad.

Polish Way: Your first question comes from the line of Polish way with Citigroup. Your line is open.

Polish Way: Oh, thank god for bubble.

The DMT.

Right.

Oh.

Polish Way: SG&A.

Polish Way: Oh boy.

Talk about the pricing environment.

Polish Way: Paul.

Polish Way: Loan pricing.

Polish Way: Yes.

Yes.

Polish Way: Yeah.

Polish Way: All right.

Polish Way: The magnitude.

Polish Way: Sure.

Polish Way: By category.

Speaker Change: Okay, Paul I'll start and then I'll turn it over the team to answer the question on Nap on pricing, but if you look at effectively what we've assumed with the on the on the tax side as I indicated in the comments, we've been assumed the enactment of the global minimum tax and that will have.

Rhodri J. Harries: We talked about POS effectively being mixed. But I think that really the story behind POS is that POS is in good shape, good shape for us across the activewear category. If you look, and that's the most important category for us.

Speaker Change: Her a retroactive to January one 2024.

Speaker Change: Currently there's draft legislation out there hasn't been enacted yet, but it is our expectation that will be enacted in Canada. This.

Rhodri J. Harries: And if you look across the board, POS is performing reasonably well, as you think about the macro backdrop. So I would say we are comfortable with what we're seeing there. There are some spots, some pockets of weakness where it's a little bit more variable, but I would say it's holding up.

Speaker Change: This year in <unk>.

Speaker Change: So what we've assumed from a tax perspective is that in parallel with the enactment of G. M. T. Our effective tax rate will move up to just below 18%.

Speaker Change: So that'll be the consequence of GMT rolling through Canada and other jurisdictions.

Rhodri J. Harries: But as we go into Q1, what we do see is effectively, we do expect restocking on the distributor side. We're going into the season, so we expect to see restocking. But because of the strength of what we saw in Q4, where normally we would expect destocking in Q4, and we've called that out. We were expecting that.

Speaker Change: However, there are other benefits that we expect to.

Speaker Change: C related to tax reform.

Speaker Change: That are expected to yield credits that will flow through our SG&A line and the simplest way to think about that is that the quantum of those credits will probably reduce our SG&A as a percent of sales by about 80 basis points. So that effectively will bring down the net impact of G. M.

Speaker Change: On our P&L, but will also boost up our operating margin and so that is reflected in our EPS guidance.

Rhodri J. Harries: But what happened was we shipped to POS. We shipped in line with POS in Q4. And effectively, as a result of that, we didn't see the, I would say, destock in Q4. And so what we expect are lower levels of replenishment in Q1. So the restock won't be as large as you might normally expect in the first quarter. And the impact of that, in total, basically means that we will see a little bit weaker start to the year. But I would say as we go forward, we do see strength as we move into Q2, Q3, Q4. And that's all on the back of our very strong competitive positioning. What we're seeing with market share gains, what we're seeing in these key categories, Rinkspun, Fleece, all the drivers of the business. I mean, there are many, I would say, drivers of the business, as we think about 24 in total, right?

Speaker Change: If we move to the question on pricing and what we've assumed in the price environment.

Speaker Change: <unk> Lee if you look at prices overall, we do see stability as we as we move into 2024, we've seen it in 'twenty three and we do see it as we move into 'twenty four there are pockets, where we do see real competitiveness and pricing I would say and if you think about our.

Speaker Change: National accounts business there, it's a I would say, it's very competitive and then if you look at it in the international markets as well, we've seen price some price pressure there, although we do see that abating I would say as we move into 'twenty, four and partly because from our perspective, we're going to be very strong on the product side, but.

Speaker Change: But overall, we are expecting a I would say a table a stable price environment with a little bit of of a I would say downward pressure overall on a net price, but very manageable as we are as we move through 2024.

Rhodri J. Harries: So we've got those product categories that we're doing very well in. We've got product innovation coming through, which I called out we're very excited about. You'll see that on the basic side.

Speaker Change: Thank you good luck.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Jay sole with UBS. Your line is open.

Rhodri J. Harries: We've got new product styles that are effectively rolling out, which will drive our business in national accounts and international. We've got new retail programs in activewear, in underwear, and in hosiery. We're doing well on the hosiery side with some of our customers, very well, actually, with some of our customers.

Jay Sole: Great. Thank you so much I have two questions first for Vince as you've gotten acclimated in the company what do you see as the biggest long term growth opportunities just from a sort of a big picture qualitative perspective.

Jay Sole: And then secondly for Rod, where if you think about the fiscal 'twenty four margin guidance. How are you thinking about gross margin versus SG&A within that guide. Thank you.

Vince Tyra: Thank you Jay this events and yes, I mean, obviously, that's a great question I think it's that's getting developed I can talk about my initial impressions in the first.

Rhodri J. Harries: We've got, we're excited about what's going on with Comfort Colors and American Apparel, and we've got strong product availability. If you look across the board at all of the different areas of the business, even though you've got the macro backdrop to deal with, we feel we're well positioned as we move through the year, and you'll see that as we move through the quarter. Okay, thanks. And just for my follow-up, I want to talk a little bit more about free cash flow. Can you maybe quantify the lift?

Vince Tyra: Arthur so here, but in terms of nail it down to the long term strategy I think that will come as 2024 develops.

Vince Tyra: Certainly my experience with the industry is helping.

Vince Tyra: Hopefully shortcut that timeframe, but.

Vince Tyra: With that being said I mean, I think the reasons I'm here.

Vince Tyra: Or what I've been able to validate in terms of what we have in the manufacturing capacity and the agility of that capacity.

Rhodri J. Harries: Or can you give us some goalposts in terms of working capital and CapEx for this year? Yeah, so CapEx, I call that 5% of sales a good guide. And as you think about CapEx, we had it a little bit higher in 23. There, we were spending a little bit more on Bangladesh, but now we're ramping up Bangladesh.

Vince Tyra: Obviously the brands that we have when you think about American apparel comfort colors and Gil Dan itself is or are you are.

Vince Tyra: Powerful in this industry and we're reenergizing the American apparel brand as most know but.

Vince Tyra: Yeah. The leadership team, there's a there's a number of things go into it but I think <unk> will be focusing on what our capabilities are in the in the manufacturing obviously looking at how we can enhance upon the the G. S. G, which I think is a pretty strong approach I mean, this back to basics that I've kind of watched and look and see what's happened. The last couple of years has led to the GSD.

Rhodri J. Harries: So CapEx comes down as we move into 24. And then, if you look from a working capital perspective, inventory, we've made our investments in working capital. So as we move into 24, we don't have to make the type of investments that we've been making in the last couple of years.

Vince Tyra: And what's happening internationally, I think I'm, just going to bail some nice opportunities in the.

Vince Tyra: The unit, probably they are probably the biggest surprise I saw in the air just being in Honduras for week is just how much innovation is going on inside the plant and what it avails us and long term opportunities.

Rhodri J. Harries: And so as a result of that, I would say we do see a strong free cash flow. So the guide is that free cash flow will come in stronger than 23, and we fully expect that given the different elements, what we see from a profitability perspective, working capital, and cap-out. Okay, will you carry me for a number of us for working capital, like just to get a sense of where you see that landing at the end of the year?

Speaker Change: Okay. Thanks, Vince and so if I go to the second part of your question Jay on gross margin SG&A and maybe I'll also talk about it.

Speaker Change: From an operating margin perspective, but look we think we're in very good shape as we are as we move into 'twenty. Four if you look from a gross margin perspective, if you look at where we were in Q4, our gross margin came in just a little above 30%.

Speaker Change: And that was in line with what we had anticipated and we have been saying all through 'twenty three that effectively we expect to see the tailwind associated with the with fiber costs are really kick in as we get into Q4 and as we move into 2024. You may you may recall that cost pressure in the early part of 'twenty three.

Rhodri J. Harries: Well, look, if you think about working capital, at the end of the year, we generally are running in the mid-30s, right, as a percent of sales. That's effectively, you know, where we tend to be. So around that, that area is what I'll be looking at, George, as you think about effectively modeling out working capital. Again, working capital is like all of the different areas of our business, and we think we've got it well under control. And, as I said, our inventory position is very good. We're in a very good spot to support productive availability. And then, you know, if you look across the board, I think we're managing that well. So the mid-30s around that area is kind of the way to think about working capital for us when we finish 24. Great, thanks. Good luck! Thank you. Your next question comes from the line of Brian Morrison with TD Securities. Your line is open. Hey, good morning.

Speaker Change: We did not price for that we knew it was effectively going to flow through and now we're seeing it in Q4 and you can expect our gross margins to stay strong.

Speaker Change: As we move through through 'twenty, four and we'll continue to improve upon that right. Because there are other things that we're doing from a manufacturing perspective.

Speaker Change: We continue to opt and optimize our structure, we have Bangladesh ramping up which we're incredibly excited about and so we believe that we are we have gross margin very well under control as.

As we move into <unk> into 'twenty for St.

Speaker Change: Same thing from an SG&A perspective, I think we're very disciplined on SG&A, we've been very focused on effectively making sure that the front.

Speaker Change: Front end of our businesses is very efficient in the way that we operate and if you look at our.

Speaker Change: Our SG&A performance full year in 'twenty three we came in just around 10% which is around our target.

Speaker Change: And as we move into 'twenty four we will be looking to continue to run at those levels, maybe improve upon it a little bit and then we'll get to also the benefit of the refundable tax credits are flowing through.

Chuck J. Ward: Hey, Rod, can you just elaborate on some of the industry details on the Q4 POS performance, maybe an update on inventory in the distributor channel, and then the trend to trade down to lower price points, is that accelerating or staying constant? Okay, Brian. We'll answer this question.

Speaker Change: And so you can see SG&A for on a full year basis should look good on a comp basis versus 'twenty three and then when you look at overall op margin and that's why we've given the guidance that we expect it to be slightly above the 18% to 20% range, but higher than the 20% because of what we're seeing gross margin and SG&A.

Chuck J. Ward: I think as we looked at, good morning, as we looked at the fourth quarter, we continued to see growth in the areas we've been talking about, with ringspun and fleece being up double digits. You know, we saw good positive POS from the basics as well, and it was up low single digits. So again, I think we saw growth across the categories throughout the fourth quarter, and we're seeing that carry into Q1 with positive POS as well. And so, you know, again, we saw ourselves continue to gain share. You know, we've been talking about that the last few quarters, with a challenge in the market. You know, we've outperformed the market in those categories. We continue to gain share from a channel inventory perspective. As I mentioned, I think it's in balance.

Speaker Change: So overall, we feel we're very well positioned.

Speaker Change: Things are well under control and we are excited about what we see for 'twenty four.

Speaker Change: Got it thank you so much.

Speaker Change: Your next question comes from the line of George <unk> with Scotiabank. Your line is open.

George: Yes, hi, good morning, guys Rod can you help us understand the moving parts embedded in the Q1 guidance of low of down low single digits. How should we how should we think of the recovery towards the flat to up low single digits. That's it will not be linear.

Speaker Change: Great.

Rod: If you look at Q1, and we have called out that it would be.

Rod: Down low single digits.

Rod: <unk> gave some color in the script right, we talked bill about P O S.

Rod: Actively being mixed but I think that's really the story behind P. O S. P. O S. P. O S is in good shape in good shape for across the the activewear.

Chuck J. Ward: It's a healthy inventory, especially as we go into season here later in the quarter. And so I think it's well dispersed and across product categories. So I think the channel is in good shape. And then on trade-down, Brian, we did see some trade-down as we moved through Q4. I mean, the trade-down isn't sort of evolving the way that we discussed it. A few categories we like to talk about are fleece, and if you look at the mix between the hoods and the crews, again, it sort of went more to a balanced mix versus what we traditionally see, which is more heavy on the hood side versus the crews.

Rod: Category, if you look and that's the most important category for us that if you look across the board.

Rod: <unk> is performing reasonably well.

Rod: As you as you think about the macro backdrop, so I would say.

Rod: We are comfortable with what we're seeing there there are some spots some pockets of weakness, where it's a little bit more variable, but I would say, it's holding up but as we go into Q1, what we do see is effectively we do expect restocking on the on the distributor side, we are going into season. So we expected to see restocking, but because of the strength of.

Rod: What we saw in Q4, where normally we would expect destocking in Q4, and we've called that out we were expecting that but what happened was we shipped to P. O S. We shipped in line with P. O S. In in Q4 and are effectively as a result of that we didn't see the I would say that the the destock in Q4.

Chuck J. Ward: So the trade-down did unfold as we moved through the fourth quarter, but mix overall, I would say we're okay as we look at it. And then, as we move into 24, we have been careful as we think about mix with respect to the guide. So we'll see how the year evolves, but because of the macro backdrop and everything that we're seeing with respect to inflation, all the things that are creating a little bit of pressure for everybody, we have been careful about how we think about mix, as we've given you the guide for full year 24. Okay, thanks for that. Chuck, I want to follow up with my second question, which is for Vincent.

Rod: For it and so what we expect there are lower levels of replenishment in.

Rod: In Q1, so the restock won't be as large as you know as you might normally expect it in the first quarter. So the impact of that in total basically meant that we will see a little bit a weaker start to the year, but I would say as we go forward, we do see strength.

Rod: As we move into Q2 Q3 Q4.

Rod: And that's all on the back of ours, a very strong competitive positioning what we're seeing with market share gains what we're seeing in these key categories ring spun fleece in all the drivers of the business. I mean, there are many I would say drivers of the business as we think about 24 in total right. So we've got those product categories that we're doing very well on.

Vincent J. Tyra: I want to circle back to your creation of long-term shareholder value in your prepared remarks. Again, it's early days. It sounds like you're content with GSG, but at a high level, what are your initial thoughts on growth drivers or avenues as we look beyond the execution of the near-term GSG strategy? You mentioned international, you mentioned the cost advantage, but does anything stand out that requires a material shift from the current strategy? No, I think I'm quick to answer that.

Rod: We've got product innovation coming through which I called out were very excited about it.

Rod: You'll see that on the basic side, we've got new product styles that are effectively rolling through which will drive our business in national accounts and international we've got new retail programs, and activewear and underwear and hosiery.

Rod: We're doing well on the hosiery side with some of our cost very well actually with some of our customers.

Rod: We've got we're excited about what's going on with comfort colors American apparel, and we've got strong product availability. If you look across the board at all of the different areas of the business.

Vincent J. Tyra: I don't see a material shift in our Gildan sustainable growth strategy. I think it's pretty profound in terms of what, like I said, is coming back to basics, the SKU rationalization, where manufacturing is today. Certainly, you can see the plan in Bangladesh where DNA is to be a low-cost producer, and I think just leveraging the Bangladeshi investment is going to be important as well. That also avails us opportunities in Europe and abroad that maybe strengthens our opportunity to expand there. No, I don't see anything material that we need. We just need to enhance what we have. Thanks very much. Your next question comes from the line of Luke Hannan, Lucana Cord Genuity.

Rod: Even though you've got the macro backdrop to deal with we feel we're well positioned as we move through the year and Youll see that as we move through the quarters.

Speaker Change: Okay, Thanks and for my follow up.

Speaker Change: I want to talk a little bit more about.

Speaker Change: Free cash flow can you maybe quantify the lift or can you give us some goalposts in terms of our working capital.

Speaker Change: Capex for this year.

Speaker Change: Yes, so capex I called out 5% of sales as a good guide and as you think about Capex, we had a little bit higher in 'twenty three.

Speaker Change: There, we were spending a little bit more on Bangladesh, but now we're ramping up our Bangladesh. So capex comes down as we are as we move into into 'twenty. Four and then if you look from a working capital perspective inventory, we've made our investments in working capital.

Speaker Change: So as we move into <unk> into 'twenty four we don't have to make the type of investments that we've been making in the last couple of years and so as a result of that let's say, we do see the strong free cash flow. So the guide is that.

Speaker Change: Free cash flow will come in stronger than.

Speaker Change: Then twenty-three and we fully expect that given the different elements, what we see from a profitability perspective, working capital and Capex.

Speaker Change: When you carry me for a number of us for working capital I, just get a sense of where you see that landing at the end of the year.

Speaker Change: Well look if you think about working capital at the end of the year. We generally are running in the mid thirties right as a percent of sales that's effectively where we tend to be solely around that that area is what I'd be looking at George as you think about.

Luke Hannan: Your line is open. Thanks, good morning. I wanted to ask about product innovation, which has come up a number of times on this call, and specifically about the new products that were introduced last month. Can you give us a sense of direction, you know, what roughly we are talking about in terms of the magnitude of sales that this will impact or even the percentage of SKUs? And where else do you see opportunities for innovation within the sector? Hi Luke, this is Chuck.

Effectively <unk>.

Speaker Change: Bottling out working capital again, working capital is like all of the different to other areas of our business. So we think we've got it well under control.

Speaker Change: And as I said, our inventory position is very good we're.

And a very thought isn't to support proactive availability.

Speaker Change: And then if you look at it across the board I think we're managing that well so mid thirties around that area is kind of the way to think about working capital for us.

Speaker Change: When we finished 24.

Speaker Change: Thanks, Good luck.

Speaker Change: Thank you your next.

Your next question comes from the line of Brian Morrison with TD Securities. Your line is open.

Brian Morrison: Hey, good morning.

Brian Morrison: Can you just elaborate on some of the industry details on the Q4 POS performance, maybe an update on inventory in the distributor channel and then the trend that trade down to lower price points is that accelerating or staying constant.

Chuck J. Ward: So I'll take that on a few things. One, you know, as we think about innovation, we think about innovation across not only products but also our manufacturing and our ESG. So we continue to innovate, you know, throughout. And so we're continuing to constantly focus on where we can innovate in the product. As you said, at the show, we were excited about the innovations we put out around our core basics. We really touched each one of the basics, our style 2000, our style 5000, our 8000, and our fleece.

Speaker Change: Okay, Brian I'll Chuckle, a will answer this question.

Speaker Change: Hey, Brian.

Speaker Change: I think as we looked at.

Brian Morrison: Good morning, as we looked at fourth quarter I mean, we continue to see growth in the areas, we've been talking about with with ring spun and and fleece being up double digits.

Brian Morrison: We saw good positive Pos from from the basics as well.

Brian Morrison: And it was up low single digits.

Brian Morrison: So again I think we saw growth across the categories.

Brian Morrison: Throughout the fourth quarter, and we're seeing that carry into Q1 with positive Pos as well.

Brian Morrison: And so you know.

Brian Morrison: Again, we saw ourselves continue to gain share we've been talking about that the last few quarters.

Chuck J. Ward: So, you know, we wanted to make some changes there to give it better features on the right hand and better printability. I think it was well received in the market. And, you know, we'll start seeing that product come through the market mid-year. And then, from a, you know, impact perspective, we think it shores up our base, you know, OE product, and then we'll continue to grow in that fleece area. We've seen drastic growth, as I was mentioning, double-digit growth before in fleece, and that's going to continue. And so it just shores up that base and will continue to drive growth across the category. Okay, understood. Thanks.

Brian Morrison: With a challenge in the market.

Brian Morrison: You know we've outperformed the market in those categories. We continue to gain share from a channel inventory perspective, I mentioned I think it's imbalance, it's a healthy inventory, especially as we go into the season here later in the quarter.

Brian Morrison: And so I think it's well dispersed and across product categories. So I think the channel is in good shape.

Brian Morrison: And then on trade down Brian we did see some trade down as we as we move through Q4 is it I mean, it's the trade down isn't.

Brian Morrison: Sort of evolving the way that we discussed of SKU category, we like to talk about is fleece and if you look at the mix between the the hoods and the cruise again, it's sort of one more to a balanced mix versus what we've traditionally see which is the more heavy on the HUD side versus the crude so that the trade down it did unfold.

Brian Morrison: As we move through the fourth quarter.

Rhodri J. Harries: And then for my follow-up here, I just wanted to ask about where both retailers and distributors are sitting as of today when it comes to inventory. Where does that stand versus pre-pandemic levels, maybe in terms of weeks of supply or otherwise? I know it was mentioned that it seems like everyone is ordering a little bit closer to their needs, but I guess that is the overall thinking that parties feel like.

Brian Morrison: But mix overall I would say we're okay. As we look at it and then as we move into 'twenty four we have been careful as we think about mix.

Brian Morrison: With respect to the guide.

Brian Morrison: So we'll see how the year evolves, but because of the macro backdrop and everything that we're seeing with respect to.

Brian Morrison: Inflation, all the things that are creating.

Brian Morrison: A little bit of pressure for everybody. We have been careful about how we think about mix as we've given you the guidance for full year 'twenty four.

Speaker Change: Okay. Thanks for that.

Speaker Change: Chuck I want to follow up this is my final question wishes for Vince.

Speaker Change: I want to circle back tears creation of long term shareholder value in your prepared remarks again, it's early days it sounds like youre content with GST, but high level. What are your initial thoughts on the growth drivers are avenues as we look beyond the execution in the near term Gst's strategy. You mentioned internationally you mentioned the cost advantage, but does anything stand out that requires a more.

Rhodri J. Harries: Can they do more with less inventory? If you look at where we are from an inventory perspective with our customers, Luke, I would say we're at good levels. We're at a normalized level, and as I called out earlier in my remarks, you know, over the last few years, we've been working to, you know, build back our inventory so that we can effectively get our customers back to normalized levels. So I would say if you look across the board, we feel like inventory is in good shape and, you know, where it needs to be. And for the most part, now, we're past all of the pandemic impacts, right, of inventories going down and then going back up again to a certain extent and then coming down, particularly on the retail side. So print where inventory is in good shape, at normalized levels.

Speaker Change: She will shift from the current strategy.

Speaker Change: No I think I'm quick to answer that I don't see a material shift in our in our guild and sustainable gross as yet I think it's down.

Speaker Change: Or what are like I said there's.

Speaker Change: Coming off the baked back to basics, the SKU rationalization, where manufacturing is today with the certainly you can see the plane in Bangladesh, where we want to the DNA is to be a low cost producer and I think just leveraging the Bangladesh investment is going to be important as well that also avails us opportunities in Europe and international that.

Speaker Change: You know maybe strengthens our opportunity to expand there so.

Speaker Change: No I don't see anything material.

Speaker Change: You know that we need to we just need enhance upon what we have.

Speaker Change: Thanks, very much thanks very much.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Luke Hannan with Canaccord Genuity. Your line is open.

Luke Hannan: Thanks, Good morning, I wanted to ask about product innovation, which has come up a number of times on this call and specifically on the new products that were introduced last months can you give us a sense of Directionally you know what what roughly are we talking about in terms of the magnitude of sales that that this will impact or even the percentage of skus.

Rhodri J. Harries: And, you know, I think that's great from a POS perspective because you have to have that inventory to drive the POS. That's why we see the strong growth and fleece in rings fund and across the board because everybody is effectively well replenished. On the retail side, if you look at inventory levels there, if you recall in 22, we had the impact of the stocking going on in 23, that moderated a bit as we moved through the middle of the year. But as we've gotten to the end of the year and as we move into 24, on the retail side, we are again seeing tight inventory levels. I think people are being very careful in the way that they manage their inventory in this environment.

Luke Hannan: Where else do you see opportunities for innovation within the portfolio.

Luke Hannan: Hi, Luke this is Chuck so I'll take that a few things one as we think about innovation, we think about innovation across not only product, but also our manufacturing and our ESG. So we continue to innovate.

Luke Hannan: Throughout.

Chuck Ward: And so we're continuing to constantly focus on where we can innovate in the product as you said at the show we were excited about the innovated innovations we put out around our core basics, we really touched each one of the basics artstyle 2000, our style 5000 or 8000 and our fleece. So we wanted to make.

Chuck Ward: Make some changes there to give it.

Chuck Ward: Better features and better better credibility I think it was well received in the market.

Rhodri J. Harries: And so, you know, on the retail side, I would say probably there we see it a little bit tighter than on the print side, where that's a little bit more normalized. Whereas if you look on the retail side, people may not necessarily be replenishing to POS. They might be going a little bit lower than that in order to keep levels at, I would say, for them, very well positioned, I suppose, you know, in the face of the macro backdrop. Okay, thank you very much.

Chuck Ward: And.

Chuck Ward: We will start seeing that product come through the market midyear.

Chuck Ward: And then from a impact perspective, we think it shores up our base.

Chuck Ward: <unk>.

Chuck Ward: OE product and then we will continue to grow in that fleece area. We.

Chuck Ward: We've seen drastic growth.

Chuck Ward: As I was mentioning double digit growth before and fleece, that's going to continue.

Chuck Ward: And so it just shows up that base and we will continue to drive growth.

Chuck Ward: Across the category.

Speaker Change: Okay understood. Thanks.

Speaker Change: For my for my follow up here I, just wanted to ask about I guess, where we're both retailers and distributors are sitting as of today. When it comes to inventory where does that stand versus pre pandemic levels, maybe in terms of weeks or weeks of supply or otherwise I know it was mentioned that it seems like everyone is ordering a little bit closer to their needs, but I guess as the overall thinking that.

Mark Robert Petrie: Your next question comes from the line of Mark Petrie with CIBC. Your line is open. Good morning, thanks. Vince, just given your background, both with brands and distributors, can you talk about your views on Gildan's positioning as a brand portfolio? And if you see any holes or opportunities. You mentioned American Apparel specifically, and I was hoping you could just expand on that and the broader topic. Yeah, I mean, obviously, the Gildan brand is even stronger than when I left the industry; the market share is enviable, as I mentioned, to be in this position. So I think that part of it is, is strong in terms of what we're doing in terms of market share. I think Chuck's, you know, hinted at the ring spun and fleece categories where we feel like there's still a lot of opportunity to grow and would love to see those categories reach the open end market share dominance that we have.

Speaker Change: These parties feel like can they do less sorry can they do more with less inventory on hand.

Speaker Change: So if you look at where we are from an inventory perspective with our customers look I would say were at good levels were at a normalized level and as I called out earlier in my remarks and over the last few years, we've been working to try to build back our inventories. So that we can effectively get our customers to do.

Speaker Change: Normalized level. So I would say if you look across the board we feel like inventory is in good shape and where it needs to be and for the most part now where we're past all of the pandemic impacts right of inventories going down and then going back up again to a certain extent and then coming down, particularly on the retail side.

Speaker Change: So print where inventory is good shape normalized levels.

Speaker Change: And I think that's great from a Pos perspective, because you have to have that inventory to drive the POS yes, that's how we see the strong growth in fleece in ring spun and across the board because we are we everybody is effectively.

Speaker Change: Well replenished on the retail side, if you look at inventory levels. There. If you recall in 'twenty two we had the impact of Destocking going on in 'twenty, three that moderated a bit as we move to the through the middle of the year.

Mark Robert Petrie: But, you know, when you look at American Apparel and Comfort Colors both, I mean, I can remember buying Comfort Color from Barry Chouinard years ago, and seeing where the brand is today and how it was merchandised at the trade shows was, frankly, terrific. And even talking about the innovation behind the scenes with the use of water and how we wash the garments and so forth.

Speaker Change: But as we've gotten to the end of the year and as we move into 'twenty four on the retail side. We are again seeing tight inventory levels. I think people are being very careful in the way that they manage their inventory in this environment and so on the retail side I would say probably there we see it a little bit more tighter.

Speaker Change: And then on the <unk> side, where that that is a little bit more normalized.

Speaker Change: Whereas if you look on the retail side people may not necessarily be replenishing to P. O S. They might be going a little bit lower than that in order to keep both at a I would say for them very.

Vincent J. Tyra: So it's what we do from there, as I said, tweaks and enhancements, you know, maybe in the, you know, in the marketing, you know, side of things, don't want to get into a lot of SG&A. That's that's not the driver of this brand, nor is American Apparel. So I don't want to make you believe that we have big plans around that, but the heritage of the brand with customers, I think, is strong. These distributors appreciate what the brand brings about, much like I did in the early 90s and through the early 2000s. And if anything, that's been accentuated over the years.

Speaker Change: Well positioned I suppose.

Speaker Change: Again for the macro backdrop.

Speaker Change: Okay. Thank you very much okay. Thank you very much.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Mark Petrie with CIBC. Your line is open.

Mark Petrie: Hey, good morning, Thanks, Vince just given your background, both with brands and distributors can you talk about your views on Guild is positioning as a brand portfolio and if you see any holes or opportunities you mentioned American apparel, specifically and hoping you could just expand on that in a broader topic.

Vince Tyra: Yeah, I mean, obviously Gil Dan Brandis is even stronger than when I left the industry the market shares as our enviable as I mentioned to be in this position. So I think that part of it is as strong in terms of what we're doing in the market share I think chuck's hinted at the ring spun in place, where we feel like there's still a.

Vincent J. Tyra: So I just think there's opportunity still within the Gildan brand, but also in the ancillary brand of American Apparel. And as we, you know, continue to enhance that and re-energize it. And then with Comfort Colors, it's still got a great place in resort wear. It's got a great place in Greek wear, if you want, on college campuses.

Vince Tyra: A lot of opportunity to grow wed love to see those categories reached the the open in market share dominance that we have but.

Vince Tyra: Yeah, I think in the when you look at the American apparel comfort colors, both I mean, I can remember Brian comfort color from bearish in ARD years ago in and seeing where the brand is today and how it was merchandised at the trade shows was frankly terrific and even talking about the innovation behind the scenes with use of water and how we how we watched the garments and so forth.

Vincent J. Tyra: And what we do with it here will be a lot of fun to play with. Okay, I appreciate that. Thank you. And I wanted to also just ask about retail shelf space. How much of the programs that you won were reflected in Q4? Was that sort of fully embedded there?

Vince Tyra: So it's what we do from there.

Said tweaks and enhancement maybe in the.

Vince Tyra: And the marketing.

Vince Tyra: Side of things don't want to get into a lot of SG&A. That's that's not the that's not the driver of this brand.

Vince Tyra: North American apparel, so I don't want to make you believe that we got they've got big plans around that but.

Vince Tyra: The the heritage of the brand with the customers I think is strong. These distributors appreciate what the brand brings about much like I did in the early nineties and through the early two thousands and if anything that's been accentuated over the years. So I just think there's opportunities still within the Guild and brand, but also in there and the <unk>.

Chuck J. Ward: Is there further gains embedded in the guidance for 2024? And would you say that there's potential upside based on what you're seeing in the market today? Mark, I would say we did have some programs in 2023 that were launched and, you know, are in our results for 2023. But in the guidance Rod gave, we also have some new retail programs in both activewear, some changes in some underwear programs that are reflected going forward, as well as we're, you know, I think we talked about, Rod talked about some of the 2024 growth that we're going to see. We're going to see it in retail, again, through underwear and some activewear.

Vince Tyra: Ancillary brands American apparel and as we can.

Vince Tyra: Continue to enhance that Reenergize it and then with our comfort colors. It's it's still got a great place and resort, where it's got a great place and in the Greek where if you work on college campuses and what we do with it for here will be a lot of fun to play with.

Speaker Change: Okay. I appreciate that thank you and I wanted to also just ask about retail shelf space.

How much of the programs that you've won were reflected in Q4 was that sort of fully embedded there is there further gains embedded in the guidance for 2024.

Speaker Change: And would you say that there is potential upside based on what youre seeing in the market today.

Speaker Change: Mark I would say we did have some programs in 2023 that were launched in our in our results for 2023, but in the guidance Rod gave we also have some new retail programs in both activewear, some some changes and some underwear programs.

Speaker Change: That are reflected going forward as well as where I think we talked about rod talked about some of the 'twenty 'twenty four growth I mean that we're going to see we're going to see it in retail again theres underwear. Some activewear, we're also going to see it in the hosiery sides because despite the you a license of non renewal there we are filling up that capacity.

Chuck J. Ward: We're also going to see it on the hosiery side because, despite the UA license non-renewal there, we are filling up that capacity with margin-enhancing programs from some other brands. So we feel good about that. And then obviously some of our global lifestyle brand partners on the activewear side, we see recovery there. So there's definitely new programs and recovery built into our 2024 guidance, kind of across each of the channels. Okay, thanks. And I guess maybe just to follow up, Chuck, other than the sock replacement program, because obviously the UA program doesn't expire until the next month, but other than that, are those programs already in place in general?

Speaker Change: With margin enhancing programs from some other brands. So we feel good about that.

Speaker Change: Obviously, some of our global lifestyle brand partners on the Activewear side, we see recovery. There. So there's there's definitely new programs and recovery built into our 2020 for guidance.

Speaker Change: Across each of the channels.

Speaker Change: Okay, Thanks, and I guess, maybe just to follow up.

Speaker Change: Chuck the other than the sock replacement program, because obviously the UAE program doesn't expire until end of next month, but other than that are those programs already in place in general or are can you just give us a sense of how that plays out through the year.

Chuck J. Ward: Or can you just give us a sense of how that plays out through the year? Yes. Well, they're in place, and they're in the plan. They're not things we're still having to chase. They are locked in.

Speaker Change: Yes, well there they are in place and they are in the plan, they're not things we're still having to go chase. They are they are locked in now we're just.

Rhodri J. Harries: Now, we're just, you know, as we brought down manufacturing of some of the UA product, we filled it up with other product along the way. So, we're able to switch that out and basically, you know, replace that with, again, margin-accretive programs going forward. And Mark, some of these programs are doing very well in the marketplace, right? When we think about the... Chuck called out on the GLB side.

Speaker Change: As we brought down manufacturing of some of the UA product, we filled it up with other product along the way. So we were able to switch that out and basically replace that with again margin accretive programs with Ford.

Speaker Change: And Mark some of these programs are doing very well in the marketplace right. When we think about the odd Chuck called out on the <unk> side. So in some respects, we're very pleased with.

Rhodri J. Harries: So, in some respects, you know, we're very pleased with, you know, our positioning. The programs that we're running with on the GLB side are winning, and we're gaining market share. The program that we're getting out of, the license that we're getting out of, in many respects, we see that as almost a return to basics. So if you look at the complexity, if you look at the cost of the program, you look at the – as Chuck and I have mentioned, the margin is very, very low associated with that profitability at the very end. So I mean, we're very excited actually about the way things are And the programs that we're behind in supporting, the GLB partners, are doing very well.

Speaker Change: Our positioning the programs that we're running with on the G. L. G L. Beside our winning are gaining market share.

Speaker Change: The program that we're getting out of a license that we're getting out of it.

Speaker Change: In many respects, we see that as almost a back to basics initiatives. So if you look at the.

Speaker Change: The complexity if you look at the cost of the program and you look at the as Chuck and I have mentioned.

Speaker Change: Our margin very very low associated with that our profitability and in the very end.

Speaker Change: So I mean, we're very excited actually and the way things are shifting because we get to use our capacity I would say in a more productive way and the programs that were behind in supporting the <unk> partners are doing very well, they're taking share and so our positioning on the hosiery side I would say is good as we as we built.

Rhodri J. Harries: They're taking share. And so our positioning on the hosiery side, I would say, is good as we did, you know, as we built through 24 and 25 as we move forward longer term. Appreciate it.

Speaker Change: Toward 25, as we move forward longer term.

Speaker Change: Yeah.

Speaker Change: Understood I appreciate all the color I appreciate it.

Christopher Li: Thank you. Your next question comes from the line of Chris Lee with Desjardins. Your line is open. Hi, good morning, everyone.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Chris Lee with <unk>. Your line is open.

Chris Lee: Hi, Good morning, everyone, maybe have a two part question on capital allocation.

Rhodri J. Harries: I just maybe have a two-part question on capital allocation. First, you mentioned obviously very strong free cash flow and that leverage is very solid, and expected for this year. I'm just wondering in terms of your share buyback, Rod. Do you expect to spend about the same amount of money on share buyback this year as you did last year?

Chris Lee: At first.

Chris Lee: You mentioned, obviously very strong free cash flow and leverage is very solid.

Chris Lee: For this year.

Chris Lee: We intend to be a share buyback and rod do you expect to spend about the same amount of money on share buyback. This year as you did last year.

Rhodri J. Harries: Yeah, if we look at the share buyback, Chris, as you said, we feel very well positioned to continue with our share buyback as we move through 24. I mean, we've got, I think, a strong record of returning capital to shareholders. And I do want to, Let's start by also just calling out the dividend increase that we're doing, right? We're excited about our ability to do the 10% dividend increase. That's the third year in a row we've increased our dividend.

Speaker Change: Yes, if we look at the share buyback Chris as you said, we are we feel very well much of that we are positioned to continue with our share buyback as we move through 'twenty four I mean, we've got I think a strong record of returning capital to.

Rod: To shareholders and I do want to.

Rod: Start by also just.

Rod: Calling out the dividend increase that we're doing right. So we are excited about our ability to do the the 10% dividend increase.

Rod: Third year in a row, where we've increased our dividend and then as we think about rounding out return of capital to our shareholders. We very definitely think about the share buyback program and if you think about what we've been able to do over the last few years last year, we did 7% and we do have a I would say at a baseline.

Rhodri J. Harries: And then as we think about rounding out the return of capital to our shareholders, we very definitely think about the share buyback program. And if you think about what we've been able to do over the last few years, last year we did 7%. And we do have, I would say, a baseline position of being able to do about 5%. And I would say this year, again, because of the overall strength of our balance sheet, our free cash flow, I wouldn't be surprised if we weren't able to do a little bit more than that throughout the full year. That's how we're thinking about NCIB as we start the year. Okay, that's helpful.

Rod: Inning of being able to do about 5% and I would say this year again because of overall strength of our balance sheet, our free cash flow I wouldn't be surprised if we wouldn't be able to do a little bit more than that.

Rod: Throughout the full year.

Rod: How we're thinking about and CIB.

Rod: We are as we start the year.

Vincent J. Tyra: And then maybe related to that is M&A. I apologize if you made comments maybe earlier, but just what's your view on M&A? Overall, for my capital allocation. Yeah, and in this event, I think I'll take that one.

Speaker Change: Okay. That's helpful and then maybe later maybe.

Speaker Change: Related to that is on M&A I apologize if you may comments, maybe earlier, but just what's your view on M&A.

Speaker Change: Were all from a capital allocation perspective.

Yeah and this is this events I think I'll take that one I mean, the company had a kind of a history in the mid teens at 2013 to 17 timeframe, where there was acquisitions, but as you know right now our capital is focused on our organic you know I think that's when we think about we have next.

Vincent J. Tyra: I mean, the company had a kind of history in the mid-teens, that 2013 to 17 timeframe, where there were acquisitions. But, you know, right now, our capital is focused on organic growth. You know, I think that's when we think about what we have next, you know, related to late M&A. I don't foresee that in our plan this year, as we think about it. And I think our allocation is geared towards Bangladesh, more towards innovation, you know, and organic play, not in the inorganic area. Great. Thanks so much, guys. Thanks, Chris. Your next question comes from the line of Martin Landry with Stiefel. Your line is open. Hi, good morning, guys.

Speaker Change: Related to lay the M&A I don't foresee that play in this year.

Speaker Change: As we think about it in.

Speaker Change: I think our equity allocation is geared towards Bangladesh.

Speaker Change: More towards innovation.

Speaker Change: Yeah on an organic play not in the inorganic area.

Speaker Change: Great. Thanks, very much guys.

Speaker Change: Thanks Kristen.

Speaker Change: Your next question comes from the line of Martin Landry with Stifel. Your line is open.

Martin Landry: Hi, good morning, guys.

Martin Landry: I would like to dig into the Q1 guidance. You know, you're talking about a margin which is going to be coming in at the lower end of your 18 to 20% range for Q1. But you're also talking about cotton being a tailwind in 2024. So I'm just trying to reconcile the two and trying to understand why, you know, your operating margins are going to be a little soft to start the year. Yeah, thanks, Martin.

Martin Landry: I would like to dig into the Q1 guidance.

Martin Landry: You're talking about.

Martin Landry: Our margin, which is going to be coming in at the lower end of your 18% to 20% range for Q1.

Martin Landry: But youre also talking about cotton being.

Martin Landry: Being a tailwind.

Martin Landry: Into 24, so I'm just trying to reconcile the two.

Martin Landry: And trying to understand why.

Martin Landry: Your operating margins are going to be a little soft to start the year.

Speaker Change: Yeah. Thanks, Martin So if you look at Q1 I mean, the primary reason that the margins are going to be a little bit lower is because it's a smaller quarter.

Rhodri J. Harries: So if you look at Q1, I mean, the primary reason that the margins are going to be a little bit lower is because it's a smaller quarter, right? So if you think about, you know, Q1, and compared to Q2, Q3, Q4, effectively, gross margins are in good shape, as I said, right, as we leave 23. And then from an SG&A perspective, you know, you tend to see our SG&A because our SG&A is reasonably consistent quarter to quarter, other than distribution expense. You normally see our Q1 is a little bit higher from an SG&A perspective. So if you look at last year, we were at 11, 11 and a half percent of sales. And so as we think about Q1 this year, effectively, probably around the same range is the way to think about that. And as a result of that, you end up with operating margin, you know, a little bit towards the lower lower end of the range.

Speaker Change: Right. So if you if you think about our Q1 compared to Q2 Q3 Q4 effectively gross margins in good shape as I said.

Speaker Change: As we as we leave 23, and then from a from an SG&A perspective, you tend to see our SG&A because of our SG&A is reasonably consistent quarter to quarter other than distribution expense.

Speaker Change: You normally see our Q1 is a little bit higher from a from an SG&A perspective. So if you look last year, we were at 11% 11, 5% of sales and so as we think about Q1 this year effectively probably around the same range as.

Is the way to think about that.

Speaker Change: As a result of that you end up with the operating margin.

Speaker Change: A little bit towards the lower lower end of the range, but again, we feel like our operating margin for the full year is in great shape, we've called it out as being slightly above the high end of our range and you'll definitely see that as we move into Q2 Q3 Q4.

Rhodri J. Harries: But again, we feel like our operating margin for the full year is in great shape. We've called it out as being slightly above the high end of our range. And you'll definitely see that as we move into Q2, Q3. Okay. Okay. And, and.

Speaker Change: Okay. Okay.

Speaker Change: Ed.

Rhodri J. Harries: Cotton prices have spiked a little bit recently, and I was wondering how much you have covered of your needs for 2024? Yeah, cotton has come up a little bit as of late. We see that. I mean, it's interesting, you know, when you watch the cotton markets. It's a little bit like everything else. I mean, inflation is still out there.

Speaker Change: Cotton prices have spiked up a little bit recently and I was wondering how much have you covered of your needs for 2024.

Ed: Yes, cotton has come up a little bit as of late we've see that I mean, it's interesting when you went to cotton markets, it's a little bit like everything else with inflation is still out there.

Rhodri J. Harries: And, you know, I would say that, effectively, if you look at what's going on, and to a certain extent, that provides price stability, right, as we move through, you know, 24, and probably as you think about moving into 25. But overall, I would say we have good visibility on our cotton position. We've called that out, you know, last quarter; we generally have good visibility on our position as we move through the years. And we feel very good about, again, what we're going to have in cost of goods sold for 24 and our ability to basically, you know, drive that gross margin. Again, our pricing is, I would say, in good shape, very much aligned with our cost structure. And, you know, again, we'll see what happens with cotton and what that does for prices in the marketplace as we go forward. Maybe again, in some places, it puts upward pressure on it, but overall, we're in good shape. Okay. Thank you. Okay. Thank you. Your next question comes from the line of Vishal Shreedhar with the National Bank. Your line is open.

And I.

Ed: I would say that effectively.

Ed: If you look at what's going on and to a certain extent that provides price stability writers are as we move through.

Ed: <unk> 24, and as you can probably as you think about moving into 'twenty five.

Ed: But overall I would say we have good visibility on our cotton position, we've called that out.

Ed: Last quarter, we generally have good visibility on our position as we move through the years and we feel very good about.

Again, our what we're going to have in cost of goods sold for 24, and our ability to basically.

Ed: You will drive that gross margin.

Ed: Again, our pricing is a I would say in good shape very much aligned with our with our cost structure and.

Ed: Again, we'll see what happens with cotton and what that does prices in the marketplaces. We go forward maybe again in some places puts upward pressure on it but overall we're in good shape.

Speaker Change: Okay. Thank you okay. Thank you.

Speaker Change: Your next question comes from the line of Vishal <unk> with National Bank. Your line is open.

Vishal Shreedhar: Hi, I was wondering about volume growth in 2024. Should we think it's in line with sales? And if not, what are the puts and takes there?

Vishal: Hi, I was wondering about volume growth in 2024.

Vishal: Should we think it's in line with sales and if not what are the puts and takes there.

Vishal: <unk>.

Rhodri J. Harries: is the expectation that as Bangladesh ramps up, we should anticipate that volume growth to accelerate through the year and accelerate through 2020. Yeah, if you look at, if you assume, or you think about volume growth through the year, I mean, yeah, we definitely expect to have volume growth as we move through 2024. If you heard earlier, we said we're being cautious on mix.

Vishal: Is the expectation that as Bangladesh ramps up we should anticipate that volume growth to accelerate through the year and accelerate through 2025.

Vishal: Yeah.

Speaker Change: Yeah, if you look at if you assume or.

Speaker Change: You think about volume growth through the year I mean, yes, we definitely expect to have volume growth as we as we move through 2024. If you heard earlier, we said we're being cautious on next and we also said there are areas, where I would assume its price stability, but there are some areas, where we see a little bit more competitiveness. So if <unk>.

Rhodri J. Harries: And we also said there are areas where we've assumed price stability, but there are some areas where we see a little bit more competitiveness. So, if you put all of that together, Vishal, you can see that we are assuming good volume growth. And volume growth fundamentally a little bit better than our sales growth, right, in order to deliver on that. And then, you know, as we move through the year, I would say that, effectively, we do expect it to come through. In Q1, as I said, we've got to be a little bit careful because of what's going on with the lower level of replenishment because of the strength of Q4. But as we move into Q2, Q3, and Q4, you'll see that. So, volume growth is a key driver. And for us, it's always been a key driver.

Speaker Change: Put all of that together.

Speaker Change: Michel you can see that we are assuming a good volume growth.

Speaker Change: And volume growth.

Speaker Change: Fundamentally a little bit better than our than our sales growth rate in order to deliver on that and then you know as.

Speaker Change: As we move through the year I would say that effectively we do.

Expect it to come through.

Speaker Change: In Q1, as I said, we've got to be a little bit careful because of what's going on with the lower level of replenishment because of the strength of Q4, but as we move into Q2 Q3, Q4, Youll see that so volume growth is a key driver and for US It's always a key driver.

Rhodri J. Harries: And that's how we think about basically growing our business over the long term. Okay, and with respect to the operating margin targets, given the tax credits that are embedded in SG&A, should we think of that operating margin target of 18 to 20 being permanently moved up? Post-2024. Well, I think it's a good question and something for us to think about, right, as we move through the year through 24. As I said earlier, legislation has not been enacted yet.

Speaker Change: And that's how we think about basically growing our business over the long term.

Speaker Change: Okay, and with respect to the activity up to the operating margin targets given the tax credits that's embedded in SG&A should we think of that operating margin target of 18 to 20 being permanently moved up.

Speaker Change: Post 2024.

Speaker Change: Well, it's I think it's a good question and something first.

Speaker Change: Think about right as we move through the through 'twenty four as I said earlier that legislation has not been enacted yet effectively we've assumed that it will be and there will be retroactive, but as we move through 'twenty four obviously, we'll be assessing that.

Speaker Change: And as we move into two towards 25 will be thinking about that I mean, I think fundamentally it just shows as we think about our operating target it's.

Speaker Change: And how we set that it's a bit of a we use it as a bit of a of the proxy.

Rhodri J. Harries: Effectively, we've assumed that it will be and that it will be retroactive. But as we move through 24, obviously, we'll be assessing that. And as we move into, towards 25, we'll be thinking about that. I mean, fundamentally, it just shows, as we think about our operating target, it's, and how we set that, it's a bit of a proxy to be able to drive return on invested capital. So what we want is good top-line growth, and then we want a very good return on invested capital. We want efficient use of our asset base, and we use operating margin as a way to achieve that. And 18 to 20% has been a good range for us.

Speaker Change: To be able to drive return on invested capital to drive Bruno So what we want is is good.

Speaker Change: Top line growth and then we want a very good return on invested capital we want an efficient use of our asset base and we use operating margin as a way to achieve that in 18% to 20%. It's been a good range for us, but if ultimately fundamentally the landscape changes and as we continue to actually.

Speaker Change: Leveraged the GST strategy, which as you can tell we're very very excited about it I think as we move to 'twenty five we'll be assessing how we think about that target we give to you.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Stephen Macleod with BMO capital markets. Your line is open.

Speaker Change: Okay.

Stephen Macleod: Mr. Mcleod your line is open.

Rhodri J. Harries: But if, ultimately, fundamentally, the landscape changes, and as we continue to actually leverage the GSG strategy, which, as you can tell, we're very, very excited about it, I think as we move to 25, we'll be assessing how we think about that target we gave to you. Thank you. Your next question comes from Stephen McLeod with BMO Capital Markets.

Stephen Macleod: Okay.

Stephen Macleod: There are no further questions at this time I will now turn the call back over to Jesse Hamm for closing remarks.

Jesse Hamm: Thank you Jeannie and 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 Change: This concludes today's call you may now disconnect.

Speaker Change: [music].

Stephen McLeod: Your line is open. Mr. McLeod, your line is open. There are no further questions at this time. I will now turn the call back over to Jesse Hayem for closing remarks. Thank you, Jeanne. 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. This concludes today's call. You may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.