Q3 2024 Gildan Activewear Inc Earnings Call
Good morning, and welcome to the third quarter 'twenty 'twenty four Gil <unk> Activewear earnings conference call. All lines have been placed on mute to prevent any background noise out there to speakers remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed.
Speaker Change: Number one on your telephone keypad and if he would like to withdraw your question Press Star. One again. Thank you I would now like to turn the call over to Jessie Heyne Senior Vice President head of Investor Relations and Global Communications. Please go ahead.
Jessie Heyne: Thank you Angela good morning, everyone earlier, we issued a press release announcing our results for the third quarter of 'twenty 'twenty four along with our interim shareholder report containing management's discussion and analysis as well as consolidated financial statements. These documents are expected to be filed with the Canadian securities and regulatory.
Jessie Heyne: Authorities and the U S Securities Commission today, and they'll also be available on our corporate website.
Jessie Heyne: Joining me on the call today are Ghansham, Andy President and CEO of Gil Dan.
Jessie Heyne: What Harry's executive Vice President and Chief financial and administrative officer, and Chuck Ward, President sales marketing and distribution.
Jessie Heyne: This morning, we'll take you through the results for the quarter and then a question and answer session will follow.
Purchase in line.
Jessie Heyne: With leverage framework of one five to two five net debt to adjusted EBITDA.
Jessie Heyne: And adjusted diluted EPS growth in the mid teen range.
Jessie Heyne: As we approached 2025, we are well positioned with good visibility heading into the new year, assuming that the current macroeconomic outlook holds.
Speaker Change: Im looking forward to answering your questions. After Raj formal remarks, and I now will turn it over to Rod.
Rod: Thank you Glenn and good morning, everyone.
Rod: And thank you for joining us today to discuss our third quarter results.
Rod: I'll start by going over the system.
Rod: Specifics of the quarter, and then I will comment on our outlook and guidance for 2024.
Rod: So let's begin with the quarters results.
Rod: As Glenn mentioned in his remarks, we reported third quarter sales of $891 million up $21 million or two 4% at the high end of our guidance range for the quarter, a flat to low single digit growth.
Rod: If we exclude the impact of the phase out of under armour net sales for the quarter were up high single digits on a year over year basis.
Rod: This was driven by a strong performance in activewear up $44 million or 6% driven by higher sales volumes, reflecting positive Pos.
Rod: Pos across channels in North America.
Rod: We observed continued momentum with national account customers in several of our retail end markets, namely craft online retailers and in certain other mass markets.
Rod: 75% by year end on.
Rod: On the innovation front, our new products are receiving positive feedback and lastly, with regards to ESG. We are proud to have received yet another recognition. This time as one of Canada's most responsible companies by Newsweek ranking 14th overall and securing the top spot in the retail and consumer goods industry, a testament to our fundamental commit.
Rod: To S T E to ESG.
Rod: So overall, we're very pleased with our performance despite a somewhat mixed macroeconomic backdrop.
Rod: More specifically, considering where we are today in our final quarter. We feel we are on track to deliver our full year 2020 for guidance and as such we have further narrowed our 2024 outlook range as follows.
Rod: We're moving our revenue growth guidance to the upper end of our previous range. So.
Rod: So we now anticipate growth of low single digits compared to our previous guidance of flat to up low single digits, noting that if we were to exclude the impact of the under armour license agreement.
Rod: 24 full year revenue growth would be in the mid single digit range and remember this phase out has had minimal impact on our profitability.
Rod: We now also expect adjusted operating margin to slightly exceed 21% compared to our previous guidance of slightly above the high end of our 18th% to 8% target range for 2024.
Rod: This factors in the benefit of the refundable jobs credit introduced by Barbados as described earlier.
Speaker Change: <unk>, yes for our fleece, but we've also significantly increased our capacity within those factories. So part of the optimization is the changeover from our new soft telecom technology as well as adding capacity in and tweaking, how we're going to make our yarn for our fleece, which will now become.
Speaker Change: More.
Speaker Change: It would become softer as well as the we will have much better printing capabilities in terms of the the garments themselves. So these are types of things that we're continuing to do and.
Speaker Change: It's for us being a vertically integrated company I mean is it gives us an advantage of Moody's and we're continuing to spend and innovate and drive sales and you know this is our sales.
Speaker Change: Basics are positive for second quarter, and this is really because of the technology being able to <unk>.
Speaker Change: <unk> delivered to the market.
Speaker Change: Okay I appreciate the comments all of us.
Your next question comes from the line of.
Speaker Change: So with UBS. Your line is now open.
Speaker Change: Great. Thank you so much.
Speaker Change: And I want to ask your question I think rod alluded to this in his prepared remarks, but just changing industry dynamics two of your largest customers.
Speaker Change: Essentially now gotten together because of the acquisition.
Speaker Change: Yeah.
Speaker Change: Martin will first of all we're diagnostic because of tariffs come in they come in for everybody right. So we'll be in the same position that we're in today.
Speaker Change: Today in Bangladesh, we do have tariffs coming back into the United States.
Speaker Change: At a rate of 465% and that's factored into our cost savings and everything else. We have plan for that facility. So you know I would say we're diagnostic I mean, the only thing I'd put things tariffs could you know do is you know create inflation and you know the question is will be the elasticity in.
Speaker Change: And how many garments people can buy because costs will go up for consumers, but.
Speaker Change: Don't forget even within Guild, and I mean, we're still.
Speaker Change: Very attractively priced in the marketplace. So I don't think it would be hugely effective to us personally.
Speaker Change: You know when our shirts are selling for $2 50, a wholesale I mean, even if they do go up I mean, its still be very attractively priced overall, so it's hard to say what will happen, but you know I don't think we're going to be at a disadvantage in fact, it may even be an advantage for us.
Speaker Change: Okay, and then is what would your production intent and Central America being impacted by the tariffs that are contemplated.
Speaker Change: Oh, we don't know I mean honestly, there's a we have free trade agreements.
Speaker Change: Today, with which we're applying to bring our products back into the United States. So it depends on you know.
Speaker Change: Traditionally sold and have a larger market share in our distributor channel, but we have very little market share in our national account channel. So that's an area of significant growth for us.
Speaker Change: Fleece today has a category is around 70, 17% of our unit volume. So it's no. It's still got a long way to go.
Speaker Change: In terms of growth. So it's you know, it's it's something that.
Speaker Change: It's still in its beginning stages. So we're very comfortable that fleeces as a category will continue to grow we're comfortable that when the distributor business will continue to take share. We got new products that are coming in to be able to support our future growth.
Speaker Change: We're very underpenetrated in the National account area. So overall I would say that fleece will continue to be a growth category.
Speaker Change: High single digit growth.
Speaker Change: And over the next three years.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: There are no further questions I would now like to turn the call back over to Jesse.
Speaker Change: For closing remarks.
Thanks, Angela I once again, we'd like to thank everyone for joining us and attending our call today and we look forward to speaking with you soon have a great day.
Speaker Change: That concludes today's conference call. Thank you all for joining you may now disconnect.