Q3 2024 Gildan Activewear Inc Earnings Call

Speaker Change: Good morning and welcome to the third quarter 2024 Guilden active wear earnings conference call. All lines should in place on me to prevent any background noise.

Speaker Change: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star for a little bit at number one in your telephone keypad and if you would like to withdraw your question, press star one again, thank you. I would now like to turn the call over to Jessy Hayem.

Speaker Change: Senior Vice President, Head of Investor Relations and Global Communications, please go ahead.

Jessy Hayem: Thank you Angela. Good morning everyone. Earlier we issued a press release announcing our results for the third quarter of 2024. Along with our interim shareholder report containing management's discussion and analysis, as well as consolidated financial statements.

Jessy Hayem: These documents are expected to be filed with the Canadian Securities and Regulatory Authorities and the US Securities Commission today, and they'll also be available on our corporate website.

Jessy Hayem: Joining me on the call today are Glenn Chamandy, President and CEO of Guilden, Broad Harries, Executive Vice President and Chief Financial and Administrative Officer and Chuck Ward, President, Sales, Marketing and Distribution.

Jessy Hayem: This morning we'll take you through the results for the quarter and then a question and answer session will follow.

Jessy Hayem: 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.

Jessy Hayem: We refer you to the company's filings with the US Securities and Exchange Commission and Canadian Securities Regulatory Authorities.

Jessy Hayem: During this call, we will also discuss certain non-gap financial measures.

Jessy Hayem: Reconciliation to the most directly comparable IFRS measures are provided in today's earnings release, as well as our MDNA. And now I'll turn it over to Glenn.

Glenn Chamandy: Thank you, Jessy and good morning everybody. As highlighted in this morning's release, our Guild Dance Sustainable Gross Ragee or GST, GST, is clearly driving growth.

Glenn Chamandy: We delivered record, third quarter sales of 891 million, which were up 2.4% versus last year.

Glenn Chamandy: is including the phase out of underarmor, or third quarter console data sales would have been up a high single digits.

Glenn Chamandy: We are not only strengthening our competitive position and driving growth, but we are also continuing to enhance our profitability. As reflected in our Q3 results, with adjusted operating margins of 22.4% of 430 basis points year over year.

Glenn Chamandy: and record 3rd quarter adjusted diluted EPS of 85 cents of 15% versus last year.

Glenn Chamandy: All while continuing to return significant capital to shareholders, with a record of 404 million returned in Q3 and 643 million to year to date. Rod will provide more details shortly.

Glenn Chamandy: But let me tell you that we are very excited about the opportunities ahead. As we continue, to leverage the benefits of our ongoing yarn operation, modernization in the United States.

Glenn Chamandy: Scale up further, capitalizing on our new Bangladesh operation, which is ramping up as planned and which will support the long-term growth of our ringspon products.

Glenn Chamandy: As we continue to optimize our operations in Central America to support the growth of our fleas.

Glenn Chamandy: and as we leverage the largest pipeline of innovation in the company's history.

Glenn Chamandy: with the development of our new soft, fun technology, our new MVS technology for fleece.

Glenn Chamandy: Our new color blast for comfort colors, our plasma technology to improve and reduce the cost of screen printers digital printing, just to name a few with more to come in 2025.

Glenn Chamandy: The Successful Execution of the Three Strategic Pillars, Capacity Expansion, Innovation, E-Street, All of which are pretty much in place today.

Glenn Chamandy: and definitely moving the company in the right direction.

Glenn Chamandy: Our complete focus on executing our GST strategy gives us a confidence in our ability to deliver on our three-year growth targets that we had laid out earlier this year. For the 2025-27 period, including...

Glenn Chamandy: Mid-Single Digital Sales Growth, improved a Justin operating margins over the three year period as compared to 2024. CapEx, as a percentage of sales, about 5% per year on average.

Glenn Chamandy: Continued share repurchase in line with leverage framework of 1.5 to 2.5 net that to adjust the evadation.

Glenn Chamandy: and adjusted diluted EPS growth in the mid-teen range.

Glenn Chamandy: As we approach 2025, we're well positioned with good visibility heading into the new year, assuming that the current macroeconomic outlook holds.

Speaker Change: I'm looking forward to answering your questions after Rod's Formula remarks and I now will turn it over to Rod.

Rod: Thank you Glenn and good morning everyone. And thank you for joining us today to discuss our third quarter results.

Rod: I'll start by going over the 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 3rd quarter sales of 891 million, up 21 million or 2.4% 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 armor, 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 active wear, a 44 million or 6% driven by higher sales volumes, reflecting positive POS across channels in North America.

Rod: We observe continued momentum with National Account customers in several of our retail and markets, namely craft, online retailers and in certain other math markets.

Rod: Moreover, our strong competitive positioning has enabled us to capitalize on recent changes in the industry landscape.

Rod: The overall growth in active earth sales would have been a part but was partially offset by unfavorable product mix in the quarter.

Rod: This was partly because of lower fleece sales compared to last year's strong performance, which was largely due to timing differences and which we had anticipated.

Rod: Overall, though, we were pleased with our mid-singled Digit sales growth in active work. As we continue to see market share gains in key growth categories, as well as a positive market response to our newly introduced product features featuring our new soft cotton technology.

Rod: Looking at international markets sales increased by 20%. Growth stem from positive POS in Europe are largest market, as well as inventory replenishment by distributors from sub-optimal levels.

Rod: We are now clearly increasingly better positioned services market as we ramp up our Bangladesh facility.

Rod: Turning the Hozerian underwear, as expected this category was down 18% versus the prior year, mainly due to the phase out of the underarmor business, and to a lesser extent due to unfavorable mix.

Rod: Excluding this phase out, our Hoosary and Underwear sales would have been up low double digits year over year, highlighting strong underlying growth as we gain further traction with other national account customers and despite the prevailing broader market weakness in underwear.

Rod: And finally, a quick note regarding our year-to-date net sales, if we exclude the impact of the underarm or phase out, sales for the hosere and underwork category, as well as consolidate the sales would have been increased by mid-single digits year-over year.

Rod: The End.

Rod: Turning our focus to margins for the quarter. Our gross margin was 31.2% versus 27.5% in the prior year. A 370 basis point improvement primarily due to lower raw material and manufacturing input costs in line with our expectations.

Rod: As for SGA, expenses were 84 million in the quarter, including 6 million in carryover charges related to the proxy contest and related matters.

Rod: Excluding these charges, adjusted SGNA expenses were 78 million or 8.8% of net sales, a 70 basis point improvement versus last year.

Speaker Change: The Euroview Reduction in SGA mainly reflected the ongoing positive benefit of the job credit introduced by part bar betos during the second quarter as part of their economic policies.

Speaker Change: As we bring all these elements together and adjusting for proxy contest and related map matters, we generated adjusted operating income of 200 million or 22.4% of net sales in line with our guidance, and up 430 basis points compared to the prior year.

Speaker Change: As expected, the company's adjusted effective income tax rate for the quarter was 18.7% compared to 5.1% last year, reflecting the enactment of global minimum tax in Canada and Barbados earlier this year.

Speaker Change: After reflecting higher net financial and income tax expenses and our lower of standing share base, we reported gap EPS of 82 cents.

Speaker Change: A just thing for the charges related to the proxy contest and related matters are adjusted to looted earnings per share where at a record level for a third quarter at 85 cents versus 74 cents in the prior year, which represents a 15 percent increase.

Speaker Change: Now let's shift the cash flow and balance sheet items.

Speaker Change: with cashflow from operating activities of 178 million and capex of 30 million, the company generated free cashflow of 149 million in the third quarter.

Speaker Change: This together with our strong balance sheet allowed us to continue to execute on our capital allocation priorities.

Speaker Change: and reflecting our strong commitment to returning capital to shareholders, we repurchased close to 9 million shares under our NCIB and returned a quarterly record of 404 million in capital, including dividends to shareholders in the third quarter.

Speaker Change: We enter the quarter with net debt of 1.5 billion and a net debt to Eva Dahliver's ratio of 1.9 times well within our targeted debt levels.

Speaker Change: Let's now focus on our strategy and outlook. As Glenn mentioned earlier, we continue to progress in the three pillars of our GST strategy, capacity-driven growth, innovation, and EST.

Speaker Change: The ramp up of our new manufacturing complex in Bangladesh is on track and set to be an exit capacity rate of 75% by year end.

Speaker Change: On the Innovation Front, our new products are receiving positive feedback and lastly with regards to ESG, we're proud to have received yet another recognition.

Speaker Change: 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 commitment to SG.

Speaker Change: So overall, we're very pleased with our performance despite a somewhat mixed macroeconomic backdrop. 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 are further near our 2024 Outlook Range as follows.

Speaker Change: We're moving our revenue growth guidance to the upper end of our previous range.

Speaker Change: So we now anticipate growth of low single digits, compared to our previous guidance of flat to up low single digits.

Speaker Change: noting that if we were to exclude the impact of the underarm or license agreement, 2024, 4-year revenue growth would be in the mid-single digit range. And remember, this phase out has had minimal impact on our profitability.

Speaker Change: We now all expect adjusted operating margin to slightly exceed 21%. Compared to our previous guidance of slightly above the high end of our 18th to 20% target range for 2024.

Speaker Change: This factors in the benefit of the refundable jobs credit introduced by Barbados as described earlier.

Speaker Change: We now expect adjusted deluded EPS to be in the range of $2.97 to $3.2. Obst significantly between 15 and 1.5% and 17.5% year over year.

Speaker Change: which compares to our previous guidance range of 292-307-2024.

Speaker Change: This takes into account an expected adjusted effective income tax rate of approximately 18% for the full year compared to 4.4% last year.

Speaker Change: We also continue to expect CapEx to come in at approximately 5% of net sales and free cash flow is still expected to be above 2023 levels driven by increased profitability, lower working capital investments and lower CapEx than in 2023.

Speaker Change: Finally, we plan to continue to share, to continue to share, we purchase in the final quarter, given the strength of our balance sheet, our expected strong free cash flow and our leverage framework target of 1.5 to 2.5 times net debt to adjusted EBITDA.

Speaker Change: So this wraps up our financial overview for the corner.

Speaker Change: Before we take your questions, I would just like to re-emphasize that the strength of our vertical integration model, our steadfast focus on our cost structure, the successful execution of our GST strategy, combined with the strength of our balance sheet and free cash flow generation ability, all position the company favourably for the coming years.

Speaker Change: especially considering the current competitive landscape.

Speaker Change: So bottom line, and as Glenn mentioned earlier, we feel like we are fully on track to deliver on the targets we have provided for the next three years of mid-Single Digit Reven You Growth, improved annual adjusted operating margin as compared to 2024, and mid-teen adjusted EPS growth.

Speaker Change: Thank you all for joining us today. I will now turn it back over to Steve.

Steve: Thank you, Rod. This concludes our prepared remarks and we'll now begin taking your questions.

Steve: Before moving to the QNA session, as usual, I'd like to remind you to limit your questions to two and circle back for a second round if time permits. Angela, you may begin the QNA session.

Angela: Thank you, and we'll now begin the question and answer session. If you have dialed in and would like us a question, please press star 1 and your telephone keypad to raise your hand and join the queue. If you would like to enjoy your question, simply press star 1 again, thank you. Your first question comes from the line of Paul Levers with City.

Angela: Your line is now open.

Speaker Change: Hey, thanks guys. Keep watching this one.

Paul Levers: In the quarter of years, if you could talk about POS trends that you saw throughout, how it trended in, if you could comment on anything you might be seeing both quarter to date. And then looking out to next year, periodists, if you have any high level thoughts about 25 market growth.

Paul Levers: but also market share opportunities just given the changing competitive landscape that you see in out there. Thanks.

Paul Levers: and the next episode of The Big Bang.

Speaker Change: Good morning Paul, I was shocked and...

Speaker Change: I guess we'll start with your question on the POS trends. So overall, we think the market has continued to be down low single digit, low single digit to mid single digits but we've been gaining share in all the categories.

Speaker Change: We are basic POS was positive for the second quarter in a row and I think it's showing really as Rod and Glenn both mentioned that our innovation or soft cotton technology is really coming through and well received by the market.

Speaker Change: But then our growth continues to be really in the ring spun of police categories where we're continuing to take share and drive growth with those categories.

Speaker Change: As for the trends through the quarter and then also what Q4 looks like.

Speaker Change: You know.

Speaker Change: We continue the same trim we've been seeing, which the quarter start out with a little slower POS and then it...

Speaker Change: picks up throughout the quarter.

Speaker Change: We saw that in Q3 and we continue to see that in as we go into Q4.

Glenn Chamandy: So that's the sort of the one that trans and where the POS had been and let Glenn talk about 2025. Yeah, look, as far as we go forward into 2025, I think, look, we've got very good visibility, first of all, on our cost structure.

Glenn Chamandy: and we have very good visibility on new programs that are basically going to support our growth for 2025.

Glenn Chamandy: and I would say that we've taken a conservative assumption to flat, to low single digit growth.

Glenn Chamandy: Basically, we're taking a still view of that the market is still going to be weak as we move into next year, but those things considered we feel comfortable that we'll be able to hit our mid-single digital target.

Speaker Change: Thank you. I'm just a bit clear. That was a flat, so let's take a look at the jigs, the mark you know we're all. Yeah.

Speaker Change: That's correct Paul. Flat the low on the market and then overall we're effectively going to be in mid-single in line with our three year algorithm for growth. And obviously we do feel very good about the market share opportunities.

Speaker Change: Highlight, you know, when we opened up the call and all the things that we're working on.

Paul Levers: Great, thank you, good luck.

Speaker Change: Thank you.

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

Mark Petrie: Thanks for morning. I wanted to sort of follow that same theme and maybe specifically honing on national accounts.

Mark Petrie: If you could just sort of talk about the dynamics that you saw in Q3, how you expect that to play out in Q4 and then into 2025 and how sticky you think the gains that you've been able to secure are.

Speaker Change: Good, thank you Mark and we're...

Speaker Change: We feel like our national count business has been going well. You know, rod caught it out in the comments, we've seen gains across the categories there and across channels within our national counts. And we think we've continued to gain share because as I mentioned earlier, where the market is,

Speaker Change: Down low to mid-single digits, but yet we are continuing to grow so we continue to gain share in those categories and we feel good about...

Speaker Change: Kind of that moving as forward as well as Glenn mentioned as we think about.

Speaker Change: Going forward into 2025, between the market growth and then plus our new programs, we feel like we're going to be able to hit our targets of growing mid-single digits. So I think we feel good about the national count business.

Speaker Change: and also some of it is not just you know, market share but don't forget we're getting new programs which just add on to a sort of combination of new programs and share it as growing the overall growth. I think that's important point.

Speaker Change: i

Speaker Change: and I'm interested in it. And also, could you just expand on specifically how the US-ERN operations sort of lay or into the GST plan and the opportunities that that's affording you with regards to market share movement.

Speaker Change: Well, what they're supporting first of all is giving us a competitive advantage as you know all of our soft cotton technology has really been developed through our yarn operations and gives us a competitive advantage.

Speaker Change: We've also not just modernized and changed the way we make our MVS for our fleas, but we've also significantly increased the capacity.

Speaker Change: with those factories. So part of the optimization is the change over for Marnooseph, Tachart Technology, as well as adding capacity and tweaking how we're going to make our yarn for a fleece which will now become...

Speaker Change: and more, it would become softer as well, 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 you know, it's for us being a very clean degraded company. It gives us an vaginal movement to continue to spend and innovate.

Speaker Change: and Drive Sales. This is our sales in basics. Our positive for second quarter, and this is really because of the technology we've been able to deliver to the market.

Speaker Change: Okay, appreciate the comments, all the best.

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

Jay Sol: I want to ask you a question. I think Roger alluded to this in his prepare remarks, but just changing the true dynamics to your largest customers. Essentially, if now got into the other because of my acquisition.

Speaker Change: She's talking about how that might impact the business. I guess there's some concern out there that their bigger maybe they have a little bit more leverage now that can maybe extract some better price and put some pressure on your margins. I mean, do you think that's possible and really what do you think the impact you're dealing in is from that acquisition?

Speaker Change: Well I think that we're going to be the beneficiary of consolidation and consolidation has been happening for the last 20 years.

Speaker Change: So this is not new. We understand what's happening to market and we've been the beneficiary.

Speaker Change: When you look at what is going to happen, the distributor market can solidate, but there's also going to be consolidation in brands.

Speaker Change: Delta's gone away. I don't know if you just heard recently that fruit is pulling out of the printware market. So, you know, as brands, you know, leave the industry. Gildan has a competitive advantage.

Speaker Change: You know, they are a large customer to us, but we are also a large customer to them as well. So I think it's a mutually good opportunity for everybody. And the market will be more stable with fewer distributors, and I think overall it's a win-win for everybody.

Speaker Change: Got it, okay, thank you so much.

Speaker Change: i

Speaker Change: Your next question comes from the line of the season, Machliet with B&O. Your line is now open.

Speaker Change: Thank you, good morning guys. I just wanted to take you to give a little bit of sort of more specific color around what you saw for PLS trends within, you know, [inaudible]

Speaker Change: Yeah, I just even so, you know, as I was mentioned, we did see again positive, feel as the basics as Glenn mentioned as well.

Speaker Change: and again we think our softcat and technology is hitting the market and as well we're seeing.

Speaker Change: As I mentioned, we're still driving growth with our ring spun as we continue to take share across ring spun and fleece categories. We see those will be, you know, have driven growth and they're going to continue to drive growth in the future years. We've seen ring spun high single digits and in fleece is maybe a little softer as it started out the season due to weather, but we still feel really good about the category and really good about our strong position that we have in fleece category as well. So, positive momentum in both of those areas.

Speaker Change: Okay, that's great. And then just on place, with respect to the timing impact that you saw on Q3, how do you expect that to evolve and Q4 to get your mind as sort of the timing impact on place?

Speaker Change: Steven, it's Rod, yeah. We will see, I would say, goodly sales in Q4, as we said.

Speaker Change: Q3, where we're infected by some timing, is we'd be moving our production around really to optimize cost. And so we had expected that Q3, we wouldn't see quite the fleece sales.

Speaker Change: We might normally expect, but we will see the fleecelle is now flowing through in the fourth quarter.

Speaker Change: and that would say effectively support us as we move through the quarter.

Speaker Change: The fourth quarter looks good as we talked about overall.

Speaker Change: If you look at the, we have headwind, right? We have headwind with respect to the phase out of under armor and the fourth quarter is a big quarter historically from a hoesary perspective. So you'll see.

Speaker Change: You know the most significant impact of that phase out occurring in the fourth quarter.

Speaker Change: But overall, we'd say we feel good about the way that the quarter is unfolding.

Speaker Change: and I think what's...

Speaker Change: I would say very pleasing about all of this. If you look at what are active where business is doing, because of all things that we've talked about, where we're trending up 6% sales in the third quarter.

Speaker Change: You know that?

Speaker Change: Overall category is really driving, I would say, the mid-single digit growth overall. And I would say as we move into the fourth quarter, we should continue to expect that to unfold, as we finish the year. Again, the Mac will see what happens to the Mac environment.

Speaker Change: That's what our expectation is and then as we move into 25.

Speaker Change: Again, we continue to see that as being a big driver overall performance.

Speaker Change: I would say we're in good shape for the quarter, the innerwear business obviously talked about the underarmor phase out. I would say in some areas things are a little bit weaker than we might like.

Speaker Change: [inaudible]

Speaker Change: and we will see that flow through also in the fourth quarter. So I think we're set up well for the finish the year and the move into 25.

Speaker Change: Okay.

Greg Holler: That's Greg Holler.

Speaker Change: and then maybe just one more if I could just be talked a little bit about kind of unfolding 2025 in terms of the top line. You know, you've had strong growth margin and strong SJA, leverage your debate. Can you just give a little bit of color on how you would expect that to evolve as you look in 2025?

Speaker Change: Yeah, look, I think we feel that we have gross margin well under control. And if you look at the performance in the quarter, effectively, where we ended up...

Speaker Change: 31.2% and now we've moved above that 30% level as we've been talking about.

Speaker Change: and Glenn highlighted it in the early part of the...

Speaker Change: of the comments. If you look at what's going on on the cos side, we feel we have that well-inner control with the ramp up of Bangladesh.

Speaker Change: and the Optimization of Central America with the Yarn Optimization. And so that's going well. I think from a pricing perspective, we see a very stable environment. And so I would say we feel well positioned on the gross margin side for...

Speaker Change: 25 and actually really as we go forward right over the whole three year period.

Speaker Change: I would say everything's coming together and we're really our benefiting from all of the elements of the strategy that we've put in place.

Speaker Change: and then we continue to grow top line and then we leverage SNA as well as that in order to drive operating margin performance. So we're in good shape overall and very much in line with what we planned for finished a year for 25 and over the three years.

Speaker Change: That's great. Thanks, Ron. Appreciate it. Thanks.

Speaker Change: The End

Speaker Change: Your next question comes from the line of Martin Landrie with Typhol, your line is now open

Martin Landrie: Hi, good morning guys. I wanted to touch on the upcoming US election and there's a lot of discussions about implementation of tariffs.

Martin Landrie: So, just try to understand what would be the implication for your production in Bangladesh that's destined to the US market.

Speaker Change: Martin will first of all, you know, we're diagnostic because if 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 Bangalore, we do have tariffs coming back into the United States.

Speaker Change: at the rate of 16.5 percent, and that's factored into our...

Speaker Change: Cosshavings and everything else we have planned for that facility.

Speaker Change: You know, I would say we're diagnostic, I mean the only thing I have with things Tyra could do is, you know, create inflation and, you know, the question is, will be their elasticity and how many garments people can buy because costs will go up for consumers.

Speaker Change: Don't forget, even within Gildan, I mean, we're still...

Speaker Change: Varia tractively priced in the marketplace, so I don't think it would be hugely effective to us personally.

Speaker Change: When our shirts are selling for 250 wholesale, I mean, even if they do go up, I mean, it's still be very tragically priced overall. So, it's hard to say what will happen, but I don't think we're going to be in a disadvantage in fact it may even be in a vansivores.

Speaker Change: and then is with your production in Central America being packed by the Tyra for their contemplative.

Speaker Change: We don't know, I mean, honestly, we have free trade agreements today, which we're applying to bring our products back into the United States. So depends on if they apply tariffs on their free trade agreements or not, or we don't know that, right? So, we'll wait and see.

Speaker Change: Good. Okay, that's it for me. Thank you.

Speaker Change: The End

Speaker Change: Your next question comes from the line of Brian Morrison with TD Covin. Your line is now open.

Speaker Change: Good morning.

Brian Morrison: Question for a Rodder Glenn, how should we think about cotton prices in your pricing strategy going forward next year? I assume your competitor to spend all their difficulties maybe hasn't to lower prices, but could that be a market share opportunity for you? I just wanted to know how we should think about this as the hedging rolls off next year.

Glenn Chamandy: Well, I would say that I look cotton, you know, cotton prices, the personal we got very good visibility and all of our cost for our recruiting cotton.

Glenn Chamandy: and Yolkaden has come down a little bit since last year.

Glenn Chamandy: But they're still inflation in the system, right? So if you look at labor, transportation, energy, you know, these things are all up. So I would say that...

Glenn Chamandy: Whatever benefit there was of slightly lower cost of cotton, I think of offset by other inflationary items in people's overall cost structures. So our view is that pricing will be...

Glenn Chamandy: Samad Flatt, because of that. But look, we're well positioned. We have a lot of caution initiatives coming through. We got, you know, Bangladesh this year. You know, as we ramped it up, it was not a cause savings. You know, it didn't.

Glenn Chamandy: Effect our cost structure was probably operating at the same cost as our Central American operations but what we pointed out is that once it's fully ramped up it will be a 25% reduction relative to what we produce fashion basics in.

Glenn Chamandy: in Central America and are you are an optimization project, those costs have not.

Glenn Chamandy: Savings have not flown through our cost of goods sold yet, so that's something that will be complete as we move into next year.

Glenn Chamandy: So, you know, we're in...

Glenn Chamandy: Ipens Yolw Arp.

Glenn Chamandy: Capacet, our utilization capacity in Central America is not running full at this point and we're continuing to ramp that up, particularly with the mix of Feliste, you know it's using much more of our capacity so we're going to get some benefits as we move into next year on our capacity utilization.

Glenn Chamandy: You know, overall we're well positioned and we got good visibility.

Glenn Chamandy: I would say that we've got a lot of new programs that have already been...

Glenn Chamandy: established as we move into 24.

Glenn Chamandy: and the only thing that we can't really control really is the outlook and hopefully things have proved because the market is weak. I mean, it's weak in all categories across the board today and hopefully we're at a bottom and that turns and that would actually be upside to our overall sales plan.

Speaker Change: Okay, I appreciate that Glenn Maybe, maybe I can just maybe I'm getting a bit in front of myself here, but with the success that you have with your...

Mark Petrie: Market Share Games, and maybe this is for Chuck, but where do we stand with days two of Bangalore Dash? And what is the cost to complete that facility? So I believe you have infrastructure in place. Should we be thinking that this could be a 2025 CapEx or a 2022 CapEx?

Speaker Change: I would say two things. First of all, we have all the capacity installed today to support the 22526 and 27 period.

Speaker Change: So if you look at what we've done, we've already, but once we fully ramp up bangledash and optimize our central American capacity, we have enough capacity in place.

Speaker Change: In our CapEx of 5% what we've done is we will in that period include the development of our phase 2 of Bangladesh, but that's really going to be supporting the sales of the end of 27 and probably in the 28th let's say for example.

Speaker Change: We have enough for well-positioned, and everything that we need.

Speaker Change: to deliver our three or targets as in place. The capacity is in place, the innovations in place, and the ERST initiatives are in place. So we're really, I think, that's why we're so confident and bullish about our three or up look is because we really don't have to do anything, but continue to sell and deliver an execute.

Speaker Change: and Brian the only thing I would add to that also as Glenn said we were well set up for the next three years, right? We know exactly where we're going and how to deliver it.

Speaker Change: What if things get better, we have the ability to also take advantage of that? And then, if you think beyond that and you think about the next phase of Bangalore, what's important is that we put all of the infrastructure in for the second phase.

Speaker Change: We built the first phase, so it's all there.

Speaker Change: and so the cost of the second phase will be very low.

Speaker Change: as compared to what we've spent on phase one. So when we see that come through, you're not going to see.

Speaker Change: I would say anything of a meaningful impact, it will be inside of our normal.

Speaker Change: and the envelope of effectively the 5% per year that we have.

Speaker Change: as a assumption for the next three years.

Speaker Change: and even beyond that historically we've been at those levels and we think we can run the business and grow the business running with that type of spending. And just maybe that one more thing that I would say is that in our planning process towards the end of 25 is when we plan to start to develop the second phase of the operation.

Speaker Change: Very helpful.

Speaker Change: The End.

Speaker Change: i

Speaker Change: Your next question comes from the line of Bishal Shred Har with National Bank. Your line is now open.

Speaker Change: Hi, I just want to ask about Bengal dashing and the civil unrest there and how you see that unfolding, is it fully stabilized and juicy that it's an impediment looking for?

Speaker Change: We've been in Bangalore for over 10 years, we've seen some instability in the past during the election years.

Speaker Change: But I would say, look at, we're very comfortable at Bangalore Dash, you know, we lost a couple of days.

Speaker Change: As we let people stay home, just for safety reasons. But overall, things are running as planned. The plants are fully functioning and running today and being ramped up. So we're very comfortable with where we are in Bangladesh.

Speaker Change: Obviously, it's something we've developed and being very clean to greater low cost manufacturing. Basically, we have the skill set to operate in some of these countries. We're still operating today every day in Haiti, which is probably in a lot of cases.

Speaker Change: You know, much more difficult environments in which to operate. So, I would say that we're very comfortable with where we are in Bangladesh and things are going well and the plant will be on track and ramp up at 75% by the end of the year.

Speaker Change: Thank you for that. With respect to fleece performance, you mentioned it earlier in the call, it's been strong for the last several years, kept it in the quarter due to timing.

Speaker Change: but fleece is also benefited from a fashion trend towards that type of product. So wondering how you see that unfolding through the years? Do you expect the tailwind to persist or is it more of a transient bump over the last few years associated with trend?

Speaker Change: Well, there's two things to note, one is that there's different areas in which we sell fleece. I mean we've traditionally sold.

Speaker Change: and have been with larger market here in our...

Speaker Change: Distributor Channel.

Speaker Change: But we have very little market here in our national town channel, so that's an area of significant growth for us.

Speaker Change: You know, fleece today as a category is around 17% of our unit volume. So it's still got a long way to go in terms of growth. So it's something that it's still in its beginning stages.

Speaker Change: We're very comfortable that fleeces as a category will continue to grow. We're comfortable that in the distributor business we're continue to take share. We've got new products that are coming in to be able to support future growth.

Speaker Change: We're very under-penetrated in the National County area. So overall I would say that you know, fleece will continue to be a growth category, you know, high-suitable digital growth in over the next three years.

Speaker Change: The End

Speaker Change: i

Speaker Change: There are no further questions I would not like to turn the call back over to Jessy Hayes for closing remarks.

Jessy Hayes: Thanks Angela, once again we'd like to thank everyone for bringing us an attending or 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 me now this Connect