Q4 2024 Gildan Activewear Inc Earnings Call
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the Guilden ActiveWares 2024 Q4 earnings and full year conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jessy Hayem, Senior Vice President, Head of Investor Relations and Global Communications. Please go ahead.
Speaker Change: Thank you. Good morning everyone and thank you for joining us. Earlier this morning we issued a press release announcing our results for the fourth quarter and full year 2024 as well as our first time guidance for 2025.
Speaker Change: 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.
Speaker Change: In a separate press release issued concurrently today, the company also announced executive leadership nominations and a CFO transition as part of a multi-year succession planning process which we'll be addressing this morning as well.
Speaker Change: Now joining me on the call today are Glenn Chamandy, President and CEO of Gildan, Rod Harries, Executive Vice President and Chief Financial and Administrative Officer, and Chuck Ward, President, Sales, Marketing and Distribution.
Speaker Change: This morning we'll take you through the results for the quarter and then 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.
Speaker Change: During this call, we will also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable IFRS measures are provided in today's earnings release, as well as our MD&A. And now, I'll turn it over to Glenn.
Glenn Chamandy: Thank you, Jessy, and good morning, everybody. I'd like to start the call by taking a moment to thank and acknowledge our global team's efforts for their strength and dedication, as well as the loyalty of our customers and the ongoing support from our shareholders.
Glenn Chamandy: As we highlighted in this morning's release, you can see that Gildan Sustainable Growth Strategy, or GSG, is clearly driving profitable growth, and we are extremely pleased with our progress.
Glenn Chamandy: We delivered record fourth quarter sales of $822 million, which were up 5% versus last year.
Glenn Chamandy: This growth rate would have been low double digits when you exclude the phase-out of Under Armour.
Glenn Chamandy: We also delivered record fourth quarter adjusted EPS of $0.83 a share, up 11% year-over-year.
Glenn Chamandy: In our 40th anniversary year, we conclude it on a high note.
Glenn Chamandy: with record revenues of about $3.3 billion, strong adjusted operating margins of 21.3%, and year-over-year adjusted diluted EPS growth of 17%, fully in line with our guidance.
Glenn Chamandy: All while continuing to return significant capital to shareholders, with a record $889 million returned in 2024.
Glenn Chamandy: We are also committed and continuing executing on our GSG strategy across all our three pillars, capacity, innovation, and ESG.
Glenn Chamandy: We are excited about our ability to deliver on our three-year objectives we have laid out for 2025 to 2027 period.
Glenn Chamandy: which include net sales of mid-single-digit range and adjusted diluted EPS growth in the mid-teen range.
Now looking at 2025, we believe we're well-positioned.
Glenn Chamandy: We have many strong drivers which we feel could allow us to deliver on our objectives for the full year.
Glenn Chamandy: We have new innovation across the board and very good reception of our soft cotton technology, which is driving our basics and continued positive territory with double digit POS growth in the fourth quarter of 2024.
We are also excited about our plasma print technology.
Glenn Chamandy: and other innovations such as ColorBlast in our Comfort Colors brand which we are seeing significant growth. In fact, the brand is up 40% for the full year in 2024.
Glenn Chamandy: We're also expanding our product line in the distribution, through distributors, under our champion brand through the license we secured for the Printware channel.
Glenn Chamandy: So these drivers will allow us to further gain share in the distributor channel in 2025.
Glenn Chamandy: And remember, we're also benefiting from the changing competitive landscape with players exiting the market.
Glenn Chamandy: Our international business has seen a 20% increase in sales the last two quarters.
Glenn Chamandy: as these markets have started to recover and our ability to service now stronger given the capacity expansion in Bangladesh and our product availability in these markets.
Finally, the national count side, we're also seeing great traction.
Glenn Chamandy: We are expanding our shelf space in underwear with additional product offering.
Glenn Chamandy: And we have secured meaningful new programs of activewear, both tees and fleece, with our National Count customers.
Glenn Chamandy: So, these are all the drivers for our growth in 2025.
Glenn Chamandy: And we are excited about the opportunities ahead. And of course, as always, we continue to focus on further cost and operating margin improvement. Ramping up Bangladesh.
Glenn Chamandy: our yarn modernization in the United States, optimizing our Central American operations.
Rod Harries: I'm looking forward to answering your questions after our forum remarks, and now I'll turn the call over to Rod.
Rod Harries: Thank you, Glenn, and good morning, everyone, and thank you for joining us today to discuss our fourth quarter and full year results.
Rod Harries: I'd also like to begin the call by thanking the entire Guilden team for their outstanding work and dedication throughout 2024.
Rod Harries: Echoing Glenn, three years into our GSG strategy, we're extremely pleased with our execution as we continue to reinforce our core competencies and our overall strong competitive positioning.
Rod Harries: Let me start by going over the specifics of the quarter, and then I will comment on our outlook and guidance for 2025.
So let's begin with the fourth quarter results.
Rod Harries: We reported fourth quarter sales of $822 million, up 5% year-over-year.
Rod Harries: If we exclude the impact of the phase-out of Under Armour, net sales for the quarter are up low double digits.
Rod Harries: This was driven by a strong performance in activewear, up 70 million or 11%, driven by higher sale volumes.
Rod Harries: We saw positive POS across channels and product lines, and continue to capture market share in key growth categories, with a strong market response to our recently introduced products which feature key innovations, including our soft cotton technology.
Rod Harries: We also saw continued momentum with national account customers, driven by our competitive positioning, and as we continue to benefit from recent changes in the industry landscape.
looking at international markets.
Sales increased by 20% year-over-year for the second consecutive quarter.
Rod Harries: Growth stemmed from positive POS in Europe, our largest market, as well as inventory replenishment by distributors.
Rod Harries: With our improved in-stock levels, supported by our global manufacturing footprint, we have improved our ability to service these markets.
Rod Harries: Turning to hosiery and underwear. As expected, this category was down 23% versus the prior year, mainly owing to the phase-out of the Under Armour business.
Rod Harries: Excluding this phase out, our hosiery and underwear sales would have been up high single digits year over year, highlighting strong underlying growth as we continue to gain traction with other national account customers.
Rod Harries: And finally, a quick note regarding our full year net sales for this category.
Turning our focus to margins for the quarter.
Rod Harries: Our gross margin was 30.8%, a 60 basis point improvement over the prior year, primarily due to lower raw material costs.
As for SG&A...
Rod Harries: Expenses were $78 million in the quarter, compared to $88 million in the prior year.
Rod Harries: If we adjust for charges related to the proxy contest and leadership changes, which were meaningful in the fourth quarter of 2023, adjusted SG&A expenses were $78 million versus $82 million last year.
Rod Harries: Adjusted SG&A as a percentage of net sales were 9.5%, down 100 basis points, reflecting the positive benefit of the jobs credit introduced by Barbados earlier this year, partly offset by higher variable compensation expenses and higher distribution expenses.
Rod Harries: As we bring all of these elements together, and after adjusting for restructuring and acquisition-related items in both years, as well as non-recurring items in the prior year's quarter, we generated adjusted operating income of $175 million, or 21.3%, up 160 basis points year-over-year.
Rod Harries: Briefly commenting again on the full year, adjusted operating margin was 21.3% up 400 basis points versus the previous year and in line with guidance.
Moving on to taxes.
Rod Harries: As expected, the company's adjusted effective income tax rate for the quarter was 13.4 percent compared to 3.1 percent last year, reflecting the enactment of global minimum tax in Canada and Barbados earlier this year.
Rod Harries: After reflecting higher net financial and income tax expenses and our lower outstanding share base, we reported GAAP diluted EPS of 86 cents in the fourth quarter, down 3% versus the prior year.
Rod Harries: Whereas adjusted diluted EPS were $0.83 versus $0.75 last year, which represents an 11% increase.
Rod Harries: Now, commenting on the full year, after adjusting for non-recurring items and taking into account the significantly higher year-over-year income tax expenses due to the enactment of GMT, as well as the benefit of our lower outstanding share base.
Rod Harries: Adjusted diluted EPS were up 17%, closing the year at $3, fully within the guidance range we had provided.
Rod Harries: Note that the net impact of the jobs credit and the higher tax rate related to the enactment of Barbados tax reform and GMT was 23 cents per share for the full year, implying that our year-over-year adjusted EPS growth rate would have been closer to 25% without these impacts.
Now, turning to cash flow and balance sheet items.
Rod Harries: Looking at the full year, cash flow from operating activities totaled $501 million compared to $547 million in the prior year, with both years impacted by non-recurring items as mentioned earlier.
Rod Harries: After accounting for CapEx of $150 million and lower year-over-year proceeds from sale and leaseback activities and asset disposals, the company generated free cash flow of approximately $390 million for the full year, essentially in line with the prior year.
Rod Harries: This cash flow generation, along with our strong balance sheet, enabled us to deliver on our capital allocation priorities and return a record $889 million to shareholders, including dividends and share repurchases of about 18 million shares, or 11% of our float in the year.
Rod Harries: And finally, even with the significant return of capital during 2024, we ended the year with net debt of about $1.6 billion and a leverage ratio of 1.9 times net debt to adjusted EBITDA, well within our target debt range of 1.5 to 2.5 times net debt to adjusted EBITDA.
Rod Harries: So, overall, and concluding on the results, we accomplished a great deal in 2024.
Rod Harries: by remaining focused on execution of our GSG strategy against a somewhat mixed macroeconomic backdrop.
Rod Harries: which resulted in record revenues, strong operating margins and putting us in an outstanding position to deliver on our capital allocation priorities including share buybacks and a 10% increase in our dividend for 2025 that we were pleased to announce this morning.
So this brings me to our strategy and outlook.
Rod Harries: So as Glenn highlighted earlier, we continue to be very pleased with our execution and progress on the three pillars of our GSG strategy.
Rod Harries: First, our new manufacturing complex in Bangladesh ramped up fully on track, supporting our growth expectations and further lowering our cost structure.
Rod Harries: and also providing additional diversification and flexibility in our global vertically integrated manufacturing platform.
Rod Harries: Moreover, on the innovation front, we are just beginning to tap into the largest innovation pipeline in the company's history, with more product launches to come in 2025, as showcased at the Impressions trade show last month, where we received great feedback.
Rod Harries: And lastly, with regards to ESG, we remain fully on track with our next generation objectives.
Rod Harries: In this regard, and as announced in January, we are pleased to have been included on the Dow Jones Best in Class North America Index for the 12th consecutive year.
Rod Harries: More recently, Gildan was also included in the 2025 Sustainability Yearbook for the 13th consecutive year based on S&P Global's Corporate Sustainability Assessment.
Rod Harries: So we know we have a strong foundation, a great competitive position, and the ability to return capital to our shareholders.
Rod Harries: That's why we're excited about the opportunities that lie ahead and about our ability to drive performance toward achieving our three-year objectives for the 2025 to 2027 period, which Glenn also touched on earlier.
Rod Harries: So now, turning to our outlook for 2025, we expect the following.
Rod Harries: Revenue growth for the full year to be up mid-single digits.
Rod Harries: Full year adjusted operating margin to increase approximately 50 basis points.
CAPEX to come in at approximately 5% of sales.
Rod Harries: Adjusted diluted EPS to be in the range of $3.38 to $3.58, up between 13% and 19% year-over-year, and free cash flow is expected to come in above $450 million.
Rod Harries: Further, the outlook that I just laid out is underpinned by some key assumptions, including the following.
Rod Harries: First, our outlook reflects continued growth in key product categories driven by recently introduced innovation.
Rod Harries: It also reflects overall POS growth, expected market share gains, the favorable impact from new product launches, as well as some improvement in certain markets that remain soft in 2024.
Rod Harries: We also expect ongoing benefits from the jobs credit program that took effect in Barbados in 2024.
Rod Harries: And we anticipate that our effective tax rate for 2025 will remain at a similar level to what we saw in 2024.
Rod Harries: Finally, we expect to continue repurchasing shares under our NCIB program, given the strength of our balance sheet, our expected strong free cash flow, and our leveraged framework target of one and a half to two and a half times net debt to adjusted EBITDA.
Rod Harries: This brings us to the outlook for the current fiscal quarter.
For the first quarter, we expect the following.
Rod Harries: Net sales to be up low single digits year over year and when excluding the impact of the Under Armour SOC license agreement, Q1 net sales growth is expected to be in the mid single digits.
Rod Harries: Adjusted operating margin is expected to be in line with our full year guidance of up approximately 50 basis points.
Rod Harries: Further, recognizing that global minimum tax in Canada and Barbados only came into effect during the second quarter of 2024, on a comparable basis, the company's adjusted effective income tax rate in the first quarter of 2025 is expected to be significantly higher than the 3.6% recorded in the first quarter of 2024.
Rod Harries: Although the situation remains fluid in broader terms, tariffs related to China, Canada, and Mexico are not expected to impact our business.
Rod Harries: More specifically, while broader market conditions remain mixed with geopolitical uncertainties and the potential longer-term repercussions of some trade policies being unclear, we are nonetheless cautiously optimistic as we look ahead to 2025.
Rod Harries: I'd also like to emphasize that regardless of the environment, we will continue to leverage the GSG strategy with a keen focus on execution to drive long-term shareholder value.
Glenn Chamandy: And with that, I will now turn it back over to Glenn.
Thank you, Rod.
Speaker Change: In a separate communication, we also announced today executive leadership nomination and a CFO transition.
Speaker Change: as part of a multi-year succession planning process which ensures, in our view, strong continuity as the company drives forward with its Gildan Sustainable Growth Strategy.
Speaker Change: First, Chuck Ward, who is currently President of Sales, Marketing, and Distribution.
Speaker Change: has been appointed to a newly created role of Executive Vice President and Chief Operating Officer, effective March 1st, 2025.
and will continue to report to me.
Speaker Change: As most of you know, Chuck joined Gildan in 2011 through the acquisition of Goldtoe.
Speaker Change: And over the years, he has held several senior roles at Gildan.
Speaker Change: accumulating extensive experience which includes leading yarn spinning operations, overseeing supply chain, sales, marketing, distribution, while gaining experience in manufacturing.
separately.
Speaker Change: After almost 10 years in the EBP chief financial and administration role, Rod Harris has informed the board of his intentions to retire on January 1st, 2026.
Speaker Change: We also announced that Luca Borelli, who is currently the CFO of Sales, Marketing and Distribution, will succeed him.
Luca Borelli: As Executive Vice President, Chief Financial Officer, assuming his new role responsibilities on March 1st, 2025.
Luca Borelli: In order to facilitate a smooth transition and over the full 10 months, Rod will retain the Chief Administration Officer function until his retirement.
Luca Borelli: Luca joined Gildan in 2012 and has held various roles in financial planning, internal audit, enterprise risk management, before being promoted to his current role as CFO of sales marketing and distribution.
Luca Borelli: I would like to express my deep appreciation to Rod who has guided our financial performance over the last 10 years.
Luca Borelli: Since 2015, he has been an invaluable partner to me and our team.
Luca Borelli: and though he will still be working together through 2025, I sincerely wish him well in retirement next year and want to thank him for the successful contribution and to our success.
Speaker Change: I'm also happy to welcome Chuck and Luca to their new roles and congratulate them both.
Luca Borelli: These appointments are a testament to our bench strength and the effectiveness of our multi-year succession planning process.
Speaker Change: They are all outstanding leaders and I firmly believe they are both well positioned to step into their roles and continue driving our GSG strategy and further drive and enhance long-term value for our shareholders.
Speaker Change: This concludes our prepared remarks this morning and I'll turn the call over to Jessy.
Jessy Hayem: Thanks Glenn. This concludes our prepared remarks and now we'll begin taking your questions. As usual, before moving to the Q&A session, I'd like to remind you to limit your questions to two and we will circle back for a second round if time permits. Sarah, please begin the Q&A session.
Jessy Hayem: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Please ensure you are not on speakerphone and that your phone is not on mute when called upon. Thank you.
Speaker Change: Your first question comes from Paul Lajuez with Citi. Your line is open.
Brandon Sheet: Hey everyone, this is Brandon Sheet along for Paul and Rod, congratulations on the retirement.
Brandon Sheet: I just wanted to dig in real quick on your expectations in the first quarter.
Brandon Sheet: for active wear and hosiery and underwear. You know, specifically, if you could quantify what you're expecting, because
Speaker Change: Activewear has its easiest comparison for the year in the first quarter, so how should we think about 1Q versus the rest of the year in that context, and was there any pull forward that may have helped 4Q but potentially hurt 1Q?
Morning, Brandon.
Speaker Change: So, if you look at the first quarter of 2025 and we look at how the business is running, I think I would say we feel very pleased about where we are. Obviously, we had a strong quarter in the fourth quarter, and activewear delivered very well. And even on the innerwear side, we also saw some good strength.
Speaker Change: And as we move into the first quarter of 25, we continue to see, I would say, good...
strength really across the board on the active work side.
Speaker Change: So if you look at our guide for the quarter, it's up low single digits.
Speaker Change: X the Under Armour impact, which continues to be significant in the first quarter of 2025, is the last quarter we'll see this. We should be up mid-single digits.
Speaker Change: And if you look at active wear overall, growth will be across the board. We will see market share gains across the channels, across the product categories.
Speaker Change: all the things that we've been talking about with respect to new products, innovation.
Speaker Change: strength in national accounts, international. All of these things we'll be playing through as we move into the first quarter. So we do see good growth on the active war side. It was particularly strong in the fourth quarter, up low double digits. So we'll moderate back from that.
Speaker Change: But it is the first quarter of the year, as you think about that.
And then on the innerwear side.
effectively.
Speaker Change: We will see, again, the impact of the phase-out of Under Armour, which will impact our numbers there. But look, overall, I think we feel good about the first quarter, and we really feel good about how the whole year looks with revenue growth up.
Speaker Change: mid-single digit. There is a fair amount of uncertainty out there, but I think our business is running very well as we look at all of the key growth drivers that Glenn laid out.
Speaker Change: Got it. Appreciate that. And then gross margin in the fourth quarter.
Speaker Change: Can you kind of unpack some of the puts and takes there, understand that, you know, product cost was a tailwind.
Speaker Change: But, you know, did you see any pricing pressure at all? Like, I think you all have mentioned that you were being aggressive in certain segments to try and gain market share. So I'm wondering if that had any impact. And then, you know, how are you thinking about gross margin?
Speaker Change: for the rest of 25, you know, could we see any, you know, tailwinds there for margin? Thanks.
Speaker Change: If you look at growth margin in the fourth quarter, we came in at 30.8%. We were up 60 basis points.
Speaker Change: SG&A was down and so in total operating margin up 160 basis points.
effectively playing out.
Speaker Change: you know we're now we firmly moved above the 30% level and you know we'll see that as we move through
Speaker Change: 25. So I would say we're very pleased with the evolution of growth margin. That is being driven by everything that we're doing as we look at our overall business and all of the things that we're controlling. So if you think about the ramp-up of Bangladesh
Speaker Change: You think about the modernization of our yarn facilities, optimization of Central America, I mean, it's all playing through.
Speaker Change: And so I would say we were pleased with what we saw.
overall in the in the fourth quarter.
And again, as we move into the first quarter.
Speaker Change: We will continue to see the benefits of all of these strategies that we're unfolding. We do see gross margin uplift in Q1 2025.
Speaker Change: On the SG&I side, we should see a bit of improvement. It's not going to be quite as large.
Speaker Change: As we've seen in prior quarters, because in prior quarters we did see the roll-in of the...
Speaker Change: the Barbados tax credit. And we will see that in the first quarter of this year. But we have other things that we're doing as well. We're investing in distribution. So IT is an area where.
We're spending a lot now as we really...
optimize our supply chain we effectively bring on new products
Speaker Change: and really focus on making sure that our customers are very much kept well in stock. And so, we've got a few things going on, but overall I would say we're pleased with the progression of our operating margin, growth margin, SG&A, and then full year, I think we're very pleased.
Speaker Change: to be able to guide to the 50 basis points up from the 21.3 driven by gross margin, strong gross margin throughout the quarters and SG&A well under control.
Got it. Appreciate it. Thanks and good luck.
Thank you.
Speaker Change: The next question comes from Jay Soule of UBS. Your line is open.
Jay Soule: Great, thank you so much and Rod, congratulations on a great run and on your retirement. Wanna ask you about the new product innovation. Glenn, you mentioned it in your prepared remarks. Just talk about how much it's impacting the business. You know, what percentage sales these new products are impacting and how big do you think you can get over the next year or two? Thank you.
Jay Soule: Well, I mean, look, it's early days still, so we've seen continued performance. You know, our soft cotton technology is really the largest innovation because that covers all of our basic category.
And, you know, that category has been declining.
Jay Soule: It takes time to spread the word. We were in the Impressions show in January, continuing to market our products.
Jay Soule: And, you know, we have, it takes time to even cycle inventory through our system, so these things are, I think, you know, still got a lot of legs, let's say, for example, because the product is great. I mean...
Jay Soule: The reality is that when you lay our new soft content technology on our basics, you can't really tell the difference between those products and the fashion products that are out there in the market. So that gives us, really, what we think, in terms of what we're priced, a very competitive advantage.
Jay Soule: And look, there's other growth drivers. Comfort Colors, for example, I mean, the brand is up 40% in 2024 and it was up in 2023, and we think it's going to be up, you know, significantly in 2025.
Jay Soule: And that's a brand that's really going after the higher-end category, right? So it's price points a little bit higher, but it's really doing well.
Jay Soule: and we're going to continue to take share as we go forward.
Jay Soule: We have our licensed, you know, our champion brand, which we've licensed now, which will roll out in 2025.
Jay Soule: You know, we see, you know, the great thing is, is that we have, you know, competitors exiting the market. You know, Delta closed down last year with Fulham, exited the printware market.
Jay Soule: Our international sales have come back, and mainly because we've now got product availability through our manufacturing facility in Bangladesh, which is fully ramped up as we planned, and we're fully ramped up by Q2.
Jay Soule: We're taking more space in underwear with new products, and we have meaningful new active wear programs of tees and fleece as we move into 2025.
Jay Soule: you know, our sales of mid-single digits, I would say that about three-quarters of the revenue growth that we have in 2025 is coming from new programs.
Jay Soule: And I think that we've got a really great slate of new programs for next year that are really solidifying, you know, what we feel comfortable with our growth trajectory.
Jay Soule: We've taken a really cautious approach still to the market. We think it's flat to low single digits up.
Jay Soule: And, you know, basically, you know, if you look at where we're positioning, if, you know, we continue to take additional share, more than we assumed, or if the market's slightly a little bit more robust, you know, that could be potentially all positive to our forecast as we move into 2025.
Thank you.
Speaker Change: It's a long history and at one point, you know, lots of over a billion dollars in sales probably. I mean, what's your ambition with that? What do you see is possible with that brand going forward, you know, now that you have it?
Speaker Change: Well, look, it's still a very strong brand, and it's going to be continuing to be sold in different channels of distribution, but we have the champion brand for the printware channel.
Speaker Change: and, you know, look at our products are going to, you know, schools and...
a company to sponsor this separate video.
Speaker Change: We've got our Comfort Colors brand, which is sort of a unique position because it's all garment dyed. We've got our American Apparel brand, and now we've got our Champion brand, which is a little bit more athletic and goes to a more collegiate type approach. So having a multi-tier brand strategy, none of our brands...
Speaker Change: compete with each other. They're all uniquely different and allow us to gain market share as we go forward. And I think that's really the key. We're well-positioned. We think that we're going to continue to grow and take share.
Speaker Change: and we're well positioned because, you know, we've got three quarters of our sales guidance really in new programs, Champion being one of them.
Got it. That's great. Thank you so much.
Speaker Change: Our next question comes from Mark Petrie with CIBC. Your line is open.
Mark Petrie: Good morning and I'll echo my congratulations to Rod, Luca, and Chuck.
Speaker Change: I wanted to ask about the product innovation and specifically the sort of skew levels in the overall business. I know this was
Speaker Change: you know, I don't know, several years ago, but also just like two to three years ago when maybe you were at sort of a trough level on skews.
Speaker Change: Well the great thing about what we're doing is we're just improving on the existing SKUs that are in our line. So all of our soft cotton technology, all of our fleece, all the innovation that we have is really being applied to the existing product line.
Speaker Change: So our SKUs really haven't changed. I mean, obviously, you know, when we bring in new brands, we'll have a little bit, you know, further expansion of our SKUs with Champion, etc. And we're always adding a little bit.
Speaker Change: on to our base as we're looking at new opportunities, but we're very mindful of managing our SKU base as we go forward.
Speaker Change: Okay, thanks for that. And if I could just have a quick follow-up, just the pace of share buyback, looks like it's slowed in the last couple of months. Is that the sort of pace we should expect through the balance of the term on the current program? Or what are your sort of criteria in making the short-term decisions on the pace of buyback?
Mark Petrie: Mark, so if you look at the buyback in 2024, yeah, we were very pleased with their ability.
Speaker Change: to buy back shares. We bought back 11% of the float.
Speaker Change: All the things that we've been planning over the last few years are unfolding very, very well.
we were able to effectively...
Speaker Change: take our leverage target up and now we have the range of one and a half to two and a half times and we were able to benefit from that in 2024 when we were buying back, but we were buying back for the most part, we try to buy it back at a consistent rate for
Speaker Change: the target for the full year that we have. So we knew that we had a, I would say, strong target for 24, especially after May. And so we bought at higher rates. But now as we move into 25.
Speaker Change: Effectively, we'll move back to, I would say, more of a normal type of buyback level that you would have seen in prior years. So for us, that generally runs around 5% to 6% for the full year.
and you will see that we generally try to...
Speaker Change: do that on a fairly consistent basis as we move through the year. So, effectively, 24, a little bit unique.
Speaker Change: But in 2025, back to, I would say, a historical cadence and a very consistent approach as we go month to month.
That's very clear, Rod. Thanks a lot. All the best.
Thank you.
Speaker Change: The next question comes from Brian Morrison of TD Cowan. Your line is open.
Brian Morrison: Oh, good morning. Thanks very much. So, first question for Chuck and for Rod.
Brian Morrison: And then, Rod, within that guidance, you did a good job of overlaying why you're going to get the 50 basis points of margin expansion, but I didn't hear you talk about pricing, and the gross margin in Q4 does look a little bit light relative to expectations. I'm wondering if you can specifically just comment on the pricing environment.
Speaker Change: Okay, thank you, Brian. I'll start with the POS and then give it to Rod. I think, you know, as Glenn mentioned, we saw positive POS for the fourth quarter. It was a strong quarter. We saw it really across
Speaker Change: the channels and across the categories, which was good from that perspective. In the basic side, Glenn mentioned we were up double digits, and I think that is coming through from one...
Speaker Change: share gains as some of the competitors he mentioned have left the market, but also really our innovation.
Speaker Change: that Glenn talked about with our soft cotton technology. I think it's really getting through the inventory at this point and getting into the consumer's hands and I think it's driving the POS. Again, he talked about, you know, the ring spun category would continue to be up.
Speaker Change: double-digit stair as well and driven across our Ringspun platform but including Comfort Colors which was up 40%.
Speaker Change: And so we continue to gain share in that area as well. So, you know, we were positive across all channels. I think from a market perspective, we continue to think the market faced some challenges being, you know,
Speaker Change: flat to flat to down and in us up and taking share.
Glenn Chamandy: So, that's kind of the way, and even in the international markets, Glenn mentioned it.
Glenn Chamandy: We were up for Q4, you know, mid-single digits in international, with Europe strong in high-single digits, continuing to be driven by the continent as well. So again, across the board, we continue to take share and kind of beat the competition.
Rod?
Glenn Chamandy: If you look at international markets, it's been a bit of a weakening off of currencies. But, you know, I would say price for us is very stable.
Glenn Chamandy: And as we move into 25, I think we feel very good about price. So if you look at...
Glenn Chamandy: You know what's driving the business? It's volume growth, ultimately, right?
Glenn Chamandy: On the price side, we have big gaps with our competitors.
and if you look at...
Glenn Chamandy: You know, things like cotton. People ask us about cotton. Yes, cotton has come down. It has given a bit of a tailwind. But you've got inflation elsewhere.
Glenn Chamandy: And so, actually, I think one of the unique things is we start at 25.
Glenn Chamandy: is the stability in pricing that we see as we move through the first quarter and as we forecast for the full year.
Speaker Change: Okay, thank you for that. The second question, maybe for Glenn, can you just remind me how much capital you've invested into expanding and modernizing your yarn facilities the last few years, and elaborate on the larger national account opportunities that you're winning contracts with? Is this for mass merchants being the end market?
Speaker Change: As far as the yarn spinning is concerned, we've spent different phases of our yarn
Speaker Change: Modernization, you know, obviously we were in the yarn spinning, we bought Frontier and I would say over the last couple of years, you know, we've put in just north of about $100 million in modernizing the Frontier facilities, which
Speaker Change: You know we're still in completing I would say as we move through 25 There's some things still to be done, but after 2025. I think that will be fully complete on all of our yarn You know Modernization
Does this answer the question?
just the opportunities like oh yeah yeah where's it going
Speaker Change: Well look at I mean look at the look there's a market of the screen printers that service really the the large mass-market retailers the Walmarts TJ Maxx Kohl's etc really those are the
Speaker Change: the type of large screen printers and those are particularly, you know, a lot of the accounts at Delta Service in the past so, you know, we've been able to, you know, which we had very good relationship with a lot of those customers and that's continued to allow us to, you know, obviously take additional market share as they've exited the market.
Speaker Change: So look, we're in a good position. We feel that, and it's not just from Delta's perspective, but we think that, look, the overall broader competitive landscape is weakening. And, you know, Gildan continues to make investments in our yarn spinning and our bangle dash.
Speaker Change: everything that we're doing you know we're investing and you know it's you know history gives you if you look over a period of time I would say today Gildan is much more positioned much more
Speaker Change: has much more of a competitive advantage in our positioning today than we did two, three, four years ago, and it's continuing to improve.
Speaker Change: We're excited about where we are. We've got everything in place. We've got good momentum. And really, what I would leave you with is that we've got good visibility as we've got a lot of new programs. And the upside for us is really, will the market participate? Because that's really...
Speaker Change: I think the one disappointment is that the market's been soft over the last 24 months. There's still a little bit of uncertainty, but I mean, you know, interest rates come down. Hopefully, we'll see the market continue to shine and be an opportunity for us.
Very good, congratulations.
Speaker Change: The next question comes from Martin Landry with Stiefel. Your line is open.
Martin Landry: Hi, good morning. Congratulations, Chuck, on your promotion and Rhodri, congratulations on your retirement. It's been great working with you for the last years.
Martin Landry: My first question, Glenn, I want to try to understand a little bit better where you're at in terms of capacity. So, could you tell us what production capacity utilization you're assuming in your guidance for 2025?
Martin Landry: Well, I would say to you, look, we've got ample capacity. We're not running full.
like we said in the past.
Martin Landry: you know we have enough capacity in-house today really to support our guidance for you know 2025, 26 and 27 and then as we you know in our capital investment you know we included you know building out additional capacity to support 28 so maybe that's just a way to look at it so and you can quantify that in our mid single digits in terms of the revenue and work backwards in terms of percentage I guess.
Martin Landry: Okay, so you have the capacity established to get to 2027 revenues.
OK.
Martin Landry: And is there a margin differential between the different channels that you're selling?
Martin Landry: You know, it seems that retail is driving a little bit more growth this year than printwear maybe and is retail a little bit margin diluted, would that be fair to say?
Martin Landry: We try to price our products pretty consistently across the board.
Martin Landry: So, you know, we always say that we have a consistent margin. There's other areas within profile, you know, fleas versus teas, for example. But if we sell teas across the board, the margin profile is pretty much the same. But we have certain product categories that, you know, have a little bit better margin profile. But overall, regardless of the channel distribution, we're pretty consistent the way we price the market.
Martin Landry: And Martin, just to add, we did that when we drove back to basics, so the margin percentages are pretty close across the board. Of course you have different price points, right? If you look at the products, a fleece is a higher price point than t-shirts, comfort colors is a very high price.
Martin Landry: T-shirts a product that is going very well. So you have different price points but margins overall are I would say pretty well aligned and all driving that strong gross margin performance that we're seeing as we move through 24 and into 25.
which makes us agnostic of which channel is really growing.
Okay, cool. That's helpful. Thank you.
Martin Landry: The next question comes from Stephen McLeod with BMO Capital Markets. Your line is open.
Stephen McLeod: Thank you. Good morning, guys. And congrats, Rod, on your retirement and Chuck, on your promotion.
Martin Landry: Look forward to continuing to work with you Chuck and great
Working with you Rod, appreciate it.
Martin Landry: Just a few questions here, just wanted to dive a little bit deeper on capacity and just get an update on kind of where you sit on Bangladesh. I think you had previously guided to, you know, the exit rate.
Martin Landry: run rate exiting 24 at being 70% so just wanted to get an update there as well as you know what your plans might be for incremental investment in in kind of a Bangladesh phase two
Martin Landry: Well, what we said previously is that we've exited around 75%, which we did. We're continuing to ramp up as we speak and as we move through 2026.
Martin Landry: Okay, that's great. And then do you expect to be 100% ramped up? Sort of like kind of Q1, Q2 period?
Martin Landry: Yeah, but probably by the end of Q2 we'll pretty much be close to 100% ramped up.
Speaker Change: Okay, so all the additional capacity that we have, which I've mentioned earlier, Martana's question would be, you know, really coming out of Central America. So we've got still additional capacity in Central America, but we're optimizing, you know, Bangladesh, because that's where we produce all of our, you know, ring-spun t-shirts, which are obviously in high demand.
Stephen McLeod: Right, okay. And then... Maybe one thing to add, Stephen, sorry, on the, because you're asking about Bangladesh and the...
Stephen McLeod: and our capacity, we have all the infrastructure in place, right, for the
Stephen McLeod: expansion beyond the first phase that again we've done a great job ramping up so I think that's the one thing to keep in mind
Stephen McLeod: from a CapEx perspective as we go forward. And as we think about additional CapEx to support, you know, the further out growth that Glenn was talking about, it will be very efficient to spend because of everything that we've done to date.
Speaker Change: Okay, that's a great increment of color, thank you. And then just secondly, just with respect to some of the changes you've seen, you know, on a competitive landscape, but I guess more so on the customer landscape, you know, there was some distributor consolidation. I'm just wondering if you've seen any impacts on kind of the industry or industry behavior in response to those moves.
Speaker Change: Hi Stephen, it's Chuck. I mean I think you know obviously over the years we've seen a lot of consolidation in the distributor channel and this was a just a continuation of that as to your point S&S and Broder combined. You know we are seeing a competitive landscape among the distributors but you know net-net it's
Speaker Change: We think it's positive for us overall, and we'll continue to be strong partners to the distributor channel, and continue to drive sales through it. So again, I think it's just continuance of what we've seen over the years. I think the reality is that as we move forward,
Speaker Change: And the distributors have consolidated a little bit. We're going to also see consolidation of brands within the channel.
Speaker Change: and you know basically we think we'll be the beneficiary of that because you know we're positioned as you know obviously the global low-cost producer.
Speaker Change: and have a significant competitive advantage over any of those other brands. So.
Speaker Change: There are a lot of brands, and particularly, you know, more in the ring spun category. I mean, you know, in the basics, you know, that market is pretty consolidated, but I think there's more consolidation to happen.
Speaker Change: on the brand side on the Ringspun category. So, look, we're excited about our positioning. We think we're well-positioned to take share, and that's sort of embedded in our guidance as we move forward over the next three years.
Okay, that's great, Keller. Thanks, guys, appreciate it.
Speaker Change: The next question comes from Vishal Sridhar with National Bank. Your line is open.
Bye.
Vishal Sridhar: Hi, thanks for taking my questions. Wanted to get your perspective on the.
Vishal Sridhar: acceleration of growth in international. It seems like momentum is building, you know, Q1 up 0.8 and now Q4 up 20%.
Vishal Sridhar: I'm wondering where that's coming from specifically. I know you gave us some color, but is it predominantly the better fulfillment through Bangladesh or is it the market recovery?
Speaker Change: Hi, Vishal. Yes, I mean, I think there is some market recovery in there, but it's also largely our Bangladesh capacity.
Vishal Sridhar: and our ability to service the market. We've, you know, as we continue...
Vishal Sridhar: to supply that market. When you think about it, I think we've talked about this many times in the past.
Our number one purchase criteria is availability.
and we need to make sure the product's available.
Speaker Change: for sale at the time and we're doing that. We're in good stock levels there and internationally and in North America. And I think that's continuing to drive sales. Also, you know, our innovation. I think our innovation is continuing to push sales there as well. As Glenn said, I think when you look at the innovative basic products.
Speaker Change: it's better than the others in the market and we're seeing share gains not only in North America but in the international market that's continuing to drive that. So combination of product, the innovation, and the supply coming out of Bangladesh.
Speaker Change: Through 2025, should we expect that cadence to improve even further, or do you think you've hit run rate?
Speaker Change: If you look at 2025, we do expect growth at the international markets. As Chuck said, we are very pleased about how we can service the products, the way things are unfolding.
Speaker Change: I would say though, if you look at our guide, we have been a little bit more conservative than what you've seen the last couple of quarters. So 20% growth, very strong overall in Q3, Q4.
Speaker Change: We're probably around 11% for the full year in the international in 2024. I would say in our guide we've been a little bit more cautious because of just a broader macroeconomic environment, but we'll see how it turns out. I would say we've tried to sort of play it at a level.
Speaker Change: That does reflect that there's some uncertainty and we're hoping that things will be better than that as we move through the year.
Speaker Change: Okay, and just a question on the market share gains, you know Gildan obviously a large supplier and this year a bit unusual given the
some of the capacity exits from your competitors.
Speaker Change: How should we expect these market share gains to continue to unfold? I mean, at some level, gaining market share becomes more and more difficult. And with the industry generally continuing to perform tepidly, is there a concern there that these trends with the industry and gilding may intersect?
Speaker Change: Well, I would say that, look, two things. One, you know, we still got a lot of runway, right? Because if you look at them as we look at the ring-spun category,
Speaker Change: You know, we're under-shared there basically, you know, we have a much lower percentage of share in that category and we're winning there from three fronts. Winning there because we have really good competitively priced ring-spun shares equivalent to what's out in the market.
Speaker Change: Two, our Comfort Colors brand is in that category of more expensive shirts and it's winning and taking out a lot of the dollars that would have been spent on a traditional ring-spun shirt and they're now buying our Comfort Colors, Garmadide.
Speaker Change: Nostalgic look, great product with all the innovation that we have associated with that brand.
Speaker Change: And the third piece is we have our soft cotton technology where people can't really tell the difference between, you know, a ring-spun shirt and a heavyweight shirt with the only nuance is that typically our basics traditionally and where all the volume is being sold is in the heavier weight category.
Speaker Change: And there actually is a trend now in the market for people to go from lighter weight to heavier weight shirts. So we're sort of in a really good spot because not only do we have all these heavyweight shirts which traditionally we sold, but now they're softer and feel better and they have the technology we've applied to them.
You know, we think that we're really doing well.
Speaker Change: And, you know, we have other technologies that we think are going to continue to drive
our market share as we go forward.
our energy on building innovation to support our sales.
Speaker Change: having the availability, making sure we got the availability and you know Rod touched on it earlier, you know one of the things in
Speaker Change: You'll see a little bit of an expense in Q1, but we're spending a lot of money now on technology. We've put in systems for our planning, our POS assumptions, our forecasting.
We're looking at...
Speaker Change: You know, different systems for distribution to optimize our deliveries to our customers to get the products there faster.
Speaker Change: You know, all these types of things that we're doing to really...
Speaker Change: We've got everything in place. We're really looking at all these other areas just to continue driving our competitive advantage and separating Gildan from the competitive landscape. We're making the investments that we need to make and I think that it's across the board. There's still lots of opportunity for us to continue to grow. The one thing I would leave you with is that all the work that we've done, we've got to
Speaker Change: about the market, and the size of the market, and the potential growth in the market, has always led to the market growth being in the mid-single digits, the growth in the market, which we haven't seen over the last 24 months.
Speaker Change: You know, the great thing I think about where we're positioned, we have a lifestyle type product, you know, we think that the market will turn and if it does come back to growth because we've got a very conservative, I think, outlook, flat to low single digits over the next three years.
For us, if we do see, you know, mid-single-digit growth...
Speaker Change: you know we will definitely you know you know have upside to what I think our market share
Speaker Change: Because now it's just share, but we're not getting the growth portion of...
of the of the opportunity.
Speaker Change: I'll just leave you with, is that as we move into 2025...
Speaker Change: Again, you know, the new programs that I outlined before represent about three quarters of our guide in terms of the top line. So you know, we're very conservative, you know, we hope for the market will be a little bit stronger. We will take a little bit of share, but I think we're well positioned and we have a very conservative outlook and you know, potentially there could be some upside to 2025.
Speaker Change: Okay, thank you for that and congrats, Chuck, Rod, and Luke.
Speaker Change: Your final question comes from Chris Lee with Desjardins. Your line is open.
Chris Lee: Thanks for squeezing me in and let me add my congratulations to you, Rod and Chuck. Very well deserved. I guess, I apologize if you answered this already, but can you just comment on what you see in terms of the inventory levels for your customers, both in the wholesale distributor and the national account space? And also, are you seeing any sort of...
Speaker Change: be stocking or just more cautious just based on what's happening on the macro side. Thanks.
I think overall we feel good about inventories.
you know, we're in good shape from that perspective.
Speaker Change: And, you know, we don't see major destocking on the horizon there. You know, you have different channels that may be a little more...
Speaker Change: cautious on their inventory but overall I'd say inventories are well balanced and we're not factoring in and don't see a major destocking.
Okay, and then just...
Speaker Change: Glenn, just when you said about like 75% of your growth is going to come from new programs, I'm assuming you have really good line of sight to those programs. And then my question is, you know, after you go through Q1, facing out the UA contract, should we expect sort of consistent mid-single-digit sales growth?
Speaker Change: sort of through the year or is some of the programs more in the back and second half so it's going to be a bit
more bumpy
Speaker Change: through the year, just in terms of the mid-single-digit sales growth.
Speaker Change: I'll let Rod answer that question, but what I would say to you is, look, what I mentioned earlier is that, you know, we have Champion and we have also meaningful programs in Tees and Fleece. Obviously, the Fleece programs, which are probably a little bit larger than the Tee programs, they're more in the back end because Fleece is sort of, you know, a Q3, Q4 story. But I'll let Rod answer the cadence of the sales guide.
Rod: Yeah, look, I think we are going to see a pretty consistent year. So, first quarter we are impacted by the Under Armour phase-out, but we would be a mid-single-digit ex-that.
Rod: And then if you look at the second quarter, the third quarter, and even into the fourth quarter. Fourth quarter, obviously, we'll be comping a good quarter, a strong quarter, in the fourth quarter of 24.
Rod: So you'll see a little bit of that, but I would say, yeah, we feel good about the consistency of the growth.
through the quarters.
Rod: which again will be supported by those new programs, by the market share gains. And then we'll see what the overall market looks like. But I think we're basically set up for a good year. And again, I think we feel our competitive positioning is very good.
Rod: Not only for what we control, but also what we see around us. And I would say good solid quarters as we move through the year.
Great, that's very clear. Thanks and all the best.
Thank you.
Rod: This concludes the question and answer session. I will turn the call back to Jessy Hayem for closing remarks.
Speaker Change: Thanks, Sarah. Once again, we'd like to thank everyone for joining us and attending our call today, and we really look forward to speaking with you soon. Have a wonderful day.
Jessy Hayem: This concludes today's conference call. We thank you for joining. You may now disconnect.
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