Q3 2025 Gildan Activewear Inc Earnings Call

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Speaker #2: So .

Speaker #3: Ladies and gentlemen , thank you for standing by . And welcome to Gildan Activewear Inc. 2025 Q3 Earnings Conference Call . Please be advised that today's conference is being recorded .

Operator: Ladies and gentlemen, thank you for standing by and welcome to Gildan Activewear Inc.'s 2025 Q3 earnings conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jesse Hayem, Senior Vice President, Head of Investor Relations and Global Communications. Please go ahead.

Speaker #3: 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 #4: Thank you . Jeannie . Good morning , everyone , and thank you for joining us . Earlier today , we issued a press release announcing our results for the third quarter while updating our full year guidance for 2025 .

Jesse Hayem: Thank you, Jeannie. Good morning everyone and thank you for joining us. Earlier today we issued a press release announcing our results for the third quarter. While updating our full year guidance for 2025, we also issued our interim shareholder report containing management's discussion and analysis and consolidated financial statements. These documents are expected to be filed with the Canadian securities and regulatory authorities and the U.S. Securities Commission today, and they'll also be available on our corporate website. Now joining me on the call today are Glenn Chamandy, our President and CEO, Luca Barile, Executive Vice President, CFO, and Chuck Ward, Executive Vice President, Chief Operating Officer. This morning we'll take you through the results for the quarter and then a question and answer session will follow.

Speaker #4: We also issued our interim shareholder report containing management's discussion and analysis and consolidated financial statements. These documents are expected to be filed with the Canadian Securities and Regulatory Authorities and the U.S. Securities Commission today, and they'll also be available on our corporate website.

Speaker #4: Now joining me on the call today are Glenn Chamandy . Our president and CEO Luca Barile Executive Vice President , CFO and Chuck Ward , Executive Vice president , chief Operating officer .

Speaker #4: This morning , we'll take you through the results for the quarter . And then a question and answer session will follow . Before we begin , please take note that certain statements included in this conference call may constitute forward looking statements which involve unknown and unknown risks , uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward looking statements .

Jesse 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. We refer you to the company's filings with the U.S. Securities and Exchange Commission and Canadian securities regulatory authorities. During this call we will also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable IFRS measures are provided in today's earnings release as well as our MD&A. Now I'll turn it over to Glenn.

Speaker #4: We refer you to the company's filings with the US Securities and Exchange Commission and Canadian Securities regulatory authorities . During this call , we will also discuss certain non-GAAP financial measures , reconciliations to the most directly comparable IFRS measures are provided in today's earnings release , as well as our MDA .

Speaker #4: And now I'll turn it over to Glenn .

Speaker #5: Thank you , Jessie , and good morning , everyone . We're pleased with our third quarter results as we continue to drive profitable growth , especially in a macroeconomic backdrop , which remains fluid .

Glenn Chamandy: Thank you, Jesse, and good morning, everyone. We're pleased with our third quarter results as we continue to drive profitable growth, especially in a macroeconomic backdrop which remains fluid. We saw strong net sales growth of 5.4% in Activewear and adjusted operating margins of 23.2%, which allowed us to deliver record adjusted diluted EPS of $1.00 this quarter, an increase of 17.6% versus the same period last year. These are record-setting third quarter results, which once again showcase the effectiveness of our Gildan sustainable growth strategy in driving strong financial performance. Our sales in the distributor channel remain healthy, and we're seeing sustained momentum in our national account customers, which is supported by strong overall competitive positioning. We continue to drive growth in key categories. We're very pleased that our innovation pipeline continues to create excitement, and we have now introduced new brand offerings such as All Pro and Champion.

Speaker #5: We saw strong net sales growth of 5.4% in activewear and adjusted operating margins of 23.2% , which allowed us to deliver record adjusted diluted EPs of $1 .

Speaker #5: This quarter , an increase of 17.6% versus the same period last year . These are record setting third quarter results , which once again showcased the effectiveness of our guild and sustainable growth strategy in driving strong financial performance .

Speaker #5: Our sales in the distributor channel remained healthy , and we're seeing sustained momentum in our national account customers , which is supported by strong overall competitive positioning .

Speaker #5: We continue to drive growth in key categories . We're very pleased that our innovation pipeline continues to create excitement , and we have now introduced new brand offerings such as opera and Champion .

Speaker #5: Furthermore , our comfort Colors brand continues to perform very well this year . The brand is actually celebrating its 50th anniversary . A great milestone for comfort , Colors , whose pigment dyed shirts are redefining comfort and style .

Glenn Chamandy: Furthermore, our Comfort Colors® brand continues to perform very well. This year, the brand is actually celebrating its 50th anniversary, a great milestone for Comfort Colors® whose pigment-dyed shirts are redefining comfort and style. They're crafted from 100% ring-spun cotton grown and harvested in the U.S. using a pigment pure technology, which helps to reduce water and energy and shortens processing time. As we turn the page to another successful quarter of execution, we are narrowing our adjusted diluted EPS guidance to a range of $3.45 to $3.51 and also updating our full year adjusted operating margins, CapEx, and free cash flow guidance. Luca will detail this in a moment. We believe that this is an exciting, pivotal moment for Gildan, and we're enthusiastic about the next phase of our growth journey. We're delivering constant execution of our strategic priorities.

Speaker #5: They're crafted from 100% ring spun cotton grown and harvested in the US using a pigment pure technology , which helps to reduce water and energy and shortens processing time .

Speaker #5: So as we turn the page to another successful quarter of execution , we are narrowing our adjusted diluted EPs guidance to a range of $3.45 to $3.51 , and also updating our full year adjusted operating margins , CapEx , free cash flow guidance .

Speaker #5: Luca will will detail this in a moment . We believe that this is exciting , pivotal moment for Gildan , and we're enthusiastic about the next phase of our growth journey .

Speaker #5: We're delivering constant execution of our strategic priorities . We're capitalizing on the largest innovation pipeline in the company's history . And now we're focused on planning the integration of the proposed acquisition of Hanesbrands , which will broaden our portfolio of retail presence as we look to drive meaningful run rate synergies of at least 200 million by leveraging our best in class , large scale , low cost , vertically integrated manufacturing network , we continue to expect the transaction to close late this year or early 2026 .

Glenn Chamandy: We're capitalizing on the largest innovation pipeline in the company's history, and now we're focused on planning the integration of the proposed acquisition of HanesBrands, which will broaden our portfolio of retail presence as we look to drive meaningful run-rate synergies of at least $200 million by leveraging our best-in-class, large-scale, low-cost, vertically integrated manufacturing network. We continue to expect the transaction to close late this year or early 2026. As you can expect, we have put in place an integration team that has begun planning for this combination. At this point, there is no further commentary that we'll be positioned to provide for the proposed transaction. In conclusion, we continue to execute from a position of strength.

Speaker #5: As you can expect , we have put in place an integration team that have begun planning for this combination at this point , there is no further commentary that will be positioned to provide for the proposed transaction in conclusion , we continue execute on from a position of strength solid foundation .

Speaker #5: . We have a

Glenn Chamandy: We have a solid foundation, we're focusing on our GSG strategy with our strong competitive positioning, all of which is putting us in a great position to execute on the eventual combination with HanesBrands and ultimately drive long-term shareholder value. I look forward to answering your questions after our formal remarks and now turn it over to Luca for a financial review.

Speaker #5: We're focusing on our GSG strategy with our strong competitive positioning , all of which is putting us in a great position to execute on the eventual combination with Hanesbrands and ultimately drive long term shareholder value .

Speaker #5: I look forward to answering your questions after our formal remarks . And now I'll turn it over to Luca for a financial review .

Speaker #6: Thank you . Glenn . Good morning , everyone , and thank you for joining us today to

Luca Barile: Thank you, Glenn. Good morning, everyone, and thank you for joining us today to discuss our third quarter results. Let me start with the specifics of the quarter, then turn to our 2025 outlook and guidance. First, the quarterly results. We reported third quarter sales of $911 million, up 2.2% year over year, in line with previously provided guidance of low single digit growth. The 5.4% increase in Activewear sales was driven by favorable product mix and higher net prices. As Glenn mentioned, we continue to drive growth in key categories and are experiencing robust demand for Comfort Colors® while supplementing our portfolio with the addition of All Pro and Champion. Sales to North American distributors were solid, complemented by sustained momentum at our national account customers, driven by our strong overall competitive positioning.

Speaker #6: third quarter results . Let me start with the specifics of the quarter . Then turn to our 2025 outlook and guidance . First , the quarterly results we reported third quarter sales of 911 million , up 2.2% year over year in line with previously provided guidance of low single digit growth .

Speaker #6: The 5.4% increase in activewear sales was driven by favorable product mix and higher net prices . As Glenn mentioned , we continue to drive growth in key categories , and our experiencing robust demand for comfort , colors while supplementing our portfolio with the addition of Alpro and champion sales to North American distributors were solid , complimented by sustained discuss our momentum at our national account .

Speaker #6: Customers driven by our strong overall competitive positioning , sales in the hosiery and underwear category were down 22% versus last year , which reflect as expected , a timing shift of shipments into the fourth quarter and to a lesser extent , unfavorable mix as the category experienced continued broader market weakness during the quarter .

Luca Barile: Sales in the Hosiery and Underwear category were down 22% versus last year, which reflect, as expected, a timing shift of shipments into the fourth quarter and, to a lesser extent, unfavorable mix as the category experienced continued broader market weakness during the quarter. Turning to international markets, sales were down by $4 million, or down 6.1% year over year, primarily reflecting ongoing demand softness across markets. We don't typically spend time on our year to date results, but just a brief comment that on a year to date basis, our consolidated revenue growth is at mid single digits excluding the impact of the exit of the Under Armour business in 2024, setting us up well for the full year.

Speaker #6: Turning to international markets , sales were down by 4 million , or down 6.1% year over year , primarily reflecting ongoing demand softness across markets .

Speaker #6: We don't typically spend time on our year to date results , but just a brief comment that on a year to date basis , our consolidated revenue growth is at mid-single digits , excluding the impact of the exit of the Under Armour business in 2024 .

Speaker #6: Setting us up well for the full year , shifting to margins for the quarter , our gross margin was 33.7% , a 250 basis point improvement over the prior year , primarily due to lower manufacturing costs and favorable pricing , which reflect price increases implemented to offset the initial impact from tariffs to a lesser extent .

Luca Barile: Shifting to margins for the quarter, our gross margin was 33.7%, a 250 basis point improvement over the prior year, primarily due to lower manufacturing costs and favorable pricing, which reflect price increases implemented to offset the initial impact from tariffs. To a lesser extent, we also benefited from lower raw material costs. SG&A expenses were $95 million versus $84 million last year. Excluding charges related to the proxy contest and leadership changes and related matters, which were almost entirely incurred in the prior year, adjusted SG&A were still $95 million, or 10.4% of sales, compared to $78 million, or 8.8% of sales in the same quarter last year, reflecting higher variable compensation and IT related general and administrative expenses.

Speaker #6: We also benefited from lower raw material costs . G&A expenses were 95 million versus 84 million last year , excluding charges related to the proxy contest and leadership changes and related matters , which were almost entirely incurred in the prior year .

Speaker #6: Adjusted G&A were still 95 million , or 10.4% of sales , compared to 78 million , or 8.8% of sales in the same quarter last year , reflecting higher variable compensation .

Speaker #6: And IT related general and administrative expenses . As we bring these elements together and adjusting for restructuring and acquisition related costs , primarily related to the proposed Hanesbrands acquisition , as well as the costs related to the proxy contest and leadership changes and related matters , which were almost all entirely incurred in the prior year .

Luca Barile: As we bring these elements together and adjusting for restructuring and acquisition related costs primarily related to the proposed HanesBrands acquisition, as well as the costs related to the proxy contest and leadership changes and related matters which were almost all entirely incurred in the prior year, we generated adjusted operating income of $212 million, up $12 million, representing a record 23.2% of net sales. This reflects an 80 basis point improvement year over year, which came in ahead of guidance we provided. Net financial expenses of $44 million were up $13 million over the prior year due primarily to fees related to the committed financing that we obtained for the proposed HanesBrands acquisition and due to generally higher borrowing levels.

Speaker #6: We generated adjusted operating income of 212 million , up 12 million , representing a record 23.2% of net sales . This reflects an 80 basis point improvement year over year , which came in ahead of guidance .

Speaker #6: We provided net financial expenses of 44 million , were up 13 million over the prior year , due primarily to fees related to the committed financing that we obtained for the proposed Hanesbrands acquisition .

Speaker #6: And due to generally higher borrowing levels . Furthermore , in connection with the proposed acquisition , as you may have seen , we announced on September 23rd a placement offering of US 1.2 billion aggregate principal amount of senior unsecured notes across two series .

Luca Barile: Furthermore, in connection with the proposed acquisition, as you may have seen, we announced on September 23rd a private placement offering of $1.2 billion aggregate principal amount of senior unsecured notes across two series. The proceeds from this offering will be used to fund the proposed acquisition of HanesBrands, refinance its debt, and cover related transaction costs. Taking into account all these factors and adjusting for restructuring and other costs and the financing fees in connection with the proposed HanesBrands acquisition, we generated record adjusted diluted EPS of $1, up 17.6% compared to $0.85 in the comparable period. Now turning to cash flow and balance sheet items, for the first nine months of 2025, operating cash flow was $270 million compared to $291 million last year, primarily reflecting higher working capital investments.

Speaker #6: The proceeds from this offering will be used to fund the proposed acquisition of Hanesbrands refinance , its debt and cover related transaction costs , taking into account all these factors and adjusting for restructuring and other costs and the financing fees in connection with the proposed Hanesbrands acquisition , we generated record adjusted diluted EPs of $1 , up 17.6% compared to $0.85 in the comparable period .

Speaker #6: Now , turning to cash flow and balance sheet items for the first nine months of 2025 , operating cash flow was 270 million , compared to 291 million last year , primarily reflecting higher capital investments .

Speaker #6: After accounting for CapEx of 82 million , we generated approximately 189 million in free cash flow in the first nine months of 2025 .

Luca Barile: After accounting for CapEx of $82 million, we generated approximately $189 million in free cash flow in the first nine months of 2025, of which $200 million was generated in the third quarter. During the first nine months of the year, we returned $286 million in capital to shareholders, including $102 million in dividends, and repurchased about 3.8 million shares under our NCIB program. Finally, we ended this quarter with net debt of about $1.7 billion and at a leverage ratio of 2 times net debt to trailing twelve months adjusted EBITDA at the midpoint of our targeted range of 1.5 to 2.5x. Now turning to our strategy and outlook, as Glenn highlighted earlier, we are pleased with the team's continued execution as we approach the end of a very solid year.

Speaker #6: Of which 200 million was generated in the third quarter . During the first nine months of the year , we returned 286 million in capital to shareholders , including 102 million in dividends and repurchased about 3.8 million shares under our NCIB program .

Speaker #6: Finally , we ended this quarter with net debt of about 1.7 billion and at a leverage ratio of two times net debt to trailing 12 months .

Speaker #6: Adjusted EBITDA at the midpoint of our targeted range of 1.1. 5 to 2 and a half times . Now , turning to our strategy and outlook as Glenn highlighted earlier , we are pleased with the team's continued execution as we approach the end of a very solid year .

Speaker #6: We continue to tap into the largest innovation pipeline in the company's history , with more product launches to come in 2025 and into 2026 .

Luca Barile: We continue to tap into the largest innovation pipeline in the company's history with more product launches to come in 2025 and into 2026. Now turning to the outlook, we remain focused on operational agility and committed to executing on our GSG strategy in order to drive strong financial performance as we navigate a fluid macroeconomic environment. We are updating our 2025 guidance as follows.

Speaker #6: Now , turning to the outlook . We remain focused on operational agility and committed to executing on our GSD strategy in order to drive strong financial performance as we navigate a fluid macroeconomic environment , we are updating our 2025 guidance as follows and expect revenue growth for the full year to be up mid-single digits in line with previous guidance .

Luca Barile: Expectations: revenue growth for the full year to be up mid single digits in line with previous guidance, full year adjusted operating margin to increase approximately 70 basis points compared to previous guidance of up approximately 50 basis points, our CapEx to come in at approximately 4% of sales compared to previous guidance of 5% of sales, adjusted diluted EPS to be in the range of $3.45 to $3.51, which is up approximately 15% and 17% year over year compared to our previous guidance of $3.40 to $3.56, and free cash flow to now approximately $400 million compared to our previous guidance of above $450 million. The assumptions underpinning this outlook are the following.

Speaker #6: Full year adjusted operating margin to increase approximately 70 basis points compared to previous guidance of up approximately 50 basis points . Our CapEx to come in at approximately 4% of sales compared to previous guidance of 5% of sales .

Speaker #6: Adjusted diluted EPs to be in the range of $3.45 to $3.51 , which is up approximately 15% and 17% year over year compared to our previous guidance of $3.40 to $3.56 and free cash flow to now approximately 400 million .

Speaker #6: Compared to our previous guidance of above 450 million , the assumptions underpinning this outlook are the following . Firstly , we continue to reflect the impact of tariffs currently in place in conjunction with mitigation initiatives available to us , including pricing and our ability to leverage our flexible business model as a low cost , vertically integrated manufacturer .

Luca Barile: Firstly, we continue to reflect the impact of tariffs currently in place in conjunction with mitigation initiatives available to us, including pricing and our ability to leverage our flexible business model as a low cost, vertically integrated manufacturer. The higher tariffs are also embedded in our inventory costs. Furthermore, the outlook continues to reflect growth in key product categories driven by recently introduced innovation, the favorable impact from new program launches and market share gains, and the various incentives from jurisdictions where we operate. We've assumed no share repurchases for the remainder of 2025 as indicated at the time of the announcement of the proposed HanesBrands acquisition. We've taken into account acquisition related costs incurred thus far, and we anticipate that our adjusted effective tax rate for 2025 will remain at a similar level to what we saw for the full year in 2024.

Speaker #6: The higher tariffs are also embedded in our inventory costs . Furthermore , the outlook continues to reflect growth in key product categories driven by recently introduced innovation .

Speaker #6: The favorable impact from new program launches and market share gains , and the various incentives from jurisdictions where we operate . We've assumed no share repurchases for the remainder of 2025 .

Speaker #6: As indicated at the time of the announcement of the proposed Hanesbrands acquisition , we've taken into account acquisition related costs incurred thus far , and we anticipate that our adjusted effective tax rate for 2025 will remain at a similar level to what we saw for the full year in 2024 .

Speaker #6: Finally , we've assumed no meaningful deterioration from the current market conditions , including the pricing and inflationary environment and the absence of a significant shift in labor conditions or the competitive environment .

Luca Barile: Finally, we've assumed no meaningful deterioration from the current market conditions, including the pricing and inflationary environment, and the absence of a significant shift in labor conditions or the competitive environment. In summary, we are pleased with the quarter and we remain confident in our ability to deliver continued strong financial performance as we look ahead and get ready to welcome HanesBrands. Thank you. Now I'll turn it over to Jesse.

Speaker #6: So , in summary , we are pleased with the quarter , and we remain confident in our ability to deliver continued financial performance as we look ahead and get ready to welcome Hanesbrands .

Speaker #6: Thank you . And now I'll turn it over to Jesse .

Speaker #4: Thank you . Luca . This concludes our prepared remarks . And now we'll begin taking your questions . As usual , before moving to the Q&A session , I would like to remind you to limit your questions to two , and we'll circle back for a second round .

Jesse Hayem: Thank you, Luca. This concludes our prepared remarks. We will begin taking your questions as usual. Before moving to the Q&A session, I would like to remind you to limit your questions to two, and we'll circle back for a second round if time permits. Jeanne, can you please begin the Q&A session?

Speaker #4: If time permits .

Speaker #4: please begin the Q&A session ?

Speaker #3: Thank you . At this time , if you would like to ask a question , simply press star , followed by the number one on your telephone keypad .

Operator: Thank you. At this time, if you would like to ask a question, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, press Star one again. Your first question comes from Paul Lejuez with Citigroup. Please go ahead.

Speaker #3: If you would like to withdraw your question , strong press star one again . And your first question comes from Paula with Citigroup .

Speaker #3: Please go ahead .

Speaker #5: Hey , thanks , guys .

[Analyst 1]: Hey, thanks guys. A couple of questions. One, can you just talk a little bit more about the weakness in the Underwear business, where you think that market share might be going? Maybe you can quantify how much was the shift versus overall market weakness, and what's your view on when that business stabilizes. Second, just curious what you're seeing at point of sale overall. Maybe if you could talk to pockets of strength and weakness at point of sale. Thank you.

Speaker #7: A couple of questions . One , can you just talk a little bit more about the weakness in the underwear business ? Where do you think that market share might be going ?

Speaker #7: Maybe you can quantify how much was the shift versus overall market weakness ? And what's your view on when that business stabilises ? And then second , just curious what you're seeing at point of sale overall .

Speaker #7: Maybe if you could talk to pockets of strength and weakness at point of sale . Thank you . Thanks .

Speaker #8: Good morning Paul , it's Chuck . Thank you for your questions . A couple quick things , I guess . First on the underwear and innerwear business , what we're seeing the innerwear business was impacted by a few things for the quarter .

Chuck Ward: Good morning, Paul, it's Chuck. Thank you for the questions. A couple quick things, I guess. First on the Underwear and innerwear business, what we're seeing, the innerwear business was impacted by a few things for the quarter. There continues to be some delays in some floor sets by a large retailer. We're continuing to face that a bit. Also, some of it is retailers managing inventory investments and balances due to the impacts of, if you think of what they now have, impacts of tariffs in their inventory and some cautiousness overall. We did see during Q3 the retailers starting to manage inventory a little tighter. We talked previously about some ongoing product and program resets that are happening within the space with some customers. All those things kind of drove the quarter results that you see here.

Speaker #8: There continues to be some delays and some floor sets by large retailer . So we're continuing to face that a bit . Also , some of it is retailers managing inventory investments and balances due to the impacts .

Speaker #8: If you think of what they now have , impacts of tariffs in their inventory and some cost cautiousness overall . We did see during Q3 the retailers starting to manage inventory a little tighter .

Speaker #8: And also we talked previously about some ongoing product and program resets that are happening with within the space , with some customers . So all those things kind of drove the quarter results that you see here .

Speaker #8: I think as we think about it going forward , we expect to see a return in innerwear of growth in Q4 . So we expect Q4 to to be back to to a growth perspective .

Chuck Ward: I think as we think about it going forward, we expect to see a return in innerwear of growth in Q4. We expect Q4 to be back to a growth perspective overall on POS and what we're seeing in the market. What we're seeing is a stable market. We have seen it stabilize over the year. We think that we'll continue to see that through Q4 as well. I think if you think about categories and how they're performing, we're seeing strong performance, obviously with our Comfort Colors® brand, we're continuing to see very large growth in net fleece has performed well. Glenn mentioned in his comments about some new Activewear programs and national account growth that we're seeing as well. We're capitalizing on those things as we go and obviously we feel good about our brand portfolio and where we are to address the market going forward.

Speaker #8: You know , overall on POS and what we're seeing in the market , I mean , what we're seeing is a stable market .

Speaker #8: You know , we have seen it stabilize over over the year . We think that , you know , we'll continue to see that through through Q4 as well .

Speaker #8: And so and I think if you think about categories and how they're performing , I mean , we're seeing strong performance , obviously with our comfort colors brand , we're continuing to see very large growth in net fleece is performed well .

Speaker #8: Glenn mentioned in his comments some about some new activewear programs and national account growth that we're seeing as well . So we're we're capitalizing on those things as we go .

Speaker #8: And then , you know , obviously we feel good about our our brand portfolio and where we are to address the market going forward .

Glenn Chamandy: Got.

Speaker #7: When you say stable market , are you saying stable to last year like POS is flat to last year or stable at a at a low single digit digit rate ?

[Analyst 1]: When you say stable market, are you saying stable to last year? Like POS is flat for last year or stable at a low single digit, mid single digit rate?

Speaker #8: Yeah . More more in line with Q2 . What we were talking about in Q2 , the market's kind of been stable at that same rate going forward .

Luca Barile: Yeah, more.

Chuck Ward: More in line with Q2, what we were talking about in Q2, the market's kind of been stable at that same rate going forward.

[Analyst 1]: Got it. Thank you.

Speaker #7: But thank you .

Speaker #3: Your next question comes from the line of Chris Lee with Desjardins . Please go ahead .

Operator: Your next question comes from the line of Chris Lee with Desjardins. Please go ahead.

Speaker #7: Hi. Good morning, everyone. I just have maybe a first question on your guidance update on your free cash flow guidance. You are guiding a little bit lower despite lower CapEx.

[Analyst 1]: Hi, good morning, everyone. Just maybe a first question on your guidance update on your free cash flow guidance. You are guiding a little bit lower despite lower CapEx. It looks like it's mostly coming from higher working capital investment. Can you please elaborate a little bit of what's driving the change in the guidance for this year? Thank you.

Speaker #7: It looks like it's mostly coming from higher working capital investment . Can you please elaborate a little bit of what's driving the change in the guidance for this year ?

Speaker #7: Thank you .

Speaker #6: Yeah , sure . Thank you , Chris , for your for your question . So look from a free cash flow perspective . We're actually .

Luca Barile: Yeah, sure. Thank you, Chris, for your question. Look, from a free cash flow perspective, a few things. One, very good free cash flow performance. In the quarter we generated $200 million, which is right in line with our own internal expectations and the revision to the guidance. From a free cash flow perspective, there's a few things that drive that. One is just taking into account the transaction costs incurred to date with the proposed HanesBrands acquisition. The second is there's a bit of timing with respect to working capital. I'd reiterate that our view on working capital as a percentage of sales is really to be around 37% to 38%. We'll get there as we move into 2026. Right now there's also some tariff costs that are incurred in our inventory.

Speaker #6: So a few things . One very good free cash flow performance in the quarter we generated 200 million which is right in line with our own internal expectations .

Speaker #6: And the revision to the guidance from a free cash flow perspective . There's a few things that drive that one . One is the just taking into account the transaction costs incurred to date with the proposed Hanesbrands acquisition , the second is there's a bit of timing with respect to working capital .

Speaker #6: I would reiterate that our view on working capital is a percentage of sales is really to be around 37 to 38% . We'll get there as we move into 2026 .

Speaker #6: And right now there's also some tariff costs that are incurred in our inventory . So that's really the main drivers from a cash flow generation perspective that we're still generating healthy elements of free cash flow .

Luca Barile: That's really the main drivers from a cash flow generation perspective that we're still generating healthy elements of free cash flow. That's really driven by the fact that we have really strong margin performance coming through and that's expected to continue into next year.

Speaker #6: That's really driven by the fact that we have really strong margin performance coming through , and that's expected to continue into next year .

[Analyst 1]: Great. Okay, that's very helpful. Maybe just another one on the guidance update. The operating margin expected to increase by 70 basis points this year. As you look out into next year, what are some of the key puts and takes, and maybe directionally speaking, do you think 70 basis points improvement again next year is achievable? Thank you.

Speaker #7: Okay . That's very helpful . And then maybe just another one on the guidance update the operating margin expected to increase by 70 basis points this year .

Speaker #7: As you look out into next year , what are some of the key puts and takes and maybe directionally speaking do you think 70 basis point improvement again next year is achievable ?

Speaker #7: Thank you .

Speaker #6: Well starting with the guidance for this year , the one thing that we're very pleased with and that is it starts with the performance that we've seen sort of quarter over quarter .

Luca Barile: Starting with the guidance for this year, the one thing that we're very pleased with is it starts with the performance that we've seen sort of quarter over quarter, and specifically in the third quarter is strong margin performance. The strong margin performance comes from is twofold. One from strong gross margin performance, but also really good cost control around SG&A. The reason why we've upped the guidance there in terms of up to 70 basis points improvement year over year versus the 50 that we previously guided to is because the elements that we control that have been driving the margin expansion are things that are foundational to the way the company is running today and will continue to run. Those things are really embedded in the ramp up of Bangladesh.

Speaker #6: And specifically in the third quarter is strong margin performance and the strong margin performance comes from is twofold . One from strong gross margin performance , but also really good cost control around a .

Speaker #6: And the reason why we've upped the guidance there in terms of up to 70 basis points , improvement year over year versus the 50 that we previously guided to , is because the elements that we control that have been driving the margin expansion are things that are foundational to the way the company is running today and will continue to run those things are really embedded in the the ramp up of Bangladesh , right .

Speaker #6: Our investment in Bangladesh and the cost differential that that's bringing us is contributing to that margin that's expected to continue. The investments we made into our yarn operations, optimization of our yarn footprint, and that those costs are coming through.

Glenn Chamandy: Right.

Luca Barile: Our investment in Bangladesh and the cost differential that that's bringing us is contributing to that margin, that's expected to continue. The investments we made into our yarn operations, optimization of our yarn footprint and those costs are coming through. Those will continue the optimization of our Central American capacity and, quite frankly, overall, our network overall, that's coming through. There are elements that when you take a look at the gross margin in the third quarter, you know, we do have some impact from favorable pricing. There's a little bit of timing versus Q4, but the way to think about the margin, it's strong and it's sustained and it's driven by things that we control and that are foundational to the business model. That's how I would think about heading into next year.

Speaker #6: Those will continue . The optimization of our Central American capacity . And quite frankly , overall , our network overall . That's coming through .

Speaker #6: So there are elements that when you take a look at at the gross margin in the third quarter , you know , we do have some impact from favorable pricing .

Speaker #6: There's a little bit of timing versus Q4, but the way to think about the margin is that it's strong and sustained. It's driven by things that we control and that are foundational to the business model.

Speaker #6: So that's what I would how I would think about heading into next year .

Speaker #7: Okay . Great . Thanks , Luca . All the best .

[Analyst 1]: Okay, great. Thanks, Luca. All the best.

Speaker #6: Thank you .

Luca Barile: Thank you.

Speaker #3: Your next question comes from the line of Jay Swell with UBS . Please go ahead .

Operator: Your next question comes from the line of Jay Soule with UBS. Please go ahead.

Speaker #9: Great . Thank you so much . A two part question for me first is just on the fleece business . If you can just talk about how the police business trended maybe in September , if the weather is a little bit warmer and maybe what you've seen in October as the weather has gotten a little cooler , and just Howe inventory in that business is looking overall and how demand is looking , and then secondly , you know , with all the tariffs now it's been a couple quarters since the April 2nd .

Luca Barile: Great.

[Analyst 2]: Thank you so much. Two part question for me. First is just on the fleece business, Glenn, if you just talk about how the fleece business trended, maybe in September, if the weather's a little bit warmer and maybe what you've seen in October as the weather's gotten a little cooler, just how inventory and that business is looking overall and how demand is looking. Then secondly, you know, with all the tariffs now, it's been a couple quarters since, you know, April 2nd. What kind of conversations are you having with companies? What kind of opportunity do you see, maybe to capture some new business from companies maybe looking to move some of their production out of Asia, maybe to your factories with your company, whether it's in Bangladesh or in Central America. Thanks so much.

Speaker #9: What kind of conversations are you having with companies ? What kind of opportunity do you see maybe to capture some new business from companies , maybe looking to move some of their production out of Asia , maybe to , to to your factories with your company , whether it's in Bangladesh or in Central America .

Speaker #9: Thanks so much .

Glenn Chamandy: Okay. I would say look at fleece is still performing well for us. We're in a good position with fleece this year. It's really early. I mean, the season really only starts kicking off, like, you know, we ship a lot of our fleece in the end of Q2, Q3 basically, and then the season really sell through period is, starts now and moves into the fall and winter really. I think we're, you know, it's early days in terms of weather, but so far the sales are meeting our expectations. I would say in terms of so far for this year regarding tariffs, I would say to you that, look, there's a lot of uncertainty in the market today and I think that we're seeing a lot of people looking to reorient their supply chain.

Speaker #5: Okay . Well , I would say look at fleece is still performing well for us . You know , we're in a good position with fleece this year .

Speaker #5: It's really early . I mean , the season really only starts kicking off . You know , we ship we ship a lot of our fleece , and , you know , the end of Q2 , Q3 basically .

Speaker #5: And then the season really sell through period as starts now . And , you know , moves into the fall and winter really .

Speaker #5: So , you know , so I think we're , you know , it's early days in terms of weather . But so far the sales are , are meeting our expectations .

Speaker #5: I would say in terms of fleece so far for this year regarding tariffs , I would say to you that , look , there's a lot of uncertainty in the market today .

Speaker #5: And I think that we've we're seeing a lot of people looking to , you know , to reorient their supply chain . But at the same time , there's a little bit of , you know , I would say hesitation because , you know , people don't understand our travels .

Glenn Chamandy: At the same time there's a little bit of, I would say hesitation because people don't understand are tariffs off, are tariffs on. They're making a deal, they're not making a deal. They're going to court, they're not going to court. Shifting your supply chain is never something you want to do in a knee jerk type of reaction. Even ourselves, to be honest with you, there's ways for us in our own manufacturing to further optimize, I would say, our supply chain relative to the way we're set up. We're sort of waiting to see how all of these things materialize. Overall, I would say that there's definitely going to be a rethink in terms of how people are trying to reorient their supply chain. There's also going to be specific areas where I think the opportunity is going to allow us to look at other product categories.

Speaker #5: After terrorists are on , they're making a deal . They're not making a deal . They're going to court . They're not going to court .

Speaker #5: So , you know , shifting your supply chain is never something you want to do in a knee jerk type of reaction . So and even ourselves , to be honest with you , there's ways for us in our own manufacturing to further optimize .

Speaker #5: I would say our supply chain relative to the way we're set up , but we're sort of waiting to see how all of these things materialize .

Speaker #5: So overall , I would say that there's definitely going to be a rethink in terms of how people are trying to reorient their supply chain .

Speaker #5: And there's also going to be specific , you know , areas where I think the opportunity is going to , you know , allow us to to to look at other product categories .

Speaker #5: So , for example , if you look at the 100% polyester product category , that's an area where the tariffs are the highest and duties are the highest .

Glenn Chamandy: For example, if you look at the 100% polyester product category, that's an area where the tariffs are the highest and duties are the highest. That's an area that we have, you know, our Rio Nancy 6 facility, for example, has got a lot of capabilities of producing polyester and there's been trade legislation changes in that category. We think that that's something that we can capitalize on and that's probably one of the areas where we have actually the lowest market penetration. We're working quickly now on building product innovation, things that we're doing to look at that category. One of our brands, which is All Pro, I mean it's really focusing on all polyester type products and as well as a lot of the big brands that are looking maybe potentially near shore. That's a category which is really important to them.

Speaker #5: So and that's an area that we have , you know , a you know , our Rio Nancy six facility for example , has got a lot of capabilities .

Speaker #5: We're producing polyester . So and there's been trade legislation changes in that category . So we think that that's something that we can capitalize on .

Speaker #5: And that's probably one of the areas where we have actually the lowest , you know , market penetration . So we're working quickly now on building product innovation , things that we're doing to look at that category .

Speaker #5: And one of our brands , which is Alpro . I mean , it's really focusing on all polyester type products and as well as a lot of the big brands that are looking maybe potentially nearshore , those are that's a category which is really important to them .

Speaker #5: So overall , look , we think there's going to be an opportunity . I think it's still , has to come to fruition .

Glenn Chamandy: Overall, look, we think there's going to be an opportunity. I think it still has to come to fruition as we move into the future, but I think we're well positioned with our manufacturing footprint to take advantage of any type of opportunity.

Speaker #5: I would say as we move into the future , but I think we're well positioned with our manufacturing footprint to take advantage of any type of opportunity .

Speaker #9: Got it . Thank you so much .

[Analyst 2]: Got it. Thank you so much.

Speaker #3: Your next question comes from the line of Vishal Sreedhar with National Bank . Please go ahead .

Operator: Your next question comes from the line. Vishal Shreedhar with National Bank. Please go ahead.

Speaker #7: Hi , thanks for taking my questions , Luca . When you when you mentioned that the market was stable , my understanding was that the market was talking about the wholesale market was was under pressure at least , you know , for the last several quarters .

[Analyst 2]: Hi, thanks for taking my questions, Luca. When you mentioned that the market was stable, my understanding was that the market was, I'm talking about the wholesale market, was under pressure at least for the last several quarters. Are we talking on a volume basis or on a sales basis? Are you including national accounts in that as well when you're saying it's stable?

Speaker #7: So were you talking about a volume basis or on a , on a sales basis and . Are you including national accounts in that as well ?

Speaker #7: When you're saying it's stable ?

Speaker #5: Okay . Well , when we look at the market , we look at the whole market and it's tiring . I would say to you that the Q3 was similar to Q2 .

Glenn Chamandy: When we look at the market, we look at the whole market in this tier and I would say to you that Q3 was similar to Q2, and what we said in Q2, it was down low single digits basically. We're seeing the same type of comps as we move into Q3. It hasn't really improved and hasn't gone any worse. It's more stable relative to Q2 but still negative year over year. Obviously, we're doing well in the market because of our soft cotton technology, our Comfort Colors®. Your American Apparel® basically is continuing to grow. Our launch of our All Pro and Champion, and remember that 3/4 of our sales growth this year in 2025 was projected coming from new programs, our fleeces in retail. A big major program we had is doing very well.

Speaker #5: And what we said in Q2 , it was down low single digits , basically . So we're seeing the same type of , you know , comps as we move into Q3 .

Speaker #5: So it hasn't hasn't really improved and hasn't gone any worse . So it's more stable relative to Q2 , but still negative year over year .

Speaker #5: obviously we're doing well in the market because of You know , our , you know , our soft cotton technology , our comfort colors , you know , our AA basically is continuing to grow .

Speaker #5: Our launch of our all pro and champion . And and remember that , you know , three quarters of our sales growth this year in 2025 was projected coming from new programs .

Speaker #5: You know , our fleeces in retail , you know , the big major program we had is doing very well . So all those things are driving the sales growth for us to have our mid-single digit growth for the full year , which we're on track for .

Glenn Chamandy: All those things are driving the sales growth for us to have our mid single digit growth for the full year, which we're on track for. I would say that the market, it was down probably low to mid in Q1. We said low in Q2, and it's probably in the same level, Q3, and we're expecting that type of scenario in Q4 in our assumption.

Speaker #5: But I would say that the market it was probably low to mid in Q1 . We said low in Q2 , and it's probably in the same level Q3 , and we're expecting that type of scenario in Q4 and our assumption , okay .

[Analyst 2]: Okay. That's on a sales basis, right? Not on a units basis.

Speaker #7: And that's on a sales basis , right ? Not on a unit basis .

Speaker #5: Yeah , yeah .

Glenn Chamandy: Yeah. Yeah.

Speaker #7: Okay . Okay . And and with respect to the gross margin , it and I know you chatted to this a little bit earlier , but it improved quite a bit sequentially .

[Analyst 1]: Okay.

[Analyst 2]: Okay. With respect to the gross margin, I know you chatted to this a little bit earlier, but it improved quite a bit sequentially. Is that mainly related to the manufacturing initiatives, or was there pricing in there as well?

Speaker #7: Is that mainly related to the manufacturing initiatives or was there pricing in there as well .

Luca Barile: Yeah, Vishal. The gross margin was strong in the quarter. It's a combination of things. What's driving the foundation of the margin at the end of the day is the contribution of the lower manufacturing costs. There is some impact from pricing, but really the lower manufacturing cost is what's foundational and that is what's going to carry forward not only into the fourth quarter, but that's foundational to the business as we move into next year.

Speaker #6: Yeah . So again , the gross margin was strong in the quarter . It's a combination of things , but really what's driving the foundation of the of the margin at the end of the day is the contribution of the lower manufacturing costs .

Speaker #6: There is some impact from from pricing , but really the lower manufacturing cost is what's foundational . And that is what's going to carry forward not only into the fourth quarter , but that's foundational to the business as we move into next year .

Speaker #5: Yeah , and maybe just add one thing to that . I would say is that look at the the fundamentals of , you know , our strategy of optimizing our manufacturing and scaling and , and generating scale in our operations is going to continue as we move into 2026 , because , you know , we've expanded in Central America , like we said this year , which , you know , we've added another 10% capacity in our facilities and our four walls at a limited CapEx and CapEx is coming even below our expectations .

Glenn Chamandy: Yes. Maybe just to add one thing to that, I would say is that look at the fundamentals of our strategy of optimizing our manufacturing and scaling and generating scale in our operations is going to continue as we move into 2026 because we've expanded in Central America, like we said this year, which we've added another 10% capacity in our facilities in our four walls at a limited CapEx. The CapEx is coming even below our expectations. As we leverage that CapEx as we move into 2026, obviously that's going to continue to help us with additional cost reductions and margin expansion as we continue to optimize our facilities. We're actually in the process now of looking to expand within our Bangladesh facility, within the four walls of that as well.

Speaker #5: So as we leverage that CapEx , as we move into 2026 , you know , obviously that's going to continue to help us with , you know , additional cost reductions and margin expansion as we continue to optimize our facilities .

Speaker #5: And we're actually in the process now of looking to expand within our Bangladeshi facility , within the four walls of that , as well .

Speaker #5: And , you know , we believe that we actually can expand that facility by probably another 50% . As we look at the four walls of that building by utilizing some space that we have within our park and allowing us to , you know , to drive additional capacity .

Glenn Chamandy: We believe that we actually can expand that facility by probably another 50% as we look at the four walls of that building by utilizing some space that we have within our park and allowing us to drive additional capacity. These are all the things that's built into Gildan MD&A, looking at ways really to optimize our manufacturing, particularly as we look at our overall planning as we move into 2026 and bringing on Hanes and as far as we continue to plan our integration strategy. Scale is going to be a key driver of continued margin expansion and we think we're well positioned to continue to grow our margins as we move forward and lower our costs.

Speaker #5: So these are all the things that's built into Gildan DNA is looking at ways really to optimize , you know , our manufacturing , particularly as we look at , you know , our overall planning as we move into 2026 and bringing on Heinz and as far as we continue to plan our integration strategy .

Speaker #5: So scale is going to be a key driver of continued margin expansion . And we think we're well positioned to continue to to grow our margins as we move forward .

Speaker #5: And lower our costs .

Speaker #7: Thank you .

[Analyst 2]: Thank you.

Speaker #3: Your next question comes from the line of Brian Morrison with TD Cowan . Please go ahead .

Operator: Your next question comes from the line of Brian Morrison with TD Cowen. Please go ahead.

Speaker #7: A .

Speaker #10: Good morning , Glenn , I want to follow up with that . What you just talked about . So how much capacity you talked about the increase in Bangladesh and in Honduras .

[Analyst 2]: Good morning, Glenn. I want to follow up with that.

Chuck Ward: What you just talked about.

[Analyst 2]: How much capacity, you talked about the increase in Bangladesh and in Honduras throughput. How much available capacity in dollars is within your existing infrastructure? It sounds like there's another $200 million to $250 million in Bangladesh. What is your view for a go ahead for a second facility at Bangladesh? I know you already have some of.

Speaker #10: Throughput . How much available capacity in dollars is within your existing infrastructure ? It sounds like there's another 200 to 250 million in Bangladesh .

Speaker #10: One . And what is your view for a go ahead for a second facility at Bangladesh ? I know you already have some of the pieces already in place .

Chuck Ward: The pieces already in place there.

Speaker #10: There .

Speaker #5: Well , I think what two things . One , look at , we'll articulate some of our plans as we move into Q1 and report because we'll we'll have good visibility on our total integration plan with HB .

Glenn Chamandy: I think two things. One, look, we'll articulate some of our plans as we move into Q1 and report because we'll have good visibility on our total integration plan with HanesBrands. I think that will sort of give you a little bit of context. The increased capacity that we can get out of Bangladesh right now doesn't preclude us from putting up the second facility. We still have that optionality. What we're going to do is we have space available to us in Bangladesh where we can add additional knitting equipment, and we're putting in some more dyeing and finishing equipment in the facility, and in the existing facility will allow us to get the first level of expansion. We'll also obviously as we move forward evaluate phase two. Phase two would be a much bigger, longer project. It's going to take 12 to 18 months to develop.

Speaker #5: So I think that will sort of give you a little bit of context , but the increased capacity that we can get out of Bangladesh right now doesn't preclude us from putting up the second facility .

Speaker #5: So we still have that optionality . What we're going to do is we have space available to us in in Bangladesh , where we can add additional knitting equipment , and we're putting in some more dyeing and finishing equipment in the facility .

Speaker #5: And in the existing facility will allow us to get the first level of expansion , and then we'll also , you know , obviously as we move forward , evaluate phase two .

Speaker #5: Phase two would be a much bigger , longer project . It's going to take 12 to 18 months to to develop . So that's something that will be down the road .

Glenn Chamandy: That is something that will be down the road. Trying to get incremental capacity and also looking to optimize our cost structure and reduce the amount of capital we've got to spend is our first priority as we bring on HanesBrands. With all that and looking at the ecosystem of what they're doing, the products, the mix, and all the different things we're building, I think a cohesive integration plan ultimately is going to continue to lower our costs and bring us scale, which is what we called out before. More importantly, we think that there's a lot of room in terms of the margin improvement and operating margin improvement on the other side because we believe that HanesBrands should be operating in the same type of operating margins as Gildan does today. That is our long-term goal, let's say, for example, as we drive into the future.

Speaker #5: But trying to get incremental capacity and also looking to optimize our cost structure and reduce the amount of capital we got to spend .

Speaker #5: That's our first priority . You know , as we bring on . So with all of that and looking at the ecosystem of , you know , what they're doing , the products , the mix and all the different things , you know , we're building .

Speaker #5: I think a cohesive integration plan that ultimately is going to continue to lower our costs and bring us scale , which is what we called out before .

Speaker #5: But more importantly , you know , we think that there's a lot of room in terms of the margin improvement and operating margin improvement on the other side , because we don't we believe that , you know , Heinz should be operating in the same type of operating margins as Gildan does today .

Speaker #5: So that's that's our long term goal . Let's say , for example , as we as we drive into the future . So everything being equal , I think we're we're in a very good position .

Glenn Chamandy: Everything being equal, I think we're in a very good position. We're very comfortable with our positioning, and we're going to continue to leverage our best-in-class vertically integrated large-scale manufacturing as we build our plans into 2026, 2027, and 2028.

Speaker #5: We're very comfortable with our positioning and we're going to continue to leverage , you know , our best in class , vertically integrated , large scale manufacturing as we build our plans into 26 , 27 and 28 .

[Analyst 2]: Glenn, to follow up, how long would it take you to expand Bangladesh one, and have tariffs on Bangladesh made you alter any of your logistics or supply chain in order to optimize your cost structure?

Speaker #10: And , Glenn , to follow up , how long would it take you to expand Bangladesh ? One and have tariffs on Bangladesh made you alter any of your logistics or supply chain in order to optimize your cost structure ?

Speaker #5: I would say that look at the even with tariffs , Bangladesh is very competitive . And what we said before is that it had a , you know , a 25% cost advantage relative to what we're doing in Central America .

Glenn Chamandy: I would say look at the, even with tariffs, Bangladesh is very competitive. What we said before is that it had a 25% cost advantage relative to what we're doing in Central America and the products that we're producing. The tariff impact with U.S. cotton obviously is a lot lower than that. As we continue to scale the thing up and lower our cost therefore, we'll be offsetting some of that tariff cost even further. That's all part of the strategy, how we're going to continue to drive efficiencies in our system. We think that we're in a good place. We're going to continue, we feel comfortable and you can see it's pulling through in our operating margin expansion this year.

Speaker #5: And the products that we're producing . So the tariff impact with us , cotton , obviously is a lot lower than that . And then as we continue to scale the thing up and lower our costs , therefore there will be offsetting some of that tariff cost even further .

Speaker #5: So , you know , that's all part of the strategy , how we're going to continue to , to to drive efficiencies in our system .

Glenn Chamandy: All we're saying to you is that we got further room to continue to expand our manufacturing footprint, reduce our costs and make us more competitive and continue to innovate our products. Don't forget, one of the things that you can take into account is that even though we've seen margin expansion, don't preclude us from the fact that we've reinvested significantly in our product and innovation because the things that we're doing in our soft cotton technology, for example, we're putting more value into these garments or more cost in terms of like-for-like type thing. The fact is, because we're optimizing, we're offsetting those costs with lower manufacturing costs which is improving our operating margins. It's a win-win scenario in our ecosystem.

Glenn Chamandy: By bringing in, I think as we move forward into 2026 and taking in the big volume that we have from HanesBrands, that's only going to continue to allow us to scale up even further. We're really excited about the opportunity.

[Analyst 2]: Thanks very much.

Luca Barile: Good luck.

Operator: Your next question comes from the line of Stephen MacLeod with BMO Capital Markets. Please go ahead.

Glenn Chamandy: Thank you. Good morning, everyone. Just a couple of questions. Just looking at the distributor channel in Q3 and you sort of called it.

Chuck Ward: Out as being similar to Q2.

Glenn Chamandy: Can you talk a little bit about what you're seeing within each segment of that market? Fashion basics, basics, and fleece. I would say to you that our soft cotton technology continues to drive our basic strategy. Comfort Colors® is doing really well, again similar to last year. American Apparel® is actually coming back. We're seeing good growth in American Apparel® and we have our new brands, All Pro, Champion, and all the new programs we have. We're doing well in a bad market. That's the truth of the situation. The market conditions, like we said, are down low single digits and we're doing well. I think that we're well positioned and hopefully we'll see a big improvement in market conditions in 2026. With the momentum we have, I think we'll see a good, strong 2026. Okay, that's great. Thank you.

Glenn Chamandy: Just turning to the cotton cost environment, obviously it's been very benign over the last year or so. I'm just curious how much does that play into your gross margin outlook and do you see incremental upside from this more benign cotton cost environment? I would say that it's going sideways right now, so there'll be no impact one way or the other on margins.

Luca Barile: Yeah. I would say, just to complement that, if you look at the, starting with the Q3, the strong margin performance, it really was driven by lower manufacturing costs. There was a little bit of lower raw material cost that did come through, and we do have visibility of that as we move forward. The real driver of the sustained margin moving forward is from the manufacturing costs.

Chuck Ward: Thank you.

Glenn Chamandy: Thank you.

Operator: Your next question comes from the line of Martin Landry with Stifel. Please go ahead.

[Analyst 2]: Hi, good morning, guys. Glenn, I want to come back on the market dynamic. You're seeing that the market has been weak in Q1, Q2, and Q3, and you also expect the market to be down in Q4. I'm just trying to understand why is the importable market down? The economy is doing well. GDP is growing nicely. What explains the fact that the industry is in decline?

Hi. Good morning, guys. Um, Glenn, I want to come back on the, uh, the market, uh, Dynamic. Uh, you're seeing with the market has been weak and q1, Q2, and Q3. And, and you also expect the market to be down in Q4, I'm just trying to understand why, why is the importable market down? The economy is doing well, GDP is growing nicely. So what explains the fact that um, the industries and the client

Glenn Chamandy: I would say that there's different things overall. When we look at the market, our GLB customers are basically, you can follow them. They're not performing as they were in previous years. That's one. We're seeing large screen retailers managing inventory a little bit. On maybe the national account side, you have corporate promotional products companies worried about tariffs and spending money basically, which is affecting potentially some of the printwear market. The travel, the tourism sort of thing, that part is still going good. People are still moving around and spending. There's different pockets of things, I would say, that are affecting the market. It's hard to say really, because there's so many different avenues of market growth, for example, or market consumption really at the end of the day. We really don't have a total handle on it, to be perfectly honest with you.

Well, I was saying that there's different things. Um, overall, when we look at the market, um, you know, our Gob customers are basically you can follow them. I mean um they're not performing um as they were in previous years. So that's 1. Um, you know, we seeing largest screen, retailers managing inventory, a little bit on, maybe the national count side. Um you have, you know, corporate promotional products companies worried about tariffs and spending money basically in the which is affecting potentially some of the proof Market, you know, the travel the you know, the tourism sort of it. I think that part is still going good. People are still you know moving around and spending so you know there's different pockets of things. Um,

I would say that are affecting the market um and you know, it's hard to say really because there's so many um there's so many different Avenues of of uh,

Glenn Chamandy: We just get the results, obviously, and it's a little bit here, a little bit there, and it all adds up to. Maybe Chuck, you want to add into that?

Chuck Ward: Yes. No, I think, Martin, again, I think, to be clear, that's the market overall. As Glenn said, it's all the, you know, it's not just in printables, it's across the whole market. We're talking about the way it looks at that, and we talked about inventory and retailers and so forth. I mean, when you're talking about the imprintables market, Martin, we feel great about our positioning when we look at our brand portfolio, what we have, and the ability to address the market. Glenn's talk about our soft cotton technology, things we've done there, that's really driving our basics category. Plasma print, which we've talked about, which has been testing with DTG printers, is going great. It's going to be launched in Q4, looks good. We're expanding the Gildan line with the new Hammer Max Heavyweight, that kind of takes on the workwear, streetwear side.

Of of, you know, of of, of market growth. Let's say, for example, or Market consumption really at the end of the day. So we, we really don't have a total handle on it to be perfectly honest with you. Um, but we, you know, we just, we get the results obviously, and it's a little bit here, a little bit there. And, you know, it all adds up to maybe chucking 1 out into that. Yeah, no. I think, uh, Martin. I again, I think to be clear, that's the market. Overall, as Glenn said, it's all the, you know, it's not just in printables, it's a cross, the whole Market, we're talking about it, the way it looks at that. And we talked about him, and

Chuck Ward: He talked about Comfort Colors®. It's our fastest growing brand. We've doubled our manufacturing capacity with that, and we're seeing a lot of organic marketing coming out of that. Like CNBC had an article recently, New York Times had one. GQ had something. We're just getting a lot of organic marketing through that brand, and we're capitalizing on that brand strength and going to expand it into premium bags and hats. We're doing a women's fleece collection. Glenn talked about American Apparel®, and really when you think about it, Martin, one of the things, if you look back at our investor presentations and what's on our website, we had said that we really participated in the core of the printables market, which is about 60% of that market. We've said we really don't play into 40% overall, but now we're looking.

Chuck Ward: For example, I just talked about Comfort Colors® going into hats and bags. We hadn't historically played in hats, outerwear, team wear, bags, accessories, and we're working to now try to reach into that 40%. We're investing in innovation in our polyester fibers and the printability of poly and poly yarns to maybe benefit going forward as Glenn was talking about bringing in poly product. That brings me to All Pro, where that's hitting new white space categories with performance and corporate ID uniforming markets. Outerwear, some outerwear jackets in that, Champion obviously going off the heritage of the Champion brand with authentic sports team colors or fanwear or team wear, coaches jackets, shorts, different things. I would say we feel very good about our ability to address the imprintables market, and as we go forward, again, to play in areas maybe we hadn't played in the past.

GQ had something. We're just getting a lot of organic marketing through that brand. Uh, and we're capitalizing on that brand strength and going to expand it into premium bags and hats. We're doing a women's fleece collection. So, you know, Glenn talked about AA and really when you think about it, Martin 1 of the things, if you look back at our investor presentations and what's on our website, we had said that we, we really participated in the core of the principles Market, which is about 60% of that market. When we've said, we really don't play in the 40%, uh, overall. But now, we're looking, for example, I just talked about Comfort colors going in the hats, and, and bags. We, we hadn't historically played in hats out of wear team wear bags accessories and we're, we're working to now, try to reach into that 40%. Uh, we're investing in Innovation and our polyester fibers. And the printability of poly and poly Yarns to maybe benefit going forward as Glenn was talking about and bringing in poly product. And so that brings me to All Pro.

where,

you know, that's hitting new white space categories with performance and corporate ID, uniforming markets, uh, you know, outerwear some outerwear jackets and that champion obviously, going off the heritage of the Champion brand with all 10 authentic, sports team colors or fan, wear or team wear, uh, coaches jackets, shorts different things. So I would say we feel very good about our ability to address the imprintables market. Uh, and, you know, as we go forward, uh, and again, to play an area

Glenn Chamandy: Just to summarize, despite there could be some negativity in the market, we're well positioned for growth regardless. Despite the market being down, we're still seeing mid single digit growth from all these factors that Chuck just mentioned. Hopefully as we move into 2026, we'll see some positive momentum in the market which will even accelerate our growth further.

Areas, maybe we hadn't played, uh, in the past. So so just to summarize is that despite the could be some negativity in the market. We're, well, positioned for growth regardless and despite the market being down, you know, we're still seeing bit single digit growth from all these factors that Chuck just mentioned. And hopefully, as we move into 2026, we'll see some positive momentum in the market, which will even accelerate our growth further.

[Analyst 2]: Okay, that's great color. Thank you. Just to be clear, you said, Chuck, that you're entering into hats. Are you entering into other categories like bags and workwear or just hats?

Chuck Ward: No hats. We're doing hats. We're going to do some bags, things like our Hammer Max will probably play a little bit in workwear as I mentioned. We're going to do some outerwear jackets, things in All Pro, and Champion has coach's jacket. We're playing in areas that, if you go back to that investor presentation, into areas where we said we didn't play in the past, we're reaching into.

Okay, that's great caller. Thank you and just to be clear. You said, Chuck that, uh, you're entering into, um, hats. Uh, are you entering into other categories? Like bags and, uh, Workwear or or, or or, or just hats?

No, no hats. Uh, we're doing hats, we're going to do some bags. Uh, you know things like our our

You know, Hammer Max will probably play a little bit in work, where as I mentioned, uh, you know, we're doing, we're going to do some outerwear jackets things in in all pro, uh, and and Champion has coaches jackets. So yeah, we're, we're playing in areas that. Uh, if you go back to that investor presentation in the areas, where we said, we didn't play in the, in the past, we're reaching into

[Analyst 2]: Super. Thank you for all the color.

Super, thank you for all the callers.

Operator: Your next question comes from the line of Paul Kearney with Barclays. Please go ahead.

Your next question comes from the line of Paul Kearney with barklay please. Go ahead.

[Analyst 2]: Hi, thanks for taking my question. First one is just looking at inventories. Can you comment on levels in the quarter? How much of the increase was from the higher tariff costs, and where do you expect to end Q4? I have a quick follow up.

Hi, thanks for taking my question. Uh, first 1 is just looking at inventories, can you comment on levels in the quarter? How much are the increase was from the higher tariff costs? And where do you expect to end Q4 and I have a quick follow-up.

Luca Barile: Yeah, thanks for your question. We're comfortable with where inventories are. The inventory levels are slightly higher and there's a few reasons for that. One, yeah, there are some costs related to tariffs that are in our inventory, but it's better, it's more that we're really well positioned from an in stock level. If you remember that when we have really good in stocks, that drives really good availability and that's what's really important from the market's perspective, perspective of our customers. As I did comment earlier, look, we've got a strong focus on working capital, strong focus on generating cash flow. Our target is to bring that working capital down towards the 37, 38% as we were in 2026. We'll be slightly higher than that as we end Q4, but we're well positioned and we're in control of our working capital. I would think of it as good inventory.

[Analyst 2]: Okay, thanks. That was great color on the innovation and the growth outlook for the activewear for next year. I guess my follow up is, I'm curious, after the HanesBrands acquisition, is there anything that we should be considering for the organic outlook for the Gildan business as you kind of roll in those brands and those customers? How should we think about the hosiery and underwear part of the business or any kind of shifts as you combine the businesses?

Yeah, thanks for your question. So what we're comfortable with where inventories are? Um the inventory levels are slightly higher uh and there's 2 few reasons for that 1. Yeah there are some some costs related to tariffs that are in our inventory but it's better, it's more that we're really well positioned from an in stock level. And if you remember that, when we have really good in stocks that drives really good availability and that's what's really important from the markets, uh perspective perspective of our customers. So um, as I did comment earlier, look we got a, a strong focus on working capital strong, focus on generating cash flow. Uh our Target is to bring that working capital down towards the 37 38%. As we were in 2026. We'll be slightly higher than that as we end uh Q4. But we're well positioned and we're in control of our working capital, so it's, I would think of it as good inventory.

Luca Barile: I think what's really important is if we take this kind of step by step as we look at what we're putting out in terms of guidance for this year, right? When we take a look at the top line, we're reconfirming our guidance there on the top line of revenue up mid single digit, right? We've seen this year very strong performance which is really fueling that top line growth. Revenue up mid single digits, right. When we take a look at the margin profile, we're calling up our operating margin guidance to 70 basis points year over year. Just as a reminder, 2024 was at 21.3%. This all feeds into an adjusted EPS guidance range that we've now tightened, right, at $3.45 to $3.51, which is up 15% to 17% as you think of the go forward, right.

Okay. Thanks. And that was great color on, on the Innovation, and the growth outlook for the active wear for next year, I guess my follow-up is, is, I'm curious after the, the Hanes brand acquisition. Is there anything that we should be, considering for the organic outlook for the guild and business as you kind of role in those Brands. And and those customers, how should we think about about the the Hoyer and underwear part of the business or or any kind of ships? As you combine the businesses,

Well, I think what's really important is, if we take this kind of step-by-step, as we look at what we're putting out in terms of guidance, for for this year, right? So, when we take a look at the Top Line, we're reconfirming our guidance there on the top line of Revenue up, mid single digit, right? We've seen this year, very strong performance,

Luca Barile: In terms of the proposed acquisition, what we've gone out to the market with, right, is a view that net sales are going to accrete over the next three years at a rate of 3% to 5% CAGR. That's the way you have to think of the top line in terms of how much we're going to continue to invest in the business is 3% to 4% of that top line into CapEx, which is going to be really important. We're going to be doing this within a leverage framework of always with our target between 1.5 to 2.5 times. It's really important to us to maintain that. If you notice where we are right now, we're actually at the midpoint of our range going into the closing of the transaction.

Luca Barile: From an EPS perspective, really jumping up to the low 20% range off the midpoint of what we're guiding to in terms of 2025. That's the profile of how you have to think about the coming together of the two entities. In the first year, what we've articulated as well is that the EPS will be meaningfully higher than that average of the 20% over the next three years. Hopefully that's helpful. That's the way you should be thinking about the coming together of the two entities.

We've now tightened right at 3:45 to 3:51, which is up 50% to 17% as you think of the go forward, right? In terms of the proposed acquisition what we've gone out to to, to, to, to the market with. Right is a view that net sales are going to accrete over the next 3 years at a rate of 3 to 5% kagar, right? So, that's the way you have to think of the Top Line, uh, in terms of how much we're going to continue to invest in the business is 3 to 4% of that Top Line into capex, which is going to be really important. Uh we're going to be doing this within a leverage framework of always with our Target between 1 and a half to 2 and a half times. It's really important to us to maintain that. If you, if you notice where we are right now, we're actually at the midpoint of our range going into the closing of the of the transaction. And then, from an EPS perspective, really jumping up to the low, 20% range off the midpoint, of what we're going to in terms of 2025. So, that's the profile of how you have to think about the coming together of the, of the 2 entities. And, and then the first year,

[Analyst 2]: Thank you.

What we've articulated as well. Is that the the um, the EPS will be meaningfully higher than that, average of the 20% over the next 3 years. So hopefully, hopefully, that's that's helpful. But that's, that's the way you should be thinking about the coming together of the 2 entities.

Thank you.

Operator: Your next question comes from the line of Luke Hannan with Canaccord Genuity. Please go ahead.

[Analyst 2]: Thanks. Good morning everyone, and thanks for all the commentary thus far. I wanted to follow up on the topic of there being delays in floor sets by large retailers. I know it was mentioned in the past that you have a large fleece program that's either already in place with their large retailer customers or set to. Has the timing of that been impacted at all by the fact that retailers are being a little bit more diligent in managing inventory?

Your next question comes from the line of Luke Hannon with canaccord. Please go ahead.

Thanks. Good morning, everyone. And thanks for all the, the commentary thus far. I wanted to follow up on, on the topic of there, being a delays in in Flores sets by by large retailers. I know, it was mentioned in the past that you have a large fleece program. Um, that's either already in place with your, with their, large retailer, customers or, or is set to has a has a timing of that been impacted At All. By the fact that retailers are being a little bit more diligent in managing inventory.

Chuck Ward: No, Luke, that has sat and on the floor it is doing well. It's performing well. Early reads on it are very good. They definitely wouldn't want to miss that fleece season. No, it's been placed on the floor. It was more in the innerwear categories.

[Analyst 2]: Got it. Thanks.

No, look that uh that has that uh and on the floor it is doing well as performing. Well early reads on it are very good. Uh they definitely wouldn't want to miss that fleece season. So uh know it's been placed in in on the floor. It's it's it was more in the inner work category.

Luca Barile: I would just add, Luke, that again from a growth perspective this year, 75% of our growth is coming from new programs. That includes the T shirt and fleece meaningful programs within our national accounts, and that plays into that piece right there.

Got it, thanks.

[Analyst 2]: Thanks. For my follow up, I wanted to ask, on that same sort of topic or dynamic of customers being a little bit more diligent in managing inventory, it sounds like distributors overall seem to be okay with their inventory balances. What's your view on why that sort of dynamic wouldn't impact distributors, but retailers seem to be a little bit more impacted?

And I would just add Luke. I would just add that again. From a growth perspective, this year and you know 75% of our growth is coming from new programs. That includes the, you know, t-shirt and fleece meaningful programs, within our national accounts, uh and so that that plays into that, um, that piece right there.

Chuck Ward: I think when you look at it again, distributors have always known that availability is their number one purchase criteria. They have to have the product available, and they found as they do that they have a better chance of servicing the market. There's been an appetite to make sure they're well balanced and well stocked to service it. I think when you look at the retailers, they're a lot wider in what they're dealing with. It's not just innerwear that we talked about or activewear we talked about. It could be everything else in the store, fashion goods, electronics, everything across the store that they're running into, and they're really uncertain about tariffs and so forth going forward. I think they look at it probably a little differently than the distributors have to look at their supply chains.

Thanks. And then for my, my follow-up, I want to ask. So on that same sort of topic or, or dynamic of of customers, being a little bit more diligent in, in managing inventory, it sounds like Distributors overall seemed to be okay, with with their inventory. Balances, what's your view on on? Why that sort of dynamic would impact Distributors but retailers seem to be a little bit more impacted.

[Analyst 2]: Got it. Thanks.

Well, I think when you look at it uh again Distributors have always known that availability is their number 1 purchase criteria. So they have to have the product available, uh, and so and they found as they do that, uh, they have a better better chance of, of servicing the market. So, uh, there's been an appetite to to make sure they're well balanced and well uh stocked to service it. Uh and again I think when you look at the retailers they're I think they're a lot wider in what they're dealing with. It's not just innerwear that we talked about or active where we talked about, it could be everything else in the store and fashion Goods. Uh you know like Electronics, everything across the store that they're running into and they're really uncertain about tariffs and so forth going forward. So I think uh they're they look at it probably a little differently than the Distributors have to look at their supply chains.

Got it, thanks.

Operator: Your next question comes from the line of John Zamparo with Scotiabank. Please go ahead.

[Analyst 2]: Thank you. Good morning. I wanted to come back to the free cash flow guide, but related to the CapEx. Apologies if I missed it, but what is the nature of that update? Are you deferring projects, or are some areas of spending no longer as compelling as they were prior? If it's the former, is that based on the supply chain uncertainty from some customers that you referenced?

Your next question comes from the line of John zaro with Scotia Bank. Please go ahead.

Glenn Chamandy: No.

Luca Barile: Two things, starting with the CapEx guide. Going from 5% to 4% of net sales, that's a healthy number. One thing that we do not move off of, I think it's important to understand, is how we reinvest in the maintenance of our assets. Always think about almost around two thirds of what we spend in CapEx goes through maintenance and reinvesting into our assets to make sure that we maintain our competitive advantage. That doesn't move. There is a little bit of shift in terms of timing of projects, which is effectively the difference between the 5% and the 4%. That's the way I would think of the CapEx. You touched upon free cash flow. I think again, free cash flow is very important to us and we're comfortable in terms of our free cash flow generation.

Thank you. Good morning. Uh, I wanted to come back to the, the free cash flow guide, but but related to the capex, um, apologies if I missed it, but what is the nature of that update? Are you deferring projects or are some areas of spending? No longer as compelling as they were prior? If it's the and if it's the former is that based on the supply chain on certainty, from some customers that you represent,

Luca Barile: The difference in the guide again comes down to we've reflected the transaction costs incurred to date. There's a bit of timing of working capital. We have a little bit of tariff cost that's in our inventories. We're comfortable where we are and we're comfortable that where we're going, there's nothing really major, it's timing.

The the difference in the guide. Again comes down to we've reflected the transaction costs, incurred to date. There's a bit of timing of working capital. Uh we're we have a little bit of tariff cost that's in our inventories. Uh, but we're comfortable where we are and we're comfortable that where we're going. Uh, there's nothing uh, really major. It's uh, it's timing.

[Analyst 2]: Okay, understood. I wanted to ask about the competitive landscape and I wonder if you've seen any meaningful change in that over the last quarter or so. Do you think your competitors are behaving rationally? Are they also passing on costs as you'd expect?

Okay, understood. And then, uh, I wanted to ask about the competitive landscape, and I wonder if you you've seen any meaningful change in that over the last quarter or so, do you think your competitors or behaving rationally? Are they also passing on costs as as you'd expect

Glenn Chamandy: I'd say overall, the whole market has passed on costs associated with tariff. I mean, that's pretty consistent across all categories, all markets, all channels. I would say that in the printwear market, we're continuing to win our strength, like Chuck mentioned, and all the brand portfolio, the technology, the innovation, it's all a function of the capital that we've been spending and leveraging our large scale, low cost manufacturing. It takes a long time to put that in place, and then we're really capitalizing it in this type of market where our competitors, we think, are weak, undercapitalized, and don't have really the brand strength, the innovation, the manufacturing to really grow their businesses. We're continuing to lead and widen the gap against the competitive landscape in most of the cases where we operate.

Let's say, overall the the whole Market has passed on, you know, costs associated with tariff. I mean, that's pretty consistent across all categories. All markets all channels

Um, I would say that, you know, in the, you know, in the printwear market, we're continuing to win, um, our strength like Chuck mentioned and all the brand portfolio, the technology, The Innovation, it's all a function of the capital that we've been spending. Um, in leveraging, our large scale low-cost manufacturing. And so, you know, it takes a long time to put that in place and then, you know, we're really capitalizing it in this type of Market where our competitors we think are weak, um, under capitalized. And don't have the really the branch strength, the The Innovation, the manufacturing to really, you know, grow their businesses. So, you know, we're continuing to lead, um, then widen the Gap against the competitive landscape and most of the cases where we where we operate.

[Analyst 2]: Understood, thank you.

Understood, thank you.

Operator: Your next question comes from the line of Chris Lee with Desjardins. Please go ahead.

[Analyst 1]: Thanks for the follow-up, Glenn. I just want to follow up on your last answer to your last question. I just want to confirm, have you seen a widening of your price gap versus your competitors given your low cost advantage? Is that also allowing you to gain more market shares? Thanks.

Your next question comes from the line of Chris Lee with dejure down. Please go ahead.

Glenn Chamandy: No, we've taken price equal to whatever tariff impact. We did it in stages too. We didn't really go out and price at one time. We slowly took prices up to cover the impact of tariffs so they would be aligned, and basically the market had to follow because everybody has that same type of cost. I would say to you that the pricing relationship before and after tariffs is probably pretty consistent in the market, and everybody had to react to the tariff costs, and everybody really reacts to our pricing because we're the price leader.

Oh, thanks for the follow-up, Climax. Yeah, I want to follow up on your last answer to your last question. I just want to confirm. So, have you seen a widening of your price gap versus your competitors, given your low-cost advantage? And is that also allowing you to gain more market share? Thanks.

No, we we've taken price.

Equal to whatever tariff impact. We did it in stages too so we didn't really go out in price at 1 time. So we slowly took prices up to cover the impact of tariffs. So they would be aligned.

And basically, you know, the market had to follow because everybody has that same type of cost. So I would say to you that, um, you know, the pricing.

I would say relationship before and after tariffs is probably pretty consistent in the market. Um, and everybody had to re react to the Tariff costs and everybody really reacts to our pricing.

[Analyst 1]: Okay, that's helpful. Maybe Luca, just a follow up for you on the SG&A expense. Sorry if you answered this already, it was a bit higher than what we were expecting in Q3. You know that there's some increase in variable compensation. Are you able to kind of break out for us just how much of that was from variable comp? A follow up to that is, as you look out for next year, your SG&A rate, should we be kind of anchoring around 10% of sales for next year? Is that still a good soft target? Thank you.

Because we're the price leader, okay?

Okay, that's helpful and maybe look at just a follow-up for you. Um, just on the sg&a expense. Uh, sorry if you answered this already, it was a bit higher than what we were expecting in Q3, um, you know, that there's some increase in very real compensation. Are you able to kind of break out for us, just

how much of that was from variable comp, and then maybe a follow-up to to that is, you know, as you look out for next year, your H&A rates, should we be kind of

Luca Barile: Yeah, thanks for your question. Look, in the quarter, I mean slightly higher, I think there's two things. The drivers are some higher variable comp, but there were also some IT-related expenses that were more one time in nature. The way you have to think about the target for SG&A, and specifically for this year, right, we've given the operating margin guidance of 70 basis points higher year over year. When you look at the composition of the gross margin and the SG&A, our SG&A is always targeted to be around 10% of sales. There's a couple of one timers here in the quarter, but we're comfortable with that target. With your question with respect to next year, I would point you towards the guidance that we've given in terms of the two companies coming together.

Anchoring around 10% of sales for next year, is that still a, um, a good soft target? Thank you.

Luca Barile: The combination really yields really strong adjusted diluted EPS CAGR over the next three years, with the first year being meaningfully higher than that low 20% range. 10% is what we're looking at for this year in terms of what we can control on our end.

[Analyst 1]: Okay, that's helpful. Thank you very much.

Yeah, thanks for your question. So, look in the quarter. I mean, slight slightly higher. I think there's 2 things. The drivers are some higher variable comp, but there is also some it related expenses that were more 1 time in, in nature, the way you have to think about the target for sgna and specifically, for for this year, right? We've given the operating margin, uh, guidance of 70 basis points higher year-over-year. Uh, and when you look at at the composition of the gross margin and the sgna, our sgna is always targeted to be around 10% of sales. So there's a couple of 1 timers here in in the quarter, but we're comfortable with that Target. And then with your question, with, with respect to next year, I, I would point you towards, you know, the guidance that we've given in terms of the, the, uh, the 2 companies coming together the combination, which really yields really strong, uh, adjusted diluted EPS kicker over the next 3 years with the first year being meaningfully higher than that, uh, low 20% range. So, you know, 10% is what we're looking at for, for this year, in terms of what we can control on on our end.

Luca Barile: Thank you.

Okay, that's helpful. Thank you very much.

Thank you.

Operator: Your next question comes from the line of Ryland Conrad with RBC. Please go ahead.

[Analyst 2]: Thank you. Good morning. Just on the three quarters of expected growth from new programs this year, just curious how long of a line of sight or how much visibility you have on incremental program wins in national accounts in 2026.

Your next question comes from the line of Ryland Conrad with RBC. Please go ahead

Chuck Ward: Yeah, Rylan, thanks for the question. We have similar, as we've mentioned, we have similar line of sight on our growth for next year. Similar percentages that we're looking at, as we said, for this year of growth that we see and have line of sight for next year.

Yeah, thank you. Good morning. Um, just on the the 3 quarters of expected growth from new programs this year, uh, just curious how long of a line of sight or, or how much visibility you have on on incremental program wins and national accounts into 2026.

Yeah, rather than thanks for the question. And we we have similar as we've mentioned, we have similar line of sight on our growth for next year. Uh, so similar similar percentages, that we're looking at uh, as we said for this year of growth that we see and have a line of sight for next year.

[Analyst 2]: Okay, great. On Comfort Colors®, could you talk a bit about the performance year to date and the underlying drivers there? On the plans to expand that brand into additional product categories, is there anything that you could share additionally on that front, whether it be timing or just expectations on how that will benefit the brand?

Drivers there. And then on the, the plans to expand that brand into additional product categories, like is there anything that you could share, additionally, there on that front, whether it be kind of timing or just expectations on on how that will benefit the brand.

Chuck Ward: Sure. I mean, the brand is our fastest growing brand with double-digit growth. It's been very strong all year long. We haven't seen it falter at all. It just keeps growing. I mentioned we doubled our manufacturing capacity for that brand and we're going to invest additional in 2026 to grow that capacity more. That's the reason we think it has brand strength to move outside of just where we have been, which is tees and fleece. We're adding more women's collections, which will be very strong. We're going to go into caps and bags as I mentioned.

Sure, I mean again, the brand is, again, it's our fastest growing brand with...

Chuck Ward: I think that'll be well received because then people can, when they're putting this product out in the printwear, you know, could go to fraternities, sororities, resorts, see it in bars where they're putting their things, they want to sell a hat and a T-shirt, they don't, you know, we're actually seeing it picked up quite a bit in band merch. When people go to a band, to a concert, they may pick up a shirt, but they also want a hat. We're trying to put out things that'll go well with the core product and a lot of it will move.

Glenn Chamandy: Together and just to your preference. Even though there's hats and bags, these are all going to be cotton based. They're going to be basically dyed in the same process as we make the T-shirts. It's going to give a nostalgic look in terms of the pigment type technology that we use on all of the Comfort Colors® products that we sell. It's really going to be enlightening and stay consistent with the brand's heritage and focus.

Double digit growth. It's been very strong all year long. Uh, we haven't seen it falter at all. It just keeps growing. I mentioned, we doubled our manufacturing capacity for that brand. And we're going to invest, uh, additional in 2026 to grow that. Uh, capacity uh, more uh, and, and so that's the reason we think it has brand strength to move outside of just where we have been, which is, which is teasing police. We're adding more women's collections, which will be very strong. Uh, we're going to go into caps, uh, and bags, as I mentioned, uh, again I think that'll be well received because then people can when they're when they're putting this product out, uh, in the printwear. You know, could go to fraternity sororities Resorts. Uh, you know, I see it in bars, where they're, they're putting the things they want to sell a hat and a t-shirt. They don't, you know, we're actually seeing it picked up quite a bit in band merch. And, you know, uh, when people go to a band to a to a concert, they may pick up a shirt, but they also want a hat. So we're, we're trying to put out things that will that will go well, uh, with the core product.

And a lot of it will move together.

And just to reference. Even though there's hats and bags, these are all going to be cotton based, they're going to be basically died in the same process as we make the t-shirts. So it's going to give a nostalgic look in terms of the pigment type technology that we use on all of the Comfort colors products that we sell. So it's really going to be, um, you know, enlightening and stay consistent with the brands Heritage and focus.

[Analyst 2]: Great, thank you very much.

Great, thank you very much.

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

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

Jesse Hayem: Thank you, everyone, for joining us today and attending our call. We look forward to speaking with you soon. Have a great day.

Thank you everyone for joining us today and attending our call. And we look forward to speaking with you soon. Have a great day.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Ladies and gentlemen, that concludes today's call, thank you all for joining. You may now disconnect

[Unknown Speaker]: Get off of working with me down at our spot. We had a panty over the view of a parking lot. It was 2 for 1 and 4 for 2 at Christmas lights in the middle of June, all hung up like I was on you. I see, baby, do you want to come over? Say no way, then you move in closer. Next thing I know, you were in my T-shirt right there, your hair messed up like a Guns and Roses video. Oh, so I still got it up in my head, you moving around in the TV line. I ain't ever seen anything like your dress, my son floor, the way you are. My, my T-shirt, yeah, you look good in my T-shirt, girl, oh yeah, we'll be walking upstairs with the neighbor saying keep it.

get off of working with me down at our spot.

We had a panio with a view of parking lot.

It was 2 for 1 and 4 for 2 at Christmas lights in the middle of June all hung up.

Was on you.

Say hey baby. Do you want to come over?

Say no. Wait, and you're moving closer.

This thing I know.

Right there. Your hair messed up, like a nothing Road this video. Oh oh.

Raining, ever seen anything like your drip? My floor, your way, you are.

My my t-shirt.

Yeah.

Yeah.

Oh yeah.

Up the stairs, with the neighbors saying, "Keep it down."