Gildan Activewear Inc (GIL) 2024 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Gildan Activewear's 2024 Q4 Earnings and Full Year Conference Call. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Jessy Hayem, Senior Vice President, Head of Investor Relations and Global Communications. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the fourth quarter and full year 2024 as well as our first time guidance for 2025. The company's management discussion and analysis and consolidated financial statements are expected to be filed with the Canadian Securities and Regulatory Authorities and the US Securities Commission today and will also be available on our corporate website.

In a separate press release issued concurrently today, the company also announced executive leadership nominations and a CFO transition as part of a multiyear succession planning process, which we'll be addressing this morning as well. Now joining me on the call today are Glenn Chamandy, President and CEO of Gildan, Rhod Harries, Executive Vice President and Chief Financial and Administrative Officer; and Chuck Ward, President, Sales, Marketing and Distribution.

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 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 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 MD&A. And now I'll turn it over to Glenn.

Thank you, Jessy, and good morning, everybody. I'd like to start the call by taking a moment to thank and acknowledge our global team's efforts for their strength and dedication as well as the loyalty of our customers and the ongoing support from our shareholders. As we highlighted in this morning's release, you can see that Gildan's Sustainable Growth Strategy or GSG, is clearly driving profitable growth, and we are extremely pleased with our progress.

We delivered record fourth quarter sales of $822 million, which were up 5% versus last year. This growth rate would have been low double digits when you exclude the phase out of Under Armour. We also delivered record fourth quarter adjusted EPS of $0.83 a share, up 11% year-over-year. In our 40th anniversary year, we concluded on a high note with record revenues of about $3.3 billion, strong adjusted operating margins of 21.3% and year-over-year adjusted diluted EPS growth of 17%, fully in line with our guidance, all while continuing to return significant capital to shareholders with a record $889 million returned in 2024.

We're also committed and continuing executing on our GSG strategy across all our three pillars: capacity, innovation and ESG. We will execute -- we are excited about our ability to deliver on our three-year objectives we had laid out for 2025 to 2027 period, which include net sales of mid-single-digit range and adjusted diluted EPS growth in the mid-teen range.

Now looking at 2025, we believe we're well positioned. We have many strong drivers, which we feel should allow us to deliver on our objectives for the full year. We have new innovation across the board and very good reception of our soft cotton technology, which is driving our basics in continued positive territory with double-digit POS growth in the fourth quarter of 2024.

We are also excited about our plasma print technology and other innovations such as Color blast in our Comfort Colors brand, which we are seeing significant growth. In fact, the brand is up 40% for the full year in 2024. We're also expanding our product line in the distribution through distributors under our Champion brand through the license we secured for the Printwear channel.

So these drivers will allow us to further gain share in the distributor channel in 2025. And remember, we're also benefiting from the changing competitive landscape with players exiting the market. Our international business has seen a 20% increase in sales the last two quarters as these markets have started to recover and our ability to service is now stronger given the capacity expansion in Bangladesh and our product availability in these markets. Finally, the national account side, we're also seeing great traction.

We are expanding our shelf space in underwear with additional product offering, and we have secured meaningful new programs of Activewear, both tees and fleece with our national account customers. So these are all the drivers for our growth in 2025, and we are excited about the opportunities ahead.

And of course, as always, we continue to focus on further cost and operating margin improvement, ramping up Bangladesh, our yard modernization in the United States, optimizing our Central American operations. I'm looking forward to answering your questions after our formal remarks.

And now I'll turn the call over to Rhod.

Thank you, Glenn, and good morning, everyone, and thank you for joining us today to discuss our fourth quarter and full year results. I'd also like to begin the call by thanking the entire Gildan team for their outstanding work and dedication throughout 2024. Echoing Glen, three years into our GSG strategy, we are extremely pleased with our execution as we continue to reinforce our core competencies and our overall strong competitive positioning.

Let me start by going over the specifics of the quarter, and then I will comment on our outlook and guidance for 2025. So let's begin with the fourth quarter results. We reported fourth quarter sales of $822 million, up 5% year-over-year. If we exclude the impact of the phaseout of Under Armour, net sales for the quarter are up low double digits.

This was driven by a strong performance in Activewear, up $70 million or 11%, driven by higher sales volumes. We saw positive POS across channels and product lines and continue to capture market share in key growth categories with a strong market response to our recently introduced products, which feature key innovations, including our soft cotton technology. We also saw continued momentum with national account customers, driven by our competitive positioning and as we continue to benefit from recent changes in the industry landscape.

Looking at international markets. Sales increased by 20% year-over-year for the second consecutive quarter. Growth stemmed from positive POS in Europe, our largest market, as well as inventory replenishment by distributors. With our improved in-stock levels supported by our global manufacturing footprint, we have improved our ability to service these markets. Turning to Hosiery and underwear.

As expected, this category was down 23% versus the prior year, mainly owing to the phase out of the Under Armour business. Excluding this phase out, our Hosiery and underwear sales would have been up high single digits year-over-year, highlighting strong underlying growth as we continue to gain traction with other national account customers.

And finally, a quick note regarding our full year net sales for this category. If we exclude the impact of the Under Armour phase-out, sales for the Hosiery and underwear category, would have increased by mid-single digits year-over-year in line with our full year Activewear growth. Turning our focus to margins for the quarter.

Our gross margin was 30.8%, a 60-basis-point improvement over the prior year, primarily due to lower raw material costs. As for SG&A, expenses were $78 million in the quarter compared to $88 million in the prior year. If we adjust for charges related to the proxy contest and leadership changes, which were meaningful in the fourth quarter of 2023, adjusted SG&A expenses were $78 million versus $82 million last year.

Adjusted SG&A as a percentage of net sales were 9.5%, down 100 basis points, reflecting the positive benefit of the jobs credit introduced by Barbados earlier this year, partly offset by higher variable compensation expenses and higher distribution expenses. As we bring all of these elements together and after adjusting for restructuring and acquisition-related items in both years, as well as nonrecurring items in the prior year's quarter, we generated adjusted operating income of $175 million or 21.3%, up 160 basis points year-over-year.

Briefly commenting again on the full year, adjusted operating margin was 21.3%, up 400 basis points versus the previous year and in line with guidance. Moving on to taxes. As expected, the company's adjusted effective income tax rate for the quarter was 13.4% compared to 3.1% last year, reflecting the enactment of global minimum tax in Canada and Barbados earlier this year.

After reflecting higher net financial and income tax expenses and our lower outstanding share base, we reported GAAP diluted EPS of $0.86 in the fourth quarter, down 3% versus the prior year, whereas adjusted diluted EPS were $0.83 versus $0.75 last year, which represents an 11% increase. Now commenting on the full year.

After adjusting for nonrecurring items and taking into account the significantly higher year-over-year income tax expenses due to the enactment of GMT as well as the benefit of our lower outstanding share base, adjusted diluted EPS were up 17%, closing the year at $3, fully within the guidance range we had provided. Note that the net impact of the jobs credit and the higher tax rate related to the enactment of Barbados tax reform and GMT was $0.23 per share for the full year, implying that our year-over-year adjusted EPS growth rate would have been closer to 25% without these impacts.

Now turning to cash flow and balance sheet items. Looking at the full year, cash flow from operating activities totaled $501 million compared to $547 million in the prior year, with both years impacted by nonrecurring items, as mentioned earlier. After accounting for CapEx of $150 million and lower year-over-year proceeds from sale and leaseback activities and asset disposals, the company generated free cash flow of approximately $390 million for the full year, essentially in line with the prior year.

This cash flow generation, along with our strong balance sheet, enabled us to deliver on our capital allocation priorities and returned a record $889 million to shareholders, including dividends and share repurchases of about 18 million shares or 11% of our float in the year. And finally, even with the significant return of capital during 2024, we ended the year with net debt of about $1.6 billion and a leverage ratio of 1.9 times net debt to adjusted EBITDA, well within our target debt range of 1.5 times to 2.5 times net debt to adjusted EBITDA.

So overall, and concluding on the results, we accomplished a great deal in 2024 by remaining focused on execution of our GSG strategy against a somewhat mixed macroeconomic backdrop, which resulted in record revenues, strong operating margins and putting us in an outstanding position to deliver on our capital allocation priorities, including share buybacks and a 10% increase in our dividend for 2025 that we were pleased to announce this morning.

So this brings me to our strategy and outlook. So as Glenn highlighted earlier, we continue to be very pleased with our execution and progress on the three pillars of our GSG strategy. First, our new manufacturing complex in Bangladesh ramped up fully on track, supporting our growth expectations and further lowering our cost structure and also providing additional diversification and flexibility in our global vertically integrated manufacturing platform.

Moreover, on the innovation front, we are just beginning to tap into the largest innovation pipeline in the company's history with more product launches to come in 2025 as showcased at the Impressions trade show last month, where we received great feedback. And lastly, with regards to ESG, we remain fully on track with our next-generation objectives.

In this regard, and as announced in January, we were pleased to have been included on the Dow Jones Best-in-Class North America Index for the 12th consecutive year. More recently, Gildan was also included in the 2025 Sustainability Yearbook for the 13th consecutive year based on S&P Global's Corporate Sustainability Assessment.

So we know we have a strong foundation, a great competitive position and the ability to return capital to our shareholders. That's why we're excited about the opportunities that lie ahead and about our ability to drive performance toward achieving our three-year objectives for the 2025 to 2027 period, which Glenn also touched on earlier. So now turning to our outlook for 2025.

We expect the following: revenue growth for the full year to be up mid-single digits; full year adjusted operating margin to increase approximately 50 basis points; CapEx to come in at approximately 5% of sales; adjusted diluted EPS to be in the range of $3.38 to $3.58, up between 13% and 19% year-over-year and free cash flow is expected to come in above $450 million. Further, the outlook that I just laid out is underpinned by some key assumptions, including the following.

First, our outlook reflects continued growth in key product categories, driven by recently introduced innovation. It also reflects overall POS growth, expected market share gains, the favorable impact from new product launches as well as some improvement in certain markets that remain soft in 2024. We also expect ongoing benefits from the Jobs Credit program that took effect in Barbados in 2024, and we anticipate that our effective tax rate for 2025 will remain at a similar level to what we saw in 2024.

Finally, we expect to continue repurchasing shares under our NCIB program given the strength of our balance sheet, our expected strong free cash flow and our leverage framework target of 1.5 times to 2.5 times net debt to adjusted EBITDA. This brings us to the outlook for the current fiscal quarter. For the first quarter, we expect the following: Net sales to be up low single digits year-over-year.

And when excluding the impact of the Under Armour stock license agreement, Q1 net sales growth is expected to be in the mid-single digits. Adjusted operating margin is expected to be in line with our full year guidance of up approximately 50 basis points. Further, recognizing the Global Minimum Tax in Canada and Barbados only came into effect during the second quarter of 2024, on a comparable basis, the company's adjusted effective income tax rate in the first quarter of 2025 is expected to be significantly higher than the 3.6% recorded in the first quarter of 2024.

This wraps up our financial overview. Before we take your questions, I'd like to leave you with the following: Although the situation remains fluid in broader terms, tariffs related to China, Canada and Mexico are not expected to impact our business. More specifically, while broader market conditions remain mixed with geopolitical uncertainties and the potential longer-term repercussions of some trade policies being unclear, we are nonetheless cautiously optimistic as we look ahead to 2025.

I'd also like to emphasize that regardless of the environment, we will continue to leverage the GSG strategy with a keen focus on execution to drive long-term shareholder value. And with that, I will now turn it back over to Glenn.

Thank you, Rhod. In a separate communication, we also announced today executive leadership nomination and a CFO transition. As part of a multiyear succession planning process, which ensures, in our view, strong continuity as the company drives forward with its Gildan sustainable growth strategy.

First, Chuck Ward, who is currently President, Sales, Marketing and Distribution has been appointed to a newly created role of Executive Vice President and Chief Operating Officer effective March 1, 2025, and will continue to report to me. As most of you know, Chuck joined Gildan in 2011 through the acquisition of Gold Toe.

And over the years, he has held several senior roles at Gildan, accumulating extensive experience, which includes leading yarn spinning operations, overseeing supply chain, sales, marketing, distribution, while gaining experience in manufacturing. Separately, after almost 10 years in the EVP, Chief Financial and Administration role, Rhod Harris has informed the Board of his intentions to retire on January 1, 2026.

We also announced that Luca Barile, who is currently the CFO of Sales, Marketing and Distribution, will succeed him as Executive Vice President, Chief Financial Officer, assuming his new role responsibilities on March 1, 2025. In order to facilitate a smooth transition and over the full 10 months, Rhod will retain the Chief Administration Officer function until his retirement. Luca joined Gildan in 2012 and has held various roles in financial planning, internal audit, enterprise risk management before being promoted to his current role as CFO of Sales, Marketing and Distribution.

I would like to express my deep appreciation to Rhod, who has guided our financial performance over the last 10 years. Since 2015, he has been an invaluable partner to me and our team. And though he will still be working together through 2025, I sincerely wish him well in retirement next year and want to thank him for the successful contribution and to our success.

I'm also happy to welcome Chuck and Luca to their new roles and congratulate them both. These appointments are a testament to our bench strength and the effectiveness of our multiyear succession planning process.

They are all -- they are outstanding leaders, and I firmly believe they are both well positioned to step into their roles and continue driving our GSG strategy and further drive and enhance long-term value for our shareholders. This concludes our prepared remarks this morning, and I'll turn the call over to Jessy.

Thanks, Glenn. This concludes our prepared remarks, and now we'll begin taking your questions. (Operator Instructions) Sarah, please begin the Q&A session.

(Operator Instructions) Paul Lejue, Citi.

This is Brandon Cheatham on for Paul. And Rhod, congratulations on the retirement. I just wanted to dig in real quick on your expectations in the first quarter for Activewear and Hosiery and underwear. Specifically, if you could quantify what you're expecting because Activewear has its easiest comparison for the year in the first quarter. So how should we think about 1Q versus the rest of the year in that context? And was there any pull forward that may have helped 4Q but potentially hurt 1Q?

Good morning, Brandon. So if you look at the first quarter of '25 and we look at how the business is running, I think I would say we feel very pleased about where we are. Obviously, we had a strong quarter in the fourth quarter, and Activewear delivered very well. And even on the Innerwear side, we also saw some good strength. And as we move into the first quarter of '25, we continue to see, I would say, good strength really across the board on the Activewear side.

So if you look at our guide for the quarter, it's up low single digits ex the Under Armour impact, which continues to be significant in the first quarter of '25 is the last quarter we'll see this. We should be up mid-single digits. And if you look at Activewear overall, growth will be across the board. We will see market share gains across the channels, across the product categories, all the things that we've been talking about with respect to new products, innovation, strength in national accounts, international, all of these things will be playing through as we move into the first quarter. So we do see good growth on the Activewear side.

We did -- it was particularly strong in the fourth quarter, up low double digits. So it will moderate back from that. But it is the first quarter of the year as you think about that. And then on the Innerwear side, effectively, we will see, again, the impact of the phaseout of Under Armour, which will impact our numbers there. But look, overall, I think we feel good about the first quarter, and we really feel good about how the whole year looks with revenue growth up mid-single digit.

There is a fair amount of uncertainty out there, but I think our business is running very well as we look at all of the key growth drivers that Glenn laid out.

Got it. Appreciate that. And then gross margin in the fourth quarter, can you kind of unpack some of the puts and takes there? I understand that product cost was a tailwind. But did you see any pricing pressure at all? I think you all have mentioned that you were being aggressive in certain segments to try and gain market share. So I'm wondering if that had any impact? And then how are you thinking about gross margin for the rest of '25? Could we see any tailwinds there for margin?

If you look at gross margin in the fourth quarter, we came in at 30.8%. We were up 60 basis points. SG&A was down. And so in total, operating margin up 160 basis points, 21.3%, running at a high level. And we came very much in line with our full year guide, which was 21.3%. So look, I think from a margin perspective, we're very pleased with how things are effectively playing out.

If you look at the gross margin that we saw, we're now -- we've firmly moved above the 30% level, and we'll see that as we move through '25. So I would say we're very pleased with the evolution of gross margin. That is being driven by everything that we're doing as we look at our overall business and all of the things that we're controlling.

So if you think about the ramp-up of Bangladesh, you think about the modernization of our yarn facilities, optimization of Central America, I mean it's all playing through. And so I would say we were pleased with what we saw overall in the fourth quarter. And again, as we move into the first quarter, we will continue to see the benefits of all of this -- of the strategies that we're unfolding.

And we do see a gross margin uplift in Q1 '25. On the SG&A side, we should see a bit of improvement. It's not going to be quite as large as we've seen in prior quarters because in prior quarters, we did see the roll in of the Barbados tax credit. And we will see that in the first quarter of this year. But we have other things that we're doing as well. We're investing in distribution.

So IT is an area where we're spending a lot now as we really optimize our supply chain, we effectively bring on new products and really focus on making sure that our customers are very much kept well in stock. And so we've got a few things going on. But overall, I would say we're pleased with the progression of our operating margin, again, gross margin, SG&A.

And then full year, I think we're very pleased to be able to guide to the 50 basis points up from the 21.3%, driven by gross margin -- strong gross margin throughout the quarters and SG&A well under control.

Jay Sole, UBS.

Rhod, congratulations on a great run and on your retirement. I want to ask about the new product innovation. Glenn, you mentioned it in your prepared remarks. Just talk about how much it's impacting the business? What percent of sales these new products are impacting? And how big do you think you can get over the next year or two?

Well, I mean, look, we're -- it's early days still. So we've seen continued performance. Our soft cotton technology is really the largest innovation because that covers all of our basic category. And that category has been declining over the last couple of years. And we've seen, obviously, Q2, it was up slightly, Q3 was up slightly.

In Q4, we saw double-digit type growth. So it takes time to spread the word. I mean we were in the Impression show in January, continuing to market our products. And we have -- it takes time to even cycle inventory through our system. So these things are, I think, still got a lot of legs, let's say, for example, because the product is great.

I mean the reality is that when you lay our new soft cotton technology on our basics, you can't really tell the difference between those products and the fashion products that are out there in the market. So that gives us really what we think in terms of where we're priced, a very competitive advantage. And look, there's other growth drivers.

Comfort Colors, for example, I mean, the brand is up 40% in 2024, and it was up in 2023, and we think it's going to be up significantly in 2025. And that's a brand that's really going after the higher-end category, right? So its price points is a little bit higher, but it's really doing well. And we have -- we're going to continue to take share as we go forward.

We have our licensed deal, our Champion brand, which we've licensed now, which we will roll out in 2025. We see -- the great thing is that we have competitors exiting the market. Delta closed down last year with Fruit of the Loom exited the Printwear market. Our international sales have come back mainly because we've now got product availability through our manufacturing facility in Bangladesh, which has fully ramped up as we planned, and will be fully ramped up by Q2.

We're taking more space in underwear with new products. And we have meaningful new Activewear programs of tees and fleece as we move into 2025. And I would say that maybe to sort of summarize really our 2025 guide, when you look at our sales of mid-single digits, I would say that about 3/4 of the revenue growth that we have in 2025 is coming from new programs.

And I think that we've got a really great slate of new programs for next year that are really solidifying what we feel comfortable with our growth trajectory. We've taken a really cautious approach still to the market. We think it's flat to low single digits up. And basically, if you look at where we're positioning, if we continue to take additional share more than we assumed or if the market is slightly a little bit more robust, that could be potentially all positive to our forecast as we move into 2025.

Glenn, that's really interesting. Maybe if we can just talk about Champion for one more second because obviously, it's a brand that has a long history and at one point, lots of over $1 billion of sales probably. I mean, what's your ambition with that? What do you see as possible with that brand going forward now that you have it?

Well, look, it's still a very strong brand, and it's going to be continuing to be sold in different channels of distribution, but we have the Champion brand for the Printwear channel. And look, our products are going to schools and jog runs and things like that. So look, it's going to be a good part of our lineup. It's going to give us a niche in an area and product category to help us continue to grow our market share. So if you look at our whole branding, we've got Gildan, which is sort of our bread and butter.

We've got our Comfort Colors brand, which is sort of a unique position because it's all garment dyed. We've got our American Apparel brand. And now we've got our Champion brand, which is a little bit more athletic and goes to a more collegiate type approach. So having a multi-tier brand strategy, none of our brands compete with each other. They're all uniquely different and allow us to gain market share as we go forward.

And I think that's really the key. We're well positioned. We think that we're going to continue to grow and take share. And we're well positioned because we've got 75% of our sales guidance really in new programs, Champion being one of them.

Mark Petrie, CIBC.

I'll echo my congratulations to Rhod, Luca and Chuck. I wanted to ask about the product innovation and specifically the sort of SKU levels in the overall business. I know this was one of the key areas of focus of Back to Basics and SKU rationalization. And I'm just wondering if you could sort of put into context the SKU levels of today versus, I don't know, several years ago, but also just like two years to three years ago when maybe you were at sort of a trough level on SKUs.

Well, the great thing about what we're doing is we're just improving on the existing SKUs that are in our line. So all of our soft cotton technology, all of our fleece, all of the innovation that we have is really being applied to the existing product line. So our SKUs really haven't changed. I mean, obviously, when we bring in new brands, we'll have a little bit further expansion of our SKUs with Champion, et cetera. And we're always adding a little bit on to our base as we're looking at new opportunities, but we're very mindful of managing our SKU base as we go forward.

Okay. And if I could just have a quick follow-up. Just the pace of share buyback, looked like it slowed in the last couple of months. Is that the sort of pace we should expect through the balance of the term on the current program? Or what are your sort of criteria in making the short-term decisions on the pace of buyback?

Mark, so if you look at the buyback in 2024, yes, we were very pleased with our ability to buy back shares. We bought back 11% of the float. We returned $889 million of capital to shareholders. So I think it was a great year, able to increase the dividend at the end of the year. But from a buyback perspective, it was a little bit unique in that effectively as we are now well placed with our GSG strategy, and we're -- all the things that we've been planning over the last few years are unfolding very, very well.

We were able to effectively take our leverage target up. And now we have the range of 1.5 times to 2.5 times. And we were able to benefit from that in 2024 when we were buying back. But we were buying back for the most part, we try to buy it back at a consistent rate for the target for the full year that we have. So we knew that we had a, I would say, strong target for '24, especially after May.

And so we bought at higher rates. But now as we move into '25, effectively, we'll move back to, I would say, more of a normal type of buyback level that you would have seen in prior years. So for us, that generally runs around 5% to 6% for the full year. And you will see that we generally try to do that on a fairly consistent basis as we move through the year. So effectively, '24, a little bit unique, but in '25, back to, I would say, a historical cadence and a very consistent approach as we go month-to-month.

Brian Morrison, TD Cowen.

So first question for Chuck and for Rhod. You're seeing, obviously, the competition is facing some challenges. Chuck, maybe just go into detail on the POS that you achieved in the quarter relative to the industry. And then, Rhod, within that guidance, you did a good job of overlaying why you're going to get this 50 basis points of margin expansion, but I didn't hear you talk about pricing. And the gross margin in Q4 does look a little bit light relative to expectations. I'm wondering if you can specifically just comment on the pricing environment.

Okay. Thank you, Brian. I'll start with the POS and then give it to Rhod. I think as Glenn mentioned, we saw positive POS for the fourth quarter. It was a strong quarter. We saw it really across the channels and across the categories, which was good from that perspective. In the basic side, Glenn mentioned we were up double digits.

And I think that is coming through from, one, share gains as some of the competitors that he mentioned have left the market, but also really our innovation that Glenn talked about with our soft cotton technology. I think it's really getting through the inventory at this point and getting into the consumers' hands, And I think it's driving the POS. Again, he talked about the ring-spun category, we continue to be up double digits there as well and driven across our ring-spun platform, but including Comfort Colors, which was up 40%.

And so we continue to gain share in that area as well. So we were positive across all channels. I think from a market perspective, we continue to think the market faced some challenges being flat to down and us up and taking share. So that's kind of the way and even in the international markets, Glenn mentioned it, we were up for Q4 in mid-single digits in international, with Europe strong in high single digits, driven -- continue to be driven by the continent as well. So again, across the board, we continue to take share there and kind of be competition. Rhod?

Okay. So moving to pricing. If you look at where we were from a price perspective in the fourth quarter, we're generally pretty stable, I would say. And our pricing has been pretty stable as we moved through '24 and very definitely as we move into '25. I mean a little bit of tactical pricing here or there, a little bit of -- probably a little bit of also impact of FX because, obviously, if you look at international markets, it's been a bit of weakening off of currencies.

But I would say price for us is very stable. And as we move into '25, I think we feel very good about price. So if you look at what's driving the business, it's volume growth ultimately, right? It's -- on the price side, we have big gaps with our competitors. And if you look at things like cotton, people ask us about cotton, yes, cotton has come down, has given a bit of a tailwind, but you got inflation elsewhere.

And so actually, I think one of the unique things as we start '25 is the stability in pricing that we see as we move through the first quarter and as we forecast for the full year.

Okay. And second question, maybe for Glenn. Can you just remind me how much capital you've invested into expanding and modernizing your yarn facilities the last few years and elaborate on the larger national account opportunities that you're winning contracts with? Is this for mass merchants being the end market?

Well, as far as the yarn spinning is concerned, look, we've spent different phases of our yarn modernization. Obviously, we were in the yarn spinning. We bought Frontier. And I would say over the last couple of years, we've put in just north of about $100 million in modernizing the Frontier facilities, which we're still in completing, I would say, as we move through '25, there's some things still to be done. But after 2025, I think that we'll be fully complete on all of our yarn modernization. What was the second question?

Just the opportunities like conversion -- where is it going?

Well, look, I mean, look at the -- look there's -- the market of -- the screen printers that service really the large mass market retailers, the Walmarts, T.J. Maxx, Kohl's, et cetera. Really, those are the type of large screen printers and those are particularly a lot of the accounts that Delta serviced in the past. So we've been able to -- which we had very good relationship with a lot of those customers, and that's continuing us to allow us to obviously take additional market share as they've exited the market. So look, we're in a good position.

We feel that -- and it's not just from Delta's perspective, but we think that look at the overall broader competitive landscape is weakening and Gildan continues to make investments in our yarn spinning and our Bangladesh. Everything that we're doing, we're investing. And history gives you -- if you look over a period of time, I would say today, Gildan is much more positioned -- much more -- has much more of a competitive advantage in our positioning today than we did two, three, four years ago, and then it's continuing to improve.

So we're excited about where we are. We've got everything in place. We've got good momentum. And really, I would leave you with is that we've got good visibility as we've got a lot of new programs. And the upside for us is really will the market participate because that's really, I think, there has been the one disappointment is that the market has been soft over the last 24 months.

There's still a little bit of uncertainty. But I mean, if interest rates come down, hopefully, we'll see the market continue to shine and be an opportunity for us.

Martin Landry, Stifel.

Congratulations, Chuck, on your promotion. And Rhodri, congratulations on your retirement. It's been great working with you for the last years. My first question, Glenn, I want to try to understand a little bit better where you're at in terms of capacity. So could you tell us what production capacity utilization you're assuming in your guidance for 2025?

Well, I would say to you, look, we've got ample capacity. We're not running full, like we said in the past. We have enough capacity in-house today really to support our guidance for 2025, '26 and '27. And then as we -- in our capital investment, we included building out additional capacity to support '28. So maybe that's just a way to look at it. So -- and you can quantify that in our mid-single digits in terms of the revenue and work backwards in terms of the percentage, I guess.

Okay. So you have the capacity established to get to 2027 revenues?

Yes.

Okay. And is there a margin differential between the different channels that you're selling? It seems like retail is driving a little bit more growth this year than Printwear maybe. And is retail a little bit margin dilutive, would that be fair to say?

No. Look, we try and price our products pretty consistently around -- across the board. So we would say that we have a consistent margin. There's other areas within profile, fleece versus tees, for example. But if we sell tees across the board, the margin profile is pretty much the same. But we have certain product categories that have a little bit better margin profile. But overall, regardless of the channel distribution, we're pretty consistent in the way we price the market.

And Martin, just to add, we did that when we drove back to basics. So the margin percentages are pretty close across the board. Of course, you have different price points, right? If you look at the products, fleece's a higher price point than T-shirts. Comfort Colors is a very high-priced T-shirt product that is going very well. So you have different price points. But margins overall are, I would say, pretty well aligned and all driving that strong gross margin performance that we're seeing as we move through '24 and into '25.

Which makes us agnostic of which channel is really growing.

Stephen MacLeod, BMO Capital Markets.

Congrats, Rhod, on your retirement and Chuck, on your promotion. Look forward to continuing to work with you, Chuck, and it's been great. working with you, Rhod. Appreciate it. Just a few questions here. Just wanted to dive a little bit deeper on capacity and just get an update on kind of where you sit on Bangladesh. I think you had previously guided to the exit rate or run rate exiting '24 at being 70%.

So I just wanted to get an update there as well as what your plans might be for incremental investment in kind of a Bangladesh Phase 2?

Well, what we said previously is that we've exited around 75%, which we did. We're continuing to ramp up as we speak. And as we move through 2026, the plant is performing well. And what I mentioned earlier is that in our three-year guide and CapEx around 5%, that includes the build-out of additional capacity in Bangladesh.

Okay. That's great. And then do you expect to be 100% ramped up sort of like kind of in Q1, Q2 period?

Yes. But probably by the end of Q2, we'll pretty much be close to 100% ramped up. So all the additional capacity that we have, which I've mentioned earlier, Martin's question would be really coming out of Central America. So we got still additional capacity in Central America, but we're optimizing Bangladesh because that's where we produce all of our ring spun T-shirts, which are obviously in high demand.

Maybe one thing to add, Stephen, sorry, on the -- because you're asking about Bangladesh and our capacity, we have all the infrastructure in place, right, for the expansion beyond the first phase that, again, we've done a great job ramping up. So I think that's the one thing to keep in mind from a CapEx perspective as we go forward. And as we think about additional CapEx to support the further out growth that Glenn was talking about, it will be a very efficient spend because of everything that we've done to date.

Okay. That's great incremental color. And then just secondly, just with respect to some of the changes you've seen in the competitive landscape, but I guess more so on the customer landscape, there was some distributor consolidation. I'm just wondering if you've seen any impacts on kind of the industry or industry behavior in response to those moves?

Stephen, it's Chuck. I mean, I think obviously, over the years, we've seen a lot of consolidation in the distributor channel. And this was just a continuation of that, as, to your point, S&S and Broder combined. We are seeing a competitive landscape among the distributors. But net-net, it's -- we think it's positive for us overall, and we'll continue to be strong partners to the distributor channel and continue to drive sales through it. And so again, I think it's just continuance of what we've seen over the years.

And one of the -- I think the reality is that as we move forward and the distributors have consolidated a little bit, we're going to start to see consolidation of brands within the channel. And basically, we think we'll be the beneficiary of that because we're positioned as obviously the global low-cost producer and have a significant competitive advantage over any of those other brands.

So -- there are a lot of brands and particularly more in the ring spun category. I mean, in the basics, that market is pretty consolidated, but I think there's more consolidation to happen on the brand side on the ring spun category. So look, we're excited about our positioning. We think we're well positioned to take share. And that's sort of embedded in our guidance as we move forward over the next three years.

Vishal Shreedhar, National Bank.

I wanted to get your perspective on the acceleration of growth in international. It seems like momentum is building, Q1 up 0.8% and now Q4 up 20%. Am wondering where that's coming from specifically. I know you gave us some color, but is it predominantly the better fulfillment through Bangladesh? Or is it the market recovery?

Vishal, yes, I mean, I think there is some market recovery in there, but it's also largely our Bangladesh capacity and our ability to service the market. We have -- as we continue to supply that market. When you think about it, I think we've talked about this many times in the past, but our number one purchase criteria is availability. And we need to make sure the product is available for sale at the time. And we're doing that.

We're in good stock levels there internationally and in North America. And I think that's continuing to drive sales. Also, our innovation. I think our innovation is continuing to push sales there as well. As Glenn said, I think when you look at the innovative basic products, it's better than the others in the market, and we're seeing share gains not only in North America, but in the international market that's continuing to drive that.

So a combination of product, the innovation and the supply coming out of Bangladesh.

Through 2025, should we expect that cadence to improve even further? Or do you think you've hit run rate?

If you look at 2025, and we do expect growth in the international markets. As Chuck said, we are very pleased about how we can service the products, the way things are unfolding. I would say, though, if you look at our guide, we have been a little bit more conservative than what you've seen the last couple of quarters. So 20% growth, very strong overall in Q3, Q4. I think we're probably around 11% for the full year in the international in '24.

I would say, in our guide, we've been a little bit more cautious because of just the broader macroeconomic environment. But we'll see how it turns out. I would say we've tried to sort of play it at a level that does reflect that there's some uncertainty, and we're hoping that things will be better than that as we move through the year.

Okay. And just a question on the market share gains. Gildan, obviously a large supplier, and this year, a bit unusual given the some of the capacity exits from your competitors. And how should we expect these market share gains to continue to unfold? I mean, at some level, gaining market share becomes more and more difficult.

And with the industry generally continuing to perform tepidly, is there a concern there that these trends with the industry and Gildan may intersect?

Well, I would say that, look, two things. One, we still got a lot of runway, right? Because if you look at the -- as we look at the ring spun category, we're under shared there basically. We have a much lower percentage of share in that category. And we're winning there from three fronts, winning there because we have really good competitively priced ring-spun shirts equivalent to what's out in the market.

Two, our Comfort Colors brand is in that category of more expensive shirts, and it's winning and taking out a lot of the dollars that would have been spent on a traditional ring spun shirt and they're now buying our Comfort Colors, garment-dyed nostalgic look, great product with all the innovation that we have associated with that brand.

And the third piece is we have our soft cotton technology where people can't really tell the difference between a ring-spun shirt and a heavyweight shirt. With the only nuance is that typically our basics traditionally and where all the volume is being sold is in the heavier weight category. And there actually is a trend now in the market for people to go from lighter weight to heavier weight shirts.

So we're sort of in a really good spot because not only do we have all these heavyweight shirts, which traditionally we sold, but now they're softer and feel better and they have the technology we've applied to them. So we think that we're really doing well. And we have other technologies that we think are going to continue to drive our market share as we go forward.

So spending our energy on building innovation to support our sales, having the availability, making sure we got the availability, and Rhod touched on it earlier. One of the things you'll see a little bit of an expense in Q1, but we're spending a lot of money now on technology. And we've put in systems for our planning, our POS assumptions, our forecasting.

We're looking at different systems for distribution to optimize our deliveries to our customers to get the products there faster. All these types of things that we're doing to really -- now we're sort of -- we've got everything in place. We're really looking at all these other areas where just to continue driving our competitive advantage and separating Gildan from the competitive landscape.

So we're making the investments that we need to make, and I think that it's across the board. There's still lots of opportunity for us to continue to grow. The one thing I would leave you with is that all the work that we've done about the market and the size of the market and the potential growth in the market has always led to the market growth being in the mid-single digits, the growth in the market, which we haven't seen over the last 24 months.

So the great thing, I think, about where we're positioned, we have a lifestyle type product. We think that the market will turn. And if it does come back to growth because we've got a very conservative, I think, outlook flat to low single digits over the next three years, for us, if we do see mid-single-digit growth, we will definitely have upside to what I think our market share because now it's just share, but we're not getting the growth portion of the opportunity.

And I'll just leave you with is that as we move into 2025, again, the new programs that I outlined before represent about 75% of our guide in terms of the top line. So we're very conservative. We hope that the market will be a little bit stronger. We will take a little bit of share, but I think we're well positioned, and we have a very conservative outlook and potentially there could be some upside to 2025.

Chris Li, Desjardins.

Let me add my congratulations to you Rhod and Chuck, very well deserved. I guess -- I apologize if you answered this already, but can you just comment on what you're seeing in terms of the inventory levels for your customers, both in the wholesale distributor and the national account space? And also, are you seeing any sort of destocking or just more cautious just based on what's happening on the macro side?

Sure, Chris. And I think overall, we feel good about inventories. They're well balanced across the channels. And so I think we're in good shape from that perspective. And we don't see major destocking on the horizon there. You have different channels that may be a little more cautiously -- cautious on their inventory. But overall, I would say inventories are well balanced, and we're not factoring in and don't see a major destocking.

Got it. Okay. And then just, Glenn, just when you said about like 75% of your growth is going to come from new programs. I'm assuming you have really good line of sight to those programs. And then my question is, after you go through Q1 phasing out the UAE contract, should we expect sort of consistent mid-single-digit sales growth sort of through the year?

Or is some of the programs more in the back and second half, so it's going to be a bit more bumpy through the year just in terms of the mid-single digit sales growth?

I'll let Rhod answer that question. But what I would say to you, look, what I mentioned earlier is that we have Champion, and we have also meaningful programs in tees and fleece Obviously, the fleece programs, which are probably a large -- a little bit larger than the tee programs. They're more in the back end because fleece is sort of Q3, Q4 story. But I'll let Rhod answer the cadence of the sales guide.

Yes. Look, I think we are going to see a pretty consistent year. So first quarter, we are impacted by the Under Armour phase out, but it would be a mid-single digit ex that. And then as you look at the second quarter, the third quarter and even into the fourth quarter. Fourth quarter, obviously, we'll be comping a good quarter, a strong quarter in the fourth quarter of '24.

So you'll see a little bit of that. But I would say, yes, we feel good about the consistency of the growth through the quarters, which again will be supported by those new programs by the market share gains. And then we'll see what the overall market looks like. But I think we're basically set up for a good year. And again, I think we feel our competitive positioning is very good, not only for what we control, but also what we see around us. And I would say good solid quarters as we move through the year.

This concludes the question-and-answer session. I will turn the call back to Jessy Hayem for closing remarks.

Thanks, Sarah. Once again, we'd like to thank everyone for joining us and attending our call today, and we really look forward to speaking with you soon. Have a wonderful day.

This concludes today's conference call. We thank you for joining. You may now disconnect.