Financial Data and Key Metrics Changes - Gildan reported record third quarter sales of $891 million, an increase of 2.4% year-over-year, with adjusted operating margins of 22.4%, up 430 basis points from the previous year [7][18] - Adjusted diluted EPS reached a record $0.85, reflecting a 15% increase compared to the prior year [8][20] - Gross margin improved to 31.2%, up from 27.5% in the prior year, primarily due to lower raw material and manufacturing input costs [18] Business Line Data and Key Metrics Changes - Activewear sales increased by $44 million or 6%, driven by higher sales volumes and positive point-of-sale (POS) trends across channels in North America [13][15] - Hosiery and Underwear category saw an 18% decline, primarily due to the phase-out of the Under Armour business; however, excluding this impact, sales would have increased by low double-digits [17][24] - International market sales rose by 20%, with significant growth in Europe and inventory replenishment by distributors [16] Market Data and Key Metrics Changes - The overall market for Gildan's products is expected to grow at a flat to low single-digit rate, while Gildan aims for mid-single-digit growth [33][34] - POS trends showed a slight decline in the overall market, but Gildan gained market share in key categories [31] Company Strategy and Development Direction - Gildan's growth strategy focuses on capacity expansion, innovation, and ESG initiatives, with ongoing modernization of yarn operations in the U.S. and ramping up of the Bangladesh facility [9][10][22] - The company plans to maintain capital expenditures at over 5% of sales annually and continue share repurchases within a net debt-to-adjusted EBITDA leverage framework of 1.5x to 2.5x [10][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving mid-single-digit sales growth targets for 2025 to 2027, despite a mixed macroeconomic backdrop [10][23] - The company anticipates adjusted operating margins to slightly exceed 21% for the full year 2024, benefiting from a refundable jobs credit introduced by Barbados [24] Other Important Information - Gildan received recognition as one of Canada's most responsible companies, ranking 14th overall and first in the retail and consumer goods industry [22] - The company reported free cash flow of $149 million in Q3, with a strong balance sheet supporting capital allocation priorities [21] Q&A Session Summary Question: POS trends and fourth quarter outlook - Management noted that the market has been down low single-digits to mid-single-digits, but Gildan has been gaining share across categories, with positive POS trends for their soft cotton technology [31] Question: National accounts dynamics - Gildan's national account business has been performing well, with continued share gains despite a declining market [35] Question: Impact of industry consolidation - Management believes consolidation in the industry will benefit Gildan, as fewer distributors may lead to a more stable market [42] Question: Fleece performance and future growth - Fleece is expected to continue growing, with Gildan under-penetrated in the national account area, indicating significant growth potential [65] Question: Cotton prices and pricing strategy - Management indicated that cotton prices have decreased slightly, but inflation in other areas may keep pricing stable [53] Question: Bangladesh operations and civil unrest - Management expressed confidence in the stability of operations in Bangladesh, noting that the plants are fully functional and ramping up as planned [62][63]
Gildan Activewear (GIL) - 2024 Q3 - Earnings Call Transcript