Gildan Activewear (US:GIL)2025-07-31 13:30Financial Data and Key Metrics Changes - The company reported record second quarter sales of $919 million, an increase of 6.5% year over year, driven by strong Activewear sales growth of 12% [5][11] - Adjusted diluted EPS reached $0.97, reflecting a 31% increase year over year, indicating a focus on profitable growth [6][15] - Gross margin improved to 31.5%, a 110 basis point increase over the prior year, primarily due to lower raw material and manufacturing costs [14] - Operating cash flow was $46 million, down from $113 million in the previous year, mainly due to higher working capital investments [15] Business Line Data and Key Metrics Changes - Activewear sales increased by 12%, supported by higher sales volumes and favorable product mix [12] - Hosiery and underwear sales decreased by 23% year over year, attributed to broad-based market demand softness and unfavorable mix [13] - International market sales declined by 14% year over year, with demand moderating in Europe and softness in Asia [12] Market Data and Key Metrics Changes - The company experienced strong sales to North American distributors, complemented by momentum with national account customers [12] - The international market faced challenges due to macroeconomic conditions, particularly in Europe and Asia [12][17] Company Strategy and Development Direction - The company is executing its Gildan Sustainable Growth strategy, focusing on operational agility and innovation [5][19] - The manufacturing complex in Bangladesh is fully ramped up, contributing to operational efficiency and cost advantages [17][19] - The company is committed to launching additional industry-leading innovations and maintaining a strong ESG focus [6][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver strong financial performance despite prevailing uncertainties [9][19] - The company reaffirmed its full-year guidance for 2025, expecting mid-single-digit revenue growth and an increase in adjusted operating margin [19][20] - Management noted that three-quarters of expected sales growth in 2025 will come from new programs [7][19] Other Important Information - The company repurchased approximately 2.9 million shares, returning $206 million in capital to shareholders, including $68 million in dividends [15] - The adjusted effective income tax rate for the quarter was 17.4%, down from 27.2% the previous year [15] Q&A Session Summary Question: Can you quantify the shifts that occurred in Q2? - Management indicated that Q2 was strong, with Activewear sales up 12%, aided by orders placed in advance of pricing actions. They expect revenue growth to be low single digits in Q3 due to timing shifts [24][26][30] Question: What was the impact from the Nike sockpaws versus the core business? - Management acknowledged headwinds in the innerwear category but expects sequential improvement as program resets occur throughout the year [32][34] Question: Can you expand on the momentum from national accounts? - Management noted that changes in the industry landscape and tariffs are driving customers to seek different suppliers, benefiting the company due to its vertically integrated manufacturing [40][41] Question: How much can you increase throughput in Honduras? - Management stated they could increase capacity by about 10% across existing facilities, which will be implemented throughout the year [49][50] Question: Is the Bangladesh facility running at optimal levels? - Management confirmed that the Bangladesh facility is fully ramped up and contributing to operating margin expansion, with further improvements expected as yarn modernization is implemented [53][56] Question: What is the outlook for corporate promotional activity? - Management expressed cautious optimism, noting that while corporate promotional activity is currently weak, they expect slight improvement as the year progresses [78][80] Question: How does the company view market weakness as an opportunity for acquisitions? - Management indicated a focus on gaining market share rather than pursuing acquisitions, leveraging their low-cost manufacturing and brand strength [101][102]