Vishal Shreedhar

Vishal Shreedhar asked about the discrepancy between management's previously articulated leverage target of mid-2s at closing and the current 3x net debt to pro forma adjusted EBITDA. He also inquired how the EPS CAGR guidance changed given the increased synergies and the consideration of HanesBrands Australia.

Answer

Luca Barile, EVP and CFO, attributed the 3x leverage to a slightly higher debt level at closing and adjustments to pro forma EBITDA, emphasizing the focus on delevering with over $850 million in free cash flow generation and potential HAA sale proceeds. He clarified that the EPS CAGR guidance remains consistent; the difference is due to HAA being classified as discontinued operations, with its $0.21 EPS contribution now reported separately.

Vishal Shreedhar asked for an explanation of the current leverage ratio of 3x, which was higher than the previously articulated mid-2s at closing. He also inquired about the unchanged EPS CAGR guidance despite increased synergies, considering the HAA divestment.

Answer

CFO Luca Barile attributed the 3x leverage to an earlier-than-expected closing, slightly higher debt levels, and adjustments in pro forma EBITDA. He outlined plans to delever quickly using over $850 million in free cash flow and HAA sale proceeds. Regarding EPS CAGR, Luca Barile clarified that the guidance remains consistent, with the difference being HAA's classification as discontinued operations, which contributes $0.21 of earnings separately.

Vishal Shreedhar sought clarification on the 'stable market' comment, asking if it referred to volume or sales basis and if national accounts were included, given previous market pressure. He also asked for more detail on the sequential improvement in gross margin, specifically whether it was primarily due to manufacturing initiatives or pricing.

Answer

Glenn Chamandy (President and CEO, Gildan Activewear) clarified that the market, including national accounts, was down low single digits in Q3, similar to Q2, and is expected to remain at that level in Q4. He emphasized Gildan's strong performance despite the market, driven by Soft Cotton Technology, Comfort Colors, AA, and new programs. Luca Barile (EVP and CFO, Gildan Activewear) confirmed that the strong gross margin was primarily driven by lower manufacturing costs, with some impact from favorable pricing, and that these foundational cost reductions are sustainable.

Vishal Shreedhar sought clarification on the 'stable market' comment, asking if it referred to volume or sales basis, and if national accounts were included, given the wholesale market's previous pressure. He also inquired about the sequential improvement in gross margin, questioning whether it was primarily due to manufacturing initiatives or pricing.

Answer

Glenn Chamandy, President and CEO, clarified that the market was down low single digits in Q3, similar to Q2, on a sales basis, and still negative year-over-year. He attributed Gildan's growth despite this market trend to Soft Cotton Technology, Comfort Colors, American Apparel, and new brand launches like AllPro and Champion, with three-quarters of 2025 sales growth projected from new programs. Luca Barile, Executive Vice President and CFO, stated that the strong gross margin was primarily driven by lower manufacturing costs, with some impact from favorable pricing. Chamandy added that manufacturing optimization and scale will continue to drive margin expansion into 2026, offsetting investments in product innovation.

Vishal Shreedhar from National Bank Financial asked about the potential for M&A given market weakness and inquired about Gildan's position following a reported exclusive distribution agreement between a competitor and a major distributor.

Answer

President & CEO Glenn Chamandy responded that the company is currently focused on gaining market share organically, which he sees as more advantageous than acquiring it. He emphasized the strength of Gildan's brands and innovation pipeline. Regarding the competitor's agreement, he stated Gildan is unaffected, as evidenced by its 12% activewear growth, and is well-positioned to continue leading the market.

Vishal Shreedhar of National Bank Financial, Inc. asked for clarification on whether Q1 industry declines were in sales or units, what Gildan's own unit growth was, and when the company will anniversary the launch of its soft cotton technology.

Answer

EVP and COO Chuck Ward confirmed the industry decline was primarily in units. President and CEO Glenn Chamandy stated that Gildan's Activewear sales were up 9% with neutral pricing, implying positive unit growth and market share gains. Regarding the soft cotton anniversary, he explained that it was a gradual, ongoing rollout, making a single anniversary date difficult to define. He highlighted the product's strong value proposition, especially in an inflationary environment where consumers may trade down.

Vishal Shreedhar asked for clarification on the drivers of accelerating international growth, questioning the balance between improved fulfillment from Bangladesh and genuine market recovery. He also probed the long-term sustainability of market share gains given Gildan's already large scale.

Answer

EVP & CFO Rhodri Harries and President, Sales, Marketing and Distribution Chuck Ward attributed the 20% international growth to a combination of some market recovery and, more significantly, improved product availability from the Bangladesh facility. President & CEO Glenn Chamandy addressed sustainability by highlighting significant runway in the under-shared ring-spun category, growth from the Comfort Colors brand, and the competitive advantage of its new soft cotton technology.

Vishal Shreedhar sought details on the drivers of gross margin expansion and the 3-year margin outlook. He also asked about the cost and pricing impact of the transition to softer cottons and whether this innovation is driving higher demand.

Answer

CFO Rhodri Harries attributed the Q2 gross margin improvement primarily to lower raw material and manufacturing costs. He noted the 3-year outlook is supported by a combination of factors including market share gains, innovation, favorable mix from brands like Comfort Colors, and manufacturing efficiencies. CEO Glenn Chamandy added that the new softer cotton products are priced similarly to previous versions, with costs absorbed by other efficiencies, and that they are driving positive POS in the Basics category.