Gildan Activewear, Inc. Q1 FY2025 earnings call

• GSG Strategy: Drives profitable growth. New manufacturing complex in Bangladesh ramping up. Strong innovation pipeline with products like Soft Cotton Technology, Plasma Print, Color Blast. ESG initiatives on track, included in S&P's Sustainability Yearbook for 13th year and CDP's leadership band for climate change disclosures.
• Quarterly Performance: Sales of $712 million, up 2.3% year-over-year. Adjusted EPS $0.59, essentially flat year-over-year. Gross margin 31.2%, up 90 basis points due to lower raw material costs. SG&A expenses decreased to $87 million, excluding proxy contest charges. Adjusted operating income $135 million, 19% of net sales, up 100 basis points year-over-year.
• Market Positioning: Gains share in a market down low single digits, with strong performance in National account customers and new product innovations.

Activewear: First quarter sales were $712 million, up 2.3% year-over-year, with a 9% growth driven by higher volumes and favorable product mix in North America (fleece and ring-spun products). Hosiery and Underwear: Down 38% year-over-year mainly due to phase-out of Under Armour business and broader market softness, though underwear showed some pickup in the current quarter.

• 2025 Guidance: Revenue growth mid-single digits, adjusted operating margin increase approximately 50 basis points, CapEx to come in at approximately 5% of sales, adjusted diluted EPS in the range of $3.38 to $3.58 (up between approximately 13% and 19% year-over-year), free cash flow expected to come in above $450 million.
• Second Quarter Guidance: Net sales expected to be up mid-single digits year-over-year and adjusted operating margin expected to be in a similar range as the second quarter of 2024, with adjusted effective income tax rate similar to the full year 2024 adjusted effective income tax rate.

• Tariffs: Fluid situation with 10% reciprocal tariff on goods imported to US from most countries. Need to monitor and leverage flexible business model, U.S. content in products, and pricing as mitigation.
• Macroeconomic Uncertainty: Dynamic macroeconomic environment could impact industry demand and operational performance.

Q: Talk about POS trends in major channels and destocking signs A: Strong quarter from an actuarial perspective, gained share in a down market. Activewear with innovation like Soft Cotton Technology up double digits. Inventory in good balance, no de-stocking seen.

Q: Tariff pressure in guidance and pricing mitigation A: Guidance factors in tariffs, considering U.S. content in products, flexible supply chain, and selective pricing. Mitigation includes leveraging low-cost vertically integrated model and U.S. input benefits.

Q: National accounts benefits and nearshoring A: Competitor weakness, new product success, and vertical integration widened cost advantage. Nearshoring opportunities seen due to changes in import tariffs and competitor vacating channels.

Q: Innovation granularity and Bangladesh capacity A: Innovation across all product lines, including Plasma Print Technology. Bangladesh facility ramping up, 25% cost reduction vs Central American cost. Flexibility in supply chain to handle tariff changes.

Q: Q2 sales trends and Central America capacity expansion A: Q2 sales trends improving sequentially, with consistent growth in April. Plans to expand capacity in Central America using existing structures to maximize efficiency and output