Gildan Activewear Inc. (NYSE:GIL) Q1 2024 Earnings Call Transcript

Gildan Activewear Inc. (NYSE:GIL) Q1 2024 Earnings Call Transcript May 1, 2024

Gildan Activewear Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Q1 2024 Gildan Activewear Earnings Conference Call. After the presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Jessy Hayem, Vice President, Head of Investor Relations. Please go ahead.

Jessy Hayem: Thank you; good afternoon, everyone. Earlier we issued a press release announcing our results for the first quarter of 2024, along with our interim shareholder report containing management’s discussion and analysis, as well as consolidated financial statements. These documents are expected to be filed with the Canadian Securities and Regulatory Authorities and the US. Securities Commission today, and they’ll also be available on our corporate website. Joining me on the call today are Vince Tyra, President and CEO of Gildan; Rhod Harries, our Executive Vice President and Chief Financial and Administrative Officer and Chuck Ward, President, Sales, Marketing and Distribution. This afternoon, we’ll take you through the results for the quarter and 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 Vince.

Vince Tyra: Thanks, Jessy, and good afternoon, everyone. This quarter, I saw firsthand the hard work and dedication of our teams as we delivered on our goals and demonstrated resilience as a company. Our first quarter performance was in-line with our expectations, with several bright spots including continued market momentum and ring-spun and fleece products. We saw good momentum in activewear overall, which was offset by some softness in hosiery and underwear, but this was expected, and to a certain extent, we had to a broader market weakness. So I’m pleased with our competitive position and the team’s execution, which drove significant year-over-year improvement in our key financial metrics. We met our top-line expectations, maintained solid margins and a healthy balance sheet, all a testament to our strong business model.

Some of you joined us on April 15 when I shared key elements of my vision for the future, which will enable us to embark on a new chapter of sustainable growth, driving strong free cash flow generation, and shareholder returns. So, before diving into the details of our first quarter results, allow me to summarize these elements on which we are now laser-focused. One, we will continue to focus on our supply chain excellence and on driving successful execution of our investments in Bangladesh, while remaining true to our back-to-basics principles and our commitment to innovation and ESG. Two, we have a renewed focus on our brands and on enhancing our commercial capabilities to deliver the best offering to our customers across the board. Three, we are increasing our emphasis on serving our retail partners and becoming the supplier of choice.

Four, we will apply a focused, be-local approach from product to pricing to supply chain to regain and gain share in targeted international markets. And lastly, we will make people and their development a priority, ensuring that the next generation of leaders has space and support to grow to their full potential. So, bottom-line, our key focus priorities are clear. We are off to a good start to the year. I look forward to taking your questions a little later during the Q&A session, and with that, I will turn it over to Rhod.

Rhodri Harries: Thank you, Vince. And thank you all for joining us today to discuss our first quarter results. The quarter unfolded largely as we anticipated, with sales of $696 million down 1% in-line with guidance provided on April 15. Activewear sales were up 1% versus last year, offset by a 10% decline in the hosiery and underwear category, which was expected and which I’ll address later. Total shipments, all categories combined, were stable compared to the previous year, slightly exceeding our initial expectations. The year-over-year decline in consolidated net sales can largely be attributed to both lower net selling prices, as we drove market share gains in certain areas, and unfavorable mix due to the ongoing impact of trade-down within certain categories.

Importantly, though, we delivered an operating margin within our target range and in-line with our guidance, as we lapped peak cotton costs and reaped the benefits of lower manufacturing costs. And this drove a strong double-digit increase in adjusted earnings growth for the quarter. So all in all, we were pleased with our performance, and as Vince mentioned, we are off to a good start to the year, allowing us to reaffirm our outlook and guidance for 2024. So now let’s turn to the specifics of the quarter. Active sales of $592 million were up 1%, driven by higher shipments, reflecting positive POS trends both in North America and international markets, and continued strength in key product categories, namely fleece and ring-spun t-shirts, where we believe we are gaining share.

We also benefited from seasonal replenishment at distributors, which came in slightly below last year’s level, as expected. Our national accounts, who service retail markets, also showed strong momentum, as we continue to gain share in this channel as well, partly offsetting the active-wear volume growth, where lower net selling prices, as we opportunistically implemented price actions in select channels, where we are seeing direct flow-through to share. This said, from an overall pricing perspective for the full year, it is important to note that we continue to expect relatively good price stability as we move through 2024. Volume growth was also offset by unfavorable product mix relative to the prior year, due to the ongoing impact of trade-down within certain categories, as noted earlier.

Finally, international sales were up 1%, reflecting a potential stabilization in POS trends, with noticeable signs of recovery in some of our regions. Turning to the hosiery and underwear category, sales were down 10% versus the prior year, reflecting unfavorable mix within this category, the phase-out of the under-armor business, with the expiry of the license on March 31, as previously communicated, and broader industry weakness in the underwear category. Moving on to margins for the quarter, both gross and adjusted gross margins saw significant improvement, up 360 and 410 basis points year-over-year, respectively. Our adjusted gross margin reached 30.3%, which was primarily driven by lower raw material and manufacturing input costs, slightly offset by the impact of lower net selling prices and unfavorable mix, as noted earlier.

With respect to SG&A, expenses were $105 million, or 15.1% of sales, including charges pertaining to advisory fees on shareholder matters, costs related to assessing external interest in acquiring the company, adjustments to CEO separation costs, as well as special retention awards, all totaling $20 million. Excluding these charges, adjusted SG&A expenses as a percentage of sales were up 70 basis points to 12.3%, mainly reflecting various non-recurring expenses, and to a lesser extent, sales deleverage. Even though it was a smaller quarter, 12.3% is definitely higher than we like, and looking ahead, we expect SG&A as a percentage of sales to return closer to 10% for the remainder of the year. Putting these elements together, we generated an operating margin of 15.1% down from 18.2% in the comparable period in 2023, which included a $25 million gain from the sale and leaseback of one of our US distribution facilities.

On an adjusted basis, our operating margin was 18%, up 340 basis points over last year, at the low end of our target range of 18%-20%, and in-line with the guidance we communicated. Further, after reflecting net financial expenses of $23 million, and factoring in the positive benefit of a lower outstanding share base, we reported GAAP diluted EPS of $0.47, down 13%. However, adjusting for the previously detailed charges, EPS was $0.59, up a strong 31% year-over-year. Turning to cash flow and balance sheet items, cash flow used in operating activities totaled $27 million, and we consumed $71 million of free cash flow in the quarter, which was a significant improvement over the $202 million free cash flow consumed in 2023. This was driven by lower working capital investments and lower CapEx, which last year reflected the investments made in our new large-scale manufacturing complex in Bangladesh.

On this note, we are pleased to share that the ramp-up of our Bangladesh facility is progressing as planned, and we continue to expect that we will reach 75% exit capacity at the end of 2024, enabling us to further reduce costs, diversify our supply base, and providing us with another valuable key foothold from which to serve our global markets. Finally, capital return to shareholders from share repurchases was $57 million during the quarter, and we ended with net debt of $1.1 billion and a net debt leverage ratio of 1.6 times well within our targeted levels. Turning to our outlook, we continue to feel cautiously optimistic about the industry landscape for the remainder of 2024. We are mindful of the general concerns over a softening and more value-focused consumer, and potentially moderating consumer spending.

Nonetheless, we believe our industry continues to benefit from some recovery and the ongoing shift of wallet share towards experiences, events, and travel. As such, we believe we remain well-positioned to meet the 2024 targets that we laid out in February and that were recently reconfirmed at our investor update on April 15. Recapping for 2024, we expect the following. Revenue growth for the full year to be flat to up low single digits, with the notable callout that excluding the impact of the Under Armour License Agreement expiry, 2024 full-year revenue growth would be in the low to mid-single-digit range. We also expect adjusted operating margin to be slightly above the high end of our 18-20% target range for 2024. This assumes that certain refundable tax credits will be introduced in one of the jurisdictions in which we operate, which will reduce our SG&A in 2024.

We expect CapEx to come in at approximately 5% of sales. We expect adjusted diluted EPS in the range of $292 to $307, up between 13.5% and 19.5% year-over-year. And we expect free cash flow to be above 2023 levels, driven by increased profitability, lower working capital investments, and lower capital expenditures than in 2023. Given our expected strong free cash flow and our recently revised target debt leverage ratio of 1.5 to two times, tightened from previously one to two times, the company currently plans, absent any further corporate developments, to resume share repurchases following the annual general meeting of shareholders on May 28, 2024. Furthermore, assumptions underpinning our outlook are essentially the same as we had previously communicated.

In this regard, we continue to assume that the Global Minimum Tax, or GMT, legislation in Canada and Barbados will be enacted during 2024, retroactive to January 1, 2024, and have incorporated its impact on our effective tax rate. Finally, we have also provided guidance for our second quarter, with net sales expected to be flat to up low single digits year over year. An adjusted operating margin is expected to come in above the high end of our 18% to 20% target range for 2024, including the cumulative positive benefit of expected refundable tax credits mentioned earlier. Correspondingly, we have also assumed that the GMT will be enacted in the second quarter of 2024, although we recognize that this could occur later in the year. So that’s all I wanted to cover from a financial perspective, and with that, I will turn it back over to Vince.

Vince Tyra: Thanks, Rhod. And to wrap up, let me reiterate that our team remains focused on executing our enhanced GST strategy and leveraging our solid foundation as we work towards executing on the five priorities I have identified and achieving the near and medium-term targets as outlined during the investor update on April 15. Our foundation is solid, and this, together with our strong balance sheet, is an enviable position to be in, and I’m excited about our ability to drive shareholder value into the future. And now I will turn it over to Jessy.

Jessy Hayem: Thank you, Vince. This concludes our prepared remarks, and now we’ll begin taking your questions. Before moving to the Q&A session, I’d like to remind you to limit your questions to two, and we’ll circle back for a second round if time permits. Operator, you may begin the Q&A session.

Operator: Thank you. [Operator instructions]. Your first question comes from the line of Paul Lejuez with Citigroup. Your line is open.

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Q&A Session

Paul Lejuez: Hey, thanks. Thanks, guys. Hopefully you can hear me. Curious what the non-recurring expenses were that you didn’t adjust out of SG&A and what the amount was, and if there was anything that we should think about in terms of SG&A dollar growth as we think about the next several quarters. I think you said closer to 10%, but obviously that’ll be dependent on sales. So curious how you’re thinking about SG&A dollar growth. And then second, curious about the product cost tailwind that helped you in the first quarter. How are you thinking about those tailwinds as we move throughout the year? And then you did, I think, invest in some price to drive market share in 1Q. How should we be thinking about your actions to do the same in future quarters?

Rhodri Harries: Thanks. Okay, Paul, I’ll take that. And there’s a few things to cover there. So on SG&A, if you look at effectively where we came in on SG&A for the quarter, the one thing you do have to remember is that we were expecting that it would be as a percent of sales a little bit lower due to the enactment of GMT. That would have had about an 80 basis point impact. That didn’t occur, but that should occur as we go forward. Right now we’re expecting that that will occur in the second quarter and there’ll be a catch up for the first quarter and the second quarter. So instead of effectively an 80 basis point reduction that you would normally see, we’d probably see something like 160 basis point reduction in the catch up.

But if you look at SG&A overall, we do think we have it dialed in well. There was a little bit of in the first quarter on some non-recurring costs that to a certain extent, somewhat related to the current situation that we’re in. We were able to effectively adjust out the majority of those impacts, but we had a little bit of noise. But I wouldn’t get too distracted by that. I think overall, we’ve got SG&A well in hand. And as we move through the year, as we said, we effectively would see SG&A delivering on our target of 10% or better, especially with the enactment of GMT. And again, when that GMT gets enacted and we do see the jobs credits coming through the quarter where that occurs, we do expect to see a fairly significant retroact or cumulative catch up.

So it might be a little bit, I would say variable as we go through the year, as you go from quarter-to-quarter driven by that. But overall, I would say the 10% or better of sales is really what we’re driving towards for the full year. If you look at product cost tailwinds, as we move through the year, we have said that effectively we would benefit from a couple of things this year, which we were tracking really in the back half of last year. And that’s flowing through as we move through 2024. We do have lower fiber costs that effectively are unfolding, and that is, I would say, pretty significant. Again, we saw that occurring to a certain extent at the end of Q3 and then Q4. And now we see that as we move through the first quarter and the remainder of the year.

And that also combined with, I would say, very good manufacturing performance, because we’re very focused on the optimization of our system, and we are ramping up Bangladesh, really gives us, I would say, strong tailwind as we move forward. And so that gross margin, which I called out at 30.3%, which is basically in-line with where we saw it in Q4, is now at that level, which I would say we feel we can continue to move forward at and gives us, I would say, strong support to our overall operating margin performance. From a pricing perspective, I did call out that we did see some negative price in the quarter. And as we move through the year, we expect to see a bit of negative price. But I think if you look at that, it’s, I would say, very targeted, the price actions that we’re taking.

We’re focusing on really areas where we can take share. We’re also seeing a little bit of targeted work in the international markets. But again, what we see is effectively, I would say, moderate impact. Because if you think about price overall, we have big price gaps versus our competitors. We are lower than our competitors. And then in an environment where you have inflation, if you look at, ultimately, what’s going on with various input costs, there’s not really, I would say, a downward price pressure for us. So for us, it’s very targeted activities on the price side where we’re driving share. And we’ll see the impact of that as we move the year long term.

Operator: Your next question comes from the line of George Doumet with Scotiabank. Your line is open.

George Doumet: Yes. Guys, good afternoon. The hosiery underwear segment came a little bit below expectations. Can you maybe give a little bit of color on there? Maybe perhaps the impact of the unfavorable mix, the expectations for some retail wins? Just trying to get a sense of maybe how the revenue outlook looks like for that segment for the year. Thanks.

Chuck Ward: Hi, George, it’s Chuck. I’ll take that. As we saw, as Rhod mentioned, we did see a little bit lower performance within the interwear category, but it was really mostly in the underwear segment; where underwear, we’re not seeing the historical replenishment at this point, that you would typically see, and the retailers are remaining cautious around that. But we do expect that to return as we go through the year. And so — and then from a hosiery perspective, I would say we had a good performance in hosiery for the quarter. We are seeing solid traction with some of our GLB partners in hosiery. And so despite the expiry of the UA license, we’re seeing good momentum from a hosiery perspective. So from a mixed perspective, again, I think there was lower underwear kind of in line with the socks. But then the overall mix that Rhod mentioned in his comments, I would say were more in the activewear area that he was mentioning, from a mixed perspective.

George Doumet: Got it. And my final question, and I know your outlook calls for no meaningful deterioration from current conditions, but I guess for Vince, if we do see a deterioration. Just wondering how you would position Gildan perhaps any differently than today over the coming quarters and year’s?

Vince Tyra: Yes, I guess you’re thinking about deterioration in pricing. And right now, I feel like we’re in a really good shape, as Rhod talked about, from the fiber cost and even competitively, I feel like we’re at a place, where we need to be. I mean, Chuck and I spend time with our teams just talking about where we are competitively priced. We’ve watched some competitive action in pricing that we’ve not followed in a couple instances and feel comfortable, we continue to move forward. So we don’t have any anticipation of it. There’s nothing in our plan for it, but we’ll watch it as the market and react accordingly.

Operator: Your next question comes from the line of Jay Sole with UBS. Your line is open.

Jay Sole: Great. Thank you so much. Rhod, I thought I heard you say for second quarter sales, you’re forecasting flat to up low single digits. Is it possible to get some more color on that? How you’re thinking about activewear, how you’re thinking about the hosiery underwear segment. That’d be super helpful. Thank you.

Rhodri Harries: Okay, Jay, thanks for the questions. Yes. So if you look at the second quarter, we are guiding flat to up low single digits. And I think as you think about how we’re progressing as we move forward, we do see strength in the activewear side. So if you look on the activewear side and you think about on the volume side, or you think about sort of pos and activewear, in the first quarter, it was, I would say, high low single digit. And then as you move into the second quarter, we see more mid-single digits. So we’re seeing positive Pos in North America. We’re seeing positive pos in international. And the active war story is unfolding. Well, we are very well positioned from a product perspective. If you look at, we talk often about how we’re driving share in ring spun, how we’re driving in fleece, but we also have new product innovation flowing through in basics.

We have new product styles coming through. 3000 is a good example of that, where we are, effectively, that’s a new product in the national account side and on the international side. And so activewear is, we’re really showing very good strength on the activewear side as we move, as we progress through the year. And so that’s where the strength is. I would say we do expect to continue to see softness in the underwear and hosiery category as we go into the second quarter. We do have the phase out of under Armour, which we’ve talked about. We do have broader market weakness on the underwear side. If you look at the market in total, effectively, you’re seeing pos down probably mid-single digit, maybe high-single digit. And that market has been a tough market.

What’s interesting is sooner or later, people are going to replenish and that’s going to turn into a tailwind. But we do see continued, I would say, weakness in the broader market in the second quarter as we move forward. And so that, I would say, is effectively that softness in the underwear and hosiery, despite really we’re doing well on products and everything that we can control is offsetting strength in the activewear side. Pricing, we will still be doing a bit of, I would say, targeted pricing to drive share, and then the unfavorable mix will be coming through with the trade down. Again, this is effectively, if we see people buying more crews than hoods, people buying more t shirts than long sleeves. I mean, this has been occurring. It was a theme that started last year, and we continue to see it in the marketplace that that ultimately will reverse as well.

So I would say, on the core fundamentals, we’re doing very well. And I think what is pleasing as we move into the second quarter, we do see now the flat to low single digit, and obviously, we’ll continue to be driving that as we, as we move through the year.

Operator: Your next question comes from the line of Brian Morrison with TD Cowen. Your line is open.

Brian Morrison: Thank you very much. Rhod. First question, can you just clarify? Did you say that Pos was up high single digits for activewear in Q1? And do you know what the industry was?

Rhodri Harries: No, I didn’t say that effectively. What I said, Brian, was, for us, it was high low-single digit. Right, so effectively, if you look at where the POS was, and if you look at across the. What was very good is that we saw positive Pos pretty well across the board on the activewear side. So we saw it in all categories and international, actually, it was mid-single digit, a little bit higher, actually. But for the total category was high low single digit. And then as we go into second quarter, what we’re seeing is more like mid-single digits. So it’s progressing well.

Brian Morrison: And relative to the industry, you think that was where?

Rhodri Harries: Well, we think the industry in some cases is really struggling, actually. If you look effectively on the printware side, I would say down, probably negative mid-single digit, maybe even high single digit. I mean, we are grabbing share, we’re doing well, and it is a tough environment out there. So I would say it is more broadly, it’s a negative environment. And, well, against that backdrop.

Brian Morrison: Okay, sorry. And Rhod, I want to follow up in terms of EPs for the quarter. Had the [indiscernible] GMT been implemented, I estimate you would have been about $0.55. Is that correct? And the second part of that question is, for Q2, you expect to be at the high-end of the margin range or above the margin range. Does that include the 160 basis points of improvement of SG&A?

Rhodri Harries: Yes. Okay. So if you look at the first quarter, your first question, I would say if GMT had been enacted, it would have been about a $0.05 impact. Right. So we would have been about a $0.05 lower. So if you think about the beat, effectively, five cents of that was GMT. And the — I would say the remainder of the beat was just on our manufacturing side, our underlying cost performance. So I would say we’re pretty pleased with the way that turned out. But then, obviously, as we go forward, there’ll be catch up on that. You have to think about that as you think about the second quarter. And then effectively, if you think about the, where we’re going to be from an operating margin standpoint for the second quarter, we have guided that we’ll be above our range, the 18% to 20%. And I would say, I think we can do well versus the high end of the range. And again, that assumes that GMT is implemented and we do get the refundable tax credits.

Brian Morrison: Okay. And then last question. It’s more high level, Vince, and I want to hear your view, not so much, on why there needed to be wholesale changes at the board level recently. But what, if any, changes we should expect either operationally or governance wise, as a result of these changes?

Vince Tyra: Yes, I don’t think you’re going to see anything material there. Obviously the special committee meets on that. It’s outside our privy in terms of involvement and, and decision making there. I certainly had an opportunity to interview some of the candidates along the way, but no decision from my end in terms of who joined our board. Obviously, we just completed our board meetings and had a nice transition between the, I’ll say the outgoing and the incoming board members. But we don’t expect anything materially to change in terms of, what’s happening, governance and things like that. We respect and rely on the professionalism and experience of who’s joined us now. We’re excited to meet them and get working with them.

Operator: Your next question comes from the line of Chris Lee with Desjardins. Your line is open.

Christopher Li: Oh, hi. Good afternoon, everyone. My first question is, I was wondering if you can talk about just the inventory level for your customers, both at the wholesale distributor level and at the retail level. Thank you.

Chuck Ward: Hi, Chris. This is Chuck. Yes, I think from an inventory perspective, we’re in balance overall. If you think about from a distributor channel perspective, I would say, as Rhod mentioned, we had our seasonal restocking, not as much as last year, but again, a good restocking. I would say weeks on hand are in good shape. And again, the inventory is imbalanced. I think from a retail perspective, we’ve continued to see retailers bring down inventory since post pandemic times. And as they adjusted, as I mentioned earlier, they are cautious and they’re monitoring inventory closely and staying more just in time. But we think inventories are in a good place overall.

Rhodri Harries: Maybe I’ll just add to that the one area where we are running, just maybe a little light, is in international, in Europe. And the one thing that we see there very definitely is with the ramp-up of Bangladesh, we’re going to fix that very soon. So I would say there’s a little bit opportunity in the international side as we bring product in. And again, we see that as effectively driving pos and sales as we go forward.

Christopher Li: Okay, that’s helpful. And maybe one for you, Rhod. Just for the quarter, activewear sales were up about 1%. I was wondering if you can sort of break out for us, how much of that was volume growth versus a net selling price decline. Just so we get a sense of what was the composition of that 1% active or sales growth?

Rhodri Harries: Yes, I mean, look, if you look at effectively the 1%, I would say that as I said, the volume was. We saw a good volume uplift in the quarter from an activewear perspective. Right. So if you think about the. I talked about the mid-single digit Pos or, sorry, not mid-single. The low single digit Pos on the higher side, really, that just flows through the volume for the most part. And so that was a good driver in the quarter. And then we saw some offset on the price side and we saw some offset on the mix side. But look, volume is going well within activewear and as I said, it sets us up well for second quarter and the remainder of the year. We’re taking share and we’re doing well.

Operator: Your next question comes from the line of Martin Landry with Stifel. Your line is open.

Martin Landry: Hi. Good evening. I would like to touch on the trade down patterns that you’ve talked about. I mean, I think if I recall correctly, we started to see trade down in Q2 last year. I was wondering, when do you expect to cycle that and how is the trend going? Is the trend worsening? Is the trend easing? Just a bit of color as to what the end consumer is — how they’re behaving?

Chuck Ward: Okay, Martin, you’re right. We did start last year seeing some of the trade down. You know, some of that may have been economic, but also some of it may have been, from a fashion perspective, we’ve seen a trade down, really in the fleece, as we talk about it, from hoods to crews. You know, we used to be a larger percent hoods. It kind of shifted down some last year to where we were larger crews. Now it’s kind of eased up to where it’s closer to 50-50 of the cruising hoods. So we’re starting to see that ease some. And then, as Rhod mentioned, the long sleeves. We’ve seen a shift some long sleeves as well. But again, that could be somewhat economical, but I think it’s also some shift in fashion but overall, we are seeing at ease.

Martin Landry: And we’re seeing in the apparel space and consumers responding to promotions a lot. Like, can you talk a little bit about, what you’re seeing in terms of promotional activity right now?

Chuck Ward: Well, as Vince mentioned earlier, I mean, I think we’ve seen some competitors do some promotional things specifically, in our activewear channels that we haven’t followed suit on and haven’t moved a whole lot there. As Vince said, it didn’t move. We continue to gain share in the market. You are seeing some at a retail level. We are looking at things with our retailers. But again, I think, as Rhod also mentioned earlier, we have a pricing gap on a lot of our competitors, such that when they do have promotional activity, we’re not seeing a big impact come our way, and we’re not having to match because we already have such pricing gaps.

Operator: Your next question comes from the line of Stephen McLeod with BMO Capital Markets. Your line is open.

Stephen McLeod: Thank you. Good evening. Just wondering if you can provide a little bit of color around what you saw in terms of pos between fleece and fashion basics in the quarter?

Chuck Ward: Yes, both were good. We saw high single digit on the fleet side and again, continue to see great volume from that perspective. We’re seeing double digit growth on the ring spine. As Rhod mentioned, we are continuing to take share across all categories, but I would say even more so those categories.

Stephen McLeod: Okay, that’s great. That’s helpful. Thanks, Chuck. And then just on the international business, you talked a little bit about in your prepared remarks, just seeing some, some incremental inflections in pos and just wondering if you can give a little bit of color around sort of where you’re seeing the PoS stabilization, maybe by market and what you think some of the drivers might be. Is it just comping up against tougher comparatives, or is there you seeing sort of demand beginning to really take hold?