Vishal Shreedhar: Hi, thanks for taking my question. In the past, through Gildan’s history, a few periods of weakness to build those business and acquire brands. Is that something that’s on the radar for Gildan as you look at your competitors maybe struggling a bit?
Glenn Chamandy: Well, right now, look, historically, we bought some brands in our channel, Anvil, we bought Alstyle, but we bought these brands for the value of their inventory or working capital pretty much, right. And then we leveraged our low-cost manufacturing and had a significant return on investment. So, I wouldn’t say we never – not look at something, but I think right now we’re well positioned, we’re focusing on organic growth. Our Back to Basics is working on all four cylinders and moving into a GSG strategy where we’re going to start seeing good top line growth. We are taking share in a weak market. We’ve got our Bangladesh facility coming along, which is going to give us, we think, a significant competitive advantage in driving our ring spun category and allowing more capacity to be freed up for expanding our fleece business.
So we’re in relatively good shape. So I would never say never, at the right price we’ll always look at everything, but, I mean, at this point in time, we think we can drive significant EPS growth on an organic basis.
Vishal Shreedhar: Okay. And over the last several years, Gildan has put in a lot of work on efficiency, and we’ve seen that come through in the P&L. Just wondering if there is any major initiatives that we should contemplate in 2024.
Glenn Chamandy: Well, that’s built into our DNA, right. I mean, we’re constantly optimizing our operations. Last quarter, we optimized some of our sewing facilities. We are recently in the process of optimizing some of our yarn spinning facilities. So we’re always looking at ways to maximize our cost. And Back to Basics was the strategy that sort of put us in this position, but that’s our DNA, right, is making sure that we optimize everything we’re doing. So, a cost competitiveness is the most important skill set that we have, which has allowed us to achieve, these high operating margins. And then the one area where, I think, that we have a really big focus, which we’re going to bring to the market in 2024 is innovation. We’ve been spending a lot of energy on a complete cycle of innovation.
Probably the largest innovation cycle since we actually started the company, to be honest with you, which we’re going to cover, all of our fabrics, our garments, the construction of our garments, et cetera. So, as we move into next year, I think, we’re not only going to be positioned on the low end of the cost curve, but we’re also going to be, I think, separating ourselves from our competitors in terms of the innovation we’re going to be able to bring to the market by leveraging our low cost manufacturing. So, we’re in a relatively good position. And I think we’re excited about 2024.
Vishal Shreedhar: Thank you.
Operator: Next question comes from the line of Martin Landry with Stifel. Your line is open.
Martin Landry: Hi, good morning. If we look at your guidance – your full year guidance implies that your Q4 operating margins is going to be in or around 20%. And I was wondering, I mean, next year, as you mentioned, you are going to benefit from low cotton costs. So, is this a good run rate for next year? And is there a potential for you to perhaps maybe even exceed your high end of your historical range of 18% to 20% next year given fiber costs are going to be so low?
Rhod Harries: Martin, the answer to that is yes, there is the potential we could exceed the high end of our range. I mean, I think if you look at how we’re performing, where our margins are going to here as we finish up the year, as we move into next year, if you think of all the things that Glenn just covered. As far as further optimization of our facilities and everything that we’re doing, there very definitely is the potential that we could go to above our range in 2024.
Martin Landry: Okay, and maybe the other side of the coin, assuming that everybody benefits from lower fiber costs next year, is there a risk that the industry becomes more promotional and you need to discount to move products? How do you think about that?
Rhod Harries: Well, like, one of the things that I would say to you is that it’s not necessarily lower cotton cost, that’s driving our operating margins, it’s normal cotton cost in relation to our selling prices. So we never raised selling prices to reflect the peak of cotton. Now, cotton has come down, but cotton has come down to where we really set price. So I would say that there is still lots of inflation, wages are continuing to go up both in North America and particularly in Central America, energy is going up. So, it’s not like there is not still a big, headwind of inflation, it’s still there, to be honest with you. So partly what’s driving our operating margins is more the alignment of our pricing and cotton, as well as our ability to optimize all of our facilities, our cost structure.
And even though we’re going to be at the higher end of our operating margins and maybe pass it, we’re also investing heavily on innovation. So typically we’ve taken a lot of our cost savings from our manufacturing and put into price and drove market share by price. We are already a price leader. Our gap in pricing relative to our fashion competitors is significant, right. So our focus right now is really is to take our low-cost model, leverage our operating margins and also to reinvest in innovation to put a little bit of money back into our products, basically, to help us gain more market share. So I think we’re in a good position as we move into 2024 on all fronts.
Martin Landry: Okay. That’s helpful. Thank you and good luck.
Operator: Our next question comes from the line of Brian Morrison with TD Securities. Your line is open.
Brian Morrison: Good morning. First question for Glenn. I joined the call late and I know you don’t give 2024 guidance, but I want to make sure I’m summarizing this properly. So you’re looking for a flat pricing environment. You are looking for market share gains in activewear, you expect retail growth and then obviously lower commodity prices. So you’re looking for higher revenues next year, higher operating margin and growth excluding your NCIB. Is that correct?
Glenn Chamandy: Yes, that’s correct.
Brian Morrison: Okay. So that takes me to the next question for Rod. So Rod, go ahead.
Glenn Chamandy: I qualify that as the only difference is we are definitely looking at a new shelf space, we are looking at definitely taking market share, but the only thing that we don’t know is really what the overall macro environment will be at the end of the day because your core business could – we don’t know what the core volume would be, basically, if there is a recession or something else. So giving things equal, the answer is yes.
Brian Morrison: That’s great. Good qualification, Glenn. Rhod, that leads me to my next question. So in terms of if pricing is flat, I want to know what you think the EPS impact was from the elevated cotton prices this year. If cotton is 25% to 30% of your cost structure, I estimate it’s got to be at least $0.20 to $0.30 of EPS this year. Is that fair?
