Gildan Activewear Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Quarter 1 2021 Gildan ActiveWare Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Ms. Sophie Argeriu, VP, Investor Relations. Please go ahead.

Thank you, Rachel. Good afternoon, everyone, and thank you for joining us. Earlier, we issued a press release announcing our earnings results for the first quarter of 2021. We also issued our interim shareholder report containing management discussion and analysis and consolidated financial statements. These documents will be filed with the Canadian Securities and Regulatory Authorities and the U.S. Securities Commission and are available on the company's corporate website. I'm joined here today by Glenn Chimandi, our President and Chief Executive Officer, and Rod Harries, our Executive Vice President and Chief Financial and Administrative Officer. In a moment, Rod will take you through the results for the quarter and a Q&A session will follow. Before we begin, please take notes. that certain statements included in this conference call may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve unknown and known risks, uncertainties, and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. We refer you to the company's filings. with the U.S. Securities and Exchange Commission and Canadian securities regulatory authorities that may affect the company's future results. And with that, I will turn the call over to Rod.

Thank you, Sophie, and good afternoon to all, and thank you for joining the call. We hope everyone is staying safe and keeping well. We were pleased with the company's first quarter performance, which reflected a strong start to 2021. Our back-to-basics strategy is working and is supporting both our sales efforts and our profitability objectives. Operationally, our strategy is making our business less complex, more cost effective, and is helping us drive growth and more efficient use of capital. Further, we are encouraged to see reopenings continue, and combined with the impact of the U.S. stimulus and the strong progress of the vaccine rollout in the U.S., we are optimistic that these factors will continue to help economic activity stay on a steady track of recovery. And finally, given the company's positioning at the end of the quarter, we were pleased to announce in our press release earlier this afternoon that our board approved the reinstatement of our quarterly cash dividend at the same rate where we left off prior to the temporary suspension of the dividend after the first quarter of last year. The board's decision to reinstate dividend payments reflects increased confidence from the strong performance in the quarter and the recovery so far, together with the outlook for the company's future cash flow generation capabilities and the reduction of our debt leverage ratio. which I'll cover later. Turning to the specifics of the quarter, we delivered net sales of $590 million, up 28% compared to the prior year quarter, with increases in both our activewear and hosiery and underwear sales categories. When compared to the first quarter of 2019, overall sales were down approximately 5%. Activewear sales in the quarter totaled $485 million and were up 30% over last year, driven by strong double-digit unit sales volume growth in both our imprintables and retail channels of distribution, together with strong product mix, which more than offset lower average net selling prices in imprintables. The volume growth in imprintables reflects the combined impact of year-over-year POS growth and net restocking by distributors, even though inventory levels in the channel remain significantly below the 2019 level. If we look at Imprintable's POS compared to pre-pandemic levels in the first quarter of 2019, it was down an average in the range of 10 to 15%, which was in line with what we saw at the start of the quarter. Moving to the hosiery underwear category, where we generated sales of 105 million, the 21% increase was driven by the strength of our underwear sales, with double-digit volume growth over both the first quarter of 2020 and 2019. Looking at gross margin for the quarter, we delivered strong performance, which in our view underscores the power of our back-to-basics strategy that is driving and is expected to continue to drive positive results going forward. Our reported gross margin was 32%, and adjusted gross margin was 31.1%, up 650 basis points over last year. While gross margin performance in the quarter was enhanced by an $18 million one-time payment we received in April from the USDA, Even without this 300 basis point benefit, gross margin was still strong at 28.1%, up 350 basis points over last year. This one-time USDA benefit was received under the Pandemic Assistance for Cotton Users, or PACU program, and represents essentially COVID-related government support provided to domestic users of U.S. cotton. Excluding the PACU benefit, The year-over-year increase in gross margin was mainly due to the non-recurrence of COVID-related charges incurred in the first quarter of 2020, lower raw material costs, favorable product mix, and the positive impact of our back-to-basics strategy, partly offset by lower average net selling prices. With respect to SG&A, we kept our expenses for the quarter essentially flat compared to last year, despite generating higher sales. SG&A expenses were approximately $73 million or 12.4% of sales compared to approximately $74 million or 16.1% of sales for the same quarter last year. The year-over-year reduction reflected cost savings stemming from our back-to-basics initiatives offset by higher variable compensation expenses. Adding this all up, we generated operating income of $114 million compared to an operating loss of $92 million in the first quarter of 2020, which if you recall included a goodwill impairment charge of $94 million. Adjusted operating income for the quarter was $110 million, significantly above the $20 million we generated last year. The increase was driven by higher sales, an adjusted gross margin, and the impact of the non-recurrence of the $21 million trade accounts receivable impairment charge recorded in the first quarter last year. Consequently, we reported net earnings close to $99 million or $0.50 per diluted share, and adjusted net earnings of $95 million, or $0.48 per share. Excluding the $0.09 PACU benefit, adjusted EPS for the quarter was $0.39, up significantly from adjusted EPS of $0.06 in the first quarter last year and $0.16 in the first quarter of 2019. So overall, a very strong performance in the first quarter, setting us on a good path for the year. From a cash flow perspective, we generated free cash flow of $38 million in the quarter compared to last year when we consumed $235 million of free cash flow. The increase reflected higher operating earnings, lower working capital impacts, and lower capex. Free cash flow in the quarter also included a net cash impact of $30 million from insurance proceeds related to the hurricane damages we sustained in November of last year, which is a timing impact related to the replacement of equipment. The decrease in working capital was largely due to a lower inventory build in the quarter, which was driven in part by benefits of our back-to-basics strategy, including our skew rationalization and distribution initiatives, which are allowing us to manage our inventories more efficiently. At the same time, while our manufacturing ramp-up following the disruption caused by the hurricanes late last year has gone well, we're continuing to ramp back our capacity and stronger than anticipated sales in the first quarter resulted in a lower-than-planned increase in inventory levels in the quarter. Consequently, we ended the quarter with inventories of $736 million, slightly up from $728 million at the end of 2020, and down 38% compared to approximately $1.2 billion a year ago. Given our free cash flow, we reduced our net debt position during the quarter to $542 million, down from $577 million at the end of 2020. Our available liquidity at quarter end remained at $1.6 billion, which was where we left off at the end of the year. Our external debt leverage ratio decreased 2.1 times adjusted EBITDA, down from 3.5 times at the end of 2020. However, for debt covenant purposes, after reflecting adjustments which exclude the impact of the second quarter of 2020, the company's net debt leverage ratio fell to I'd like to highlight that as of April 5th, we are no longer required to comply with the restrictions and provisions established in June of last year when we amended our loan agreements to obtain temporary COVID-related covenant relief. Further, on April 20th, we repaid the $400 million two-year term loan, which was due in 2022, which we secured last year as a precautionary COVID measure. Finally, as highlighted previously, given the strength of our recovery thus far, we're very pleased to announce this quarter that we are reinstating our dividend at its pre-pandemic level. Regarding other return of capital considerations, we expect that our board will assess the potential reinstatement of our share repurchase program when we gain further visibility on the COVID recovery outlook and when the company's debt leverage ratio falls well within its historical target range. This sums up the key highlights of our results for the first quarter. And before we open it up for questions, let me just touch upon the sell-through trends that we're seeing currently. As we move from the first quarter into the second quarter, overall imprintables POS is tracking slightly better than during the first quarter, down approximately 10% compared to pre-pandemic 2019 levels. In retail channels, our sales in all product categories are tracking above prior year levels. Although we're encouraged by these trends, we are monitoring other broader market dynamics that could affect the pace of the overall recovery. Events driven by large gatherings that have historically been a key driver of our imprintable business have not yet restarted. And although reopenings continue and the pace of vaccinations in the U.S. has accelerated nicely, we cannot predict with accuracy when large gatherings will fully come back. Further, as I'm sure many of you are hearing, supply chains are being impacted by labor shortages in the U.S. affecting certain industries, including yarn spinners. Tightness in raw material supply is also developing, and the impact of port backlogs and transportation-related issues are factors that we are monitoring. Consequently, we remain conscious in the near term, particularly with respect to these global factors. However, as it relates to areas we have executed on and continue to drive, including our back-to-basics strategy, we are extremely pleased with progress, and are confident that the steps taken to accelerate our strategy last year And the benefits that we are seeing thus far are positioning us well to take advantage of market share opportunities, deliver on our profitability targets, and create shareholder value over the long term. And with that, I'll turn it back to Sophie.

Thank you, Rod. That concludes our formal remarks. Before moving to the Q&A, I ask that you limit the number of questions to two, and we will circle back for a second round of questions if time permits. I will now turn the call over back to the operator for the question and answer session. Rachel?

Thank you, Sophie. And again, as a reminder, to ask a question, you will need to press star and the number one on your telephone. Again, just press star and the number one on your telephone. And to withdraw your question, just press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Paul Lewis from Citi. Sir, your line is open.

Hey, everyone. This is Brandon Cheatham on for Paul. Thanks for taking our question. I was just wondering, you know, how do you feel about your inventory position now? I think last time we spoke, manufacturing was outpacing POS, so I'm just kind of curious about the dynamic there. Did sales come back stronger than expected or were there some impacts from some of the things you mentioned on the supply chain side that constricted things there?

Thanks. With Glenn, well, our inventory position is, you know, it's right size. It's lower than we originally anticipated, obviously, mainly because sales were stronger than we anticipated in Q1. However, we're still running at a good run rate relative to 19 levels. Our current run rate is around 90% of what we ran at 19 levels, and we're going to continue to ramp up. It's been challenging, to say the least, because of the things that Bob mentioned as commentary, but we're well positioned. As we continue to execute on our back-to-basics strategy, what we're focusing on is obviously less product, less use, less complexity, So it gives us a very good opportunity to zero in on what we need. So we should be able to operate at inventories that were lower than historical levels and yet still improve our service as we go forward. So we're not back up to full capacity yet, and that will happen as we move through the end of the year. But I think we're going to go through to around 90% of 19 levels.

And then on the labor shortages, you know, ultimately, do you think it's higher wages drive people back or are people just not there? And what's your outlook on that abating?

Well, our outlook is you've got to spend the money from the stimulus package, really, to be honest with you. I mean, that's the answer, right? So, you know, that's, you know, we pay our wages on our facilities, but, you know, the, you know, I think that's sort of our,

Yeah, I think if you look, it's really the wages, it's effectively the stimulus, the $300 a week, right, that we're seeing out there. But it's also COVID as well. It's also, I think, I mean, there's a number of factors. You know, people coming back into the workforce are being impacted with a number of pressures, a number of stresses. And so, you know, I think ultimately, The stimulus will work our way through that and will work our way through COVID. And so ultimately that will abate, but it will take a bit of time. And, you know, we do see these pressures over the next number of months. And this is mainly in our U.S. operations.

In terms of our Honduras operations, they're running well. We have ample people other than, you know, supplies and other things that could affect us. It's not a people issue in Central America.

Got it. Thanks a lot. Good luck.

Thank you. Thank you. Our next question comes from the line of Sabah Skan from RBC Capital. Sir, your line is open.

Okay. Thanks and good afternoon. In your release, you noted some distributor restocking. Can you maybe give us some context on, you know, where in the restocking cycle you're at? Is it broad-based? Is it just people kind of, you know, testing the water? Just some context on where we are in the cycle.

Well, typically the inventories that our distributors carry go forward inventory, so normally they would increase their inventories as they go into season. But to put things in context, our inventories are about 40% below levels of 2019, even though we had some restocking. So they were very low at the end of Q4, and they're still significantly below where we were in 2019 levels. And, you know, they're lower than, I would say, the normal, really normal low that they should be at this time of the year. So the stocking that we did have, I think, would be relatively, you know, far overstocking and stocking that's required to support the seasonality of the business in Q2.

And then just a quick follow-up on that, I guess. What are distributors, I guess, kind of waiting? Is this to improve visibility or is it? maybe they'll just do a bit more just-in-time going forward. Demand obviously looks like it's picking up. I'm just trying to understand if, you know, it'll be more of a gradual rebuild this time versus some of those large restocking quarters we've historically seen.

Well, I mean, look, partly, you know, sales are strong. POS is starting to improve. I mean, one thing we're starting to see is we're starting to see, you know, basics products come back. I mean, our sales have been driven really by fashion T-shirts and fleece, which are actually positive in, POS and where we really see the drag so far on our minus 15 and now minus 10 is more on the basic side. And we're starting to see some, you know, those are larger orders typically that we see floating around. We're starting to see some of that come back. So, you know, we think as we go through this and the market continues to open up, sales will continue to improve. You know, we're tight on capacity, so as we're going to stay tight until we exit Q2 and move into Q3 and Q4.

Great. Thanks very much.

Thank you. Our next question comes from the line of Vishal Sridhar from National Bank. Sir, your line is open.

Hi. Thanks for taking my question. I guess you've already hinted at it in your remarks, but broad-based inflation seems to be topical. Wondering how much latitude Gildan thinks it has to increase price if need be, and Did Guilden take any pricing or promo action in the quarter?

Well, we're still taking our price leadership position in the market, so we're pricing as we've been pricing for the last three, four quarters. And yes, we think that our industry is capable of taking price increases, but one of the things that's also occurring as we leverage our back-to-basics strategy is that we're lowering our cost structure. Our manufacturing costs, believe it or not, despite inflation, are coming down as we streamline our operations. Our SG&A is coming down as a percentage of sales. So, you know, overall, what we're targeting is to, you know, drive ourselves to what we think is the 18% operating margins, and, you know, we'll do that a combination of, you know, we'll see how we get there, but if we have room, we think, to continue to price aggressive and you know, offset some of the inflationary costs with our manufacturing cost savings and our estuary leverage to still achieve our goals as we move into the future. But we also have the opportunity to raise prices we think it's required, but we have a lot of flexibility as we move into the balance half of this year and the next year.

Okay. And given that there's a lot of room for wholesalers to restock, and given that Q2 POS is tracking down about 10%, is the subtext there that Gildan's trends should exceed POS in the interim as these wholesalers restock, given optimism about large gatherings coming back, call it, in a few months?

Well, I don't think that we're going to have that opportunity to restock inventory in the channel. I mean, we think that... Our own inventory levels will be pretty similar at the end of this quarter as they are at the beginning of the quarter. And like I said before, we're running at a rate of about 90% at 2019 levels, so we can work it that way. So we're tight on capacity as we move into Q2. If you look at where we are now in April, plus the supply time it takes to produce goods, I mean, the quarter's going pretty quick, right? So... we have pretty good visibility to where we are. And we're going to continue to ramp up as we move through the year. And I think that's the more important thing is that we're very comfortable with the way we see the market evolving. We're pretty much tracking in line with the market in terms of where our capacity currently is and where the market POS is. So that's a good thing. And as we move into Q3, we should be able to continue to take opportunities as the market recovers and our capacity continues So that's sort of where we're looking at as we move through the year. Thank you.

Thank you. Our next question comes from the line of Chris Lee from Desjardins Securities. Sir, your line is open.

Good afternoon. Just maybe first question on the gross margin. Obviously very strong in the quarter. Can you maybe talk about your gross margin outlook for the remainder of the year? Do you expect to build on that margin improvement from Q1?

Yeah, look, our gross margin was very strong. If you look at the 31.1, if you exclude the PACU 28.1, I would say we're very pleased with the margin. I think as we go forward through the year, there'll be some puts and takes, right? So effectively, we probably see a little bit stronger mix coming through as we continue to push forward with the overall recovery. But at the same time, as we noted, right, it is an environment where there are some inflationary pressures As we get to the back end of the year, we'll have to see what we do with raw material costs. And so there are some things that will drive margin up. There's some things that we have to work with as well. So I think overall, I think what we'd like to do probably is try to hold at levels which are close to where we are Q1 as we move through the year. We'll see.

Okay, that's very helpful, Rod. And another question, I know this is a very tough one to answer because nothing has been decided yet, but, you know, the concept of the global minimum tax is very topical these days. If it does get implemented, it could potentially cause tax rates to rise across the board. I guess my question is, you know, what are your thoughts on this and what levers does Gildan have to mitigate the impact if it does get implemented?

Well, I would say, Chris, I think it's very early in the overall discussion of the, you know, if you look at a minimum tax from a global perspective, I mean, we're like everybody else. We're just monitoring what's going on. We'll see how that unfolds. Right now, we don't see any significant impact based on what we're aware of. But we'll monitor the situation as we go forward.

Great. Thanks for the answers and best of luck.

Thank you. Our next question comes from the line of Mark Petrie from CIBC. Sir, your line is open.

Good afternoon. Thanks. Sorry, Glenn, could you just clarify your comment with regards to distributor levels? It wasn't clear to me what you were referring to, but something was about 40% below levels seen previously. Could you just clarify?

Yeah, so the inventories in the channel are roughly 40% below 19 levels. And pretty much the same below 20 levels, too, because it really moved between 19 and 20.

Okay, thanks. And I guess just broadly, you know, you're not seeing large-scale events resume at least just quite yet, but can you just sort of walk us through what you're seeing or hearing with regard to other end markets, including some of the pockets of demand or markets that accelerated or developed through the pandemic? Okay.

Well, I think those markets developed during the pandemic, the online, you know, the casual at home, you know, leisure, all those things that driven share, I think, during the pandemic are continuing to drive share. I think as we see the pickup right now from Q1 into Q2, I think it's a little bit more the recovery of gatherings. I mean, if you look at the Kentucky Derby, there wasn't 130,000 people. They had 50,000 people there. We're seeing some baseball games with a large crowd. So definitely, you know, things are starting to open up and I think that will only continue to improve as we move through the balance of the year. You know, I don't see the other part of that business going away. I mean, I think that's what we discussed last quarter is that I think that the overall market is going to expand. Our universe is going to expand. as we really have a full recovery because, you know, we've created new opportunities and new channels of sales through all this online selling. So we're hopeful that as the recovery comes, I mean, we'll see a bigger market and more opportunity.

Okay. And then just to follow up, I think it was Chris's question with regards to the gross margin. Rod, thanks for the comments, for the expectations for the balance of 2021. I'm just thinking back to sort of, you know, your 30% gross margin target. And I know that you're sort of pivoting to focus people more on the 18% operating margin target. But nonetheless, should we think about upside from that gross margin as revenue rebuilds to a 2019 type level? Or what is the lever to see further upside from gross margin today? Okay. I think you said it's actually market.

We're really focused on that 18%, right? So I think that's what we're really driving to deliver with the back-to-basics strategy. And I think if we get back to 2019 sales levels, we like our chances to be able to deliver the 18%. So I think as we go forward, we will see it come from gross margin. We'll also see it come from SG&A. But that's where we're really working effectively to deliver. And it's also combined together with the growth and the volume. It's all placed together. So I think, look, I think we're happy with the progress that we're making with our overall strategy. I mean, if you look at what Back to Basics is delivering for us, both in-growth margin and SG&A, I mean, we really are seeing very strong benefit. And we'll see it, I think, in both areas as we go forward, and that will flow through to operating margins. And, again, we get back to 2019 levels. I think we feel very good about hitting that 18%.

And plus, we're going to leverage that for top-line growth as well, because I think that's the point here, is that we're focused more on all those factors, but as well as make sure that we have top-line growth. So we can leverage our low-cost manufacturing, these cost savings, to achieve these operating market targets and grow sales. That's really what the back-to-basics is all about.

Yeah, understood. Appreciate all the comments, and wish you all the best.

Thank you. Our next question comes from the line of Jay Soul from UBS. Sir, your line is open.

Great. Thank you so much. I just want to follow up on some of the margin questions talking about SG&A. You know, the SG&A dollars were down, you know, pretty significantly versus not just one Q of 20, but also one Q of 19. As we get into the second quarter, obviously the comparisons get a little bit different because the SG&A was down so much last year. But how should we think about the SG&A dollars in Q2 versus SG&A? Q2 of 19, I mean, can we really see them down as much as they were in terms of just total dollars versus 2Q19, or is there going to be more of like a bounce back so the dollars will be a lot closer to the 2019 level? Thank you.

If you look at 2019, we haven't really seen the benefit of back-to-basics really flowing through in the SG&A side. So if you do look at where we're running in the first quarter, I think as we go into Q2, we'll see a little bit of some increase with respect to distribution costs. But look, we have the SG&A well under control as we work towards that 12% target. So the delta, which you've seen between 2019 and where we currently are in the first quarter, I mean, that's all back to basics. It's all come out of the system. I think we've done a great job on the SG&A side to reduce it. And so, I mean, again, we feel very good about our ability to deliver on our target this year.

Got it. Okay. Thank you so much.

Thank you. Our next question comes from the line of Luke Hannon from Canaccord. Sir, your line is open.

Yeah, good afternoon. First one for me is on the competitive environment. Glenn, I know you touched on it earlier. You're still sort of the price leader in the Infrontables channel, but I'm curious to see, are you seeing anything from your customers in terms of how they are reacting? Are they choosing to compete on price as well, or what are you seeing there?

Well, look, we're continuing to take the price leadership in every category, so we are the I think the low price in the market. But at the same time, look at it. There's also other suppliers and competitors that don't have availability of product, and they think that, in general, the inventory in the marketplace is relatively tight amongst all suppliers. So people are skeptical to lower prices with their tight inventory. So we're taking a strategy of everyday low price, and we're going We're seeing market share growth. Even though we're down to 10 to 15 or down 10 now, we know from statistics within the market that we're actually gaining share. So I think that's sort of our strategy. We're going to be consistent in our approach and focus on top-line growth and thriving market share.

Okay. And one more for me. We've all seen the headlines on how COVID is playing out overseas. So I'm curious to know, on the build-out of Bangladesh, do you see any risk on maybe there being a labor shortage for continuing to build out that facility? Or do you see any risk maybe on the timeline for that being pushed out when that might be completed?

Well, right now... You know, we're still on time with Bangladesh to support 2023. You know, we started the construction of the project, was moving along. Bangladesh does not have the same type of COVID environment that India does. They've had a much greater percentage of vaccines in Bangladesh than they've had in India. I think 8% of the population has been vaccinated already. So it's a little bit different environment. Things were getting a little bit worse last month, but during Ramadan, they have a complete shutdown right now, and things are improving. So the environment there is stable and improving, I would say, as we see it today. Obviously, there's no crystal ball. This is a pandemic, so... But so far things are so good and we're on track to support 2023. We're also in the process of reconfiguring our Mexican capacity into Central America which we dismantled at the end of last year. So we're still on track to put incremental capacity in Central America as well. as we go forward.

Okay. Thank you very much.

Thank you. Our next question comes from the line of Stephen McLeod from BMO Capital Markets. Sir, your line is open.

Okay. Thank you. Good morning. Good afternoon, guys. Just a couple of questions. You've covered a lot of ground here, but a few things that I wanted to dig in on. You mentioned that in previous quarters, you've talked about sort of your underwear market share gains. And I'm just curious if you think based on how the underlying market performed, whether you continue to gain share in Q2 on the underwear side at retail.

We definitely gain share in retail. We're up 20-plus percent in underwear, so it's going very good. I think that underwear is on track and ahead of expectations.

Okay, that's great. Thank you. And then I just wanted to clarify some commentary on the gross margin. You're clearly well on the way to exceed your 12% SG&A target. You talked a little bit about the 18% operating margin target. But with gross margin expected to continue to trend sort of in line with the adjusted Q1 through the balance of this year, do you think it's achievable to meet your 30% target in 2022?

Again, Stephen, what I would say is we get back to the 2019 sales levels, I think we feel very good about that 18%. So I think, as we said earlier, working both the gross margin and the SG&A effectively, we feel very good about it. So I think we have, again, because back to basics is driving both sides of the equation. Bottom line, we do feel good about gross margin and SG&A, and as Glenn said earlier, about our ability to drive volume. That's key. With the back-to-basics, we get the cost reduction. We keep the prices down. We get the volume. We get the operating leverage. We get better gross margin. We get better SG&A. Everything works. So we're very pleased with the whole strategy.

Right. Okay. Great. Thank you.

Thank you. Our next question comes from the line of Brian Morrison from TD Security. Sir, your line is open.

Hi, good evening. Thank you. A couple of follow-up questions. Glenn or Rod, are you able to quantify? You said the channel is 40% below 2019-2020 levels. Are you able to quantify that amount?

Just over $100 million.

Okay. And then... in terms of the underwear commentary, um, and specifically private label, I think last time you had mentioned that, uh, opportunities were somewhat on hold during the pandemic. I'm wondering as the social restrictions start to ease or the pandemic gets, uh, gets a little less, um, in the U S in particular, if you're seeing any progress with respect to opportunities in this vertical.

Well, yes. I mean, we're working with all our partners for future opportunities. So, um, I don't want to say anything concrete, but we're definitely looking and working on future growth opportunities to align ourselves to as we move forward into 2022. And we're very comfortable that all of the four pillars of our growth, you know, creating, you know, brilliant or North American printwear or international sales, as well as both our product label and our own brands and retail, we think All of these areas are going to see significant growth as we move into 2022.

We're poised in all areas. Okay. And then last question. And it's high level, Glenn. Your POS is tracking down 10%, yet the imprintable drivers, you look at tourism or sporting events, they're still very limited. So I just want to understand, what is filling this void? I understand some of it's got to be online and some of it's got to be national accounts. But what's filling that void? And then in terms of national accounts, are you seeing more movement towards onshoring? And is this something that could be permanent market share gains?

Retail in general, retailers are selling more T-shirts probably than they sold pre-pandemic because people aren't going to the fair. So some of that is maybe double dipping a little bit, I would say, because people are going to buy so many shirts a year, right? So And they have to buy them because they're staying home and there's more leisure, etc. So they're looking for places to go get them instead of buying them online or buying them at retail outlets. So that's what's happening. But then I would say that the overall market has grown because of the onset of all the online availability of people to buy screen printed t-shirts. Digital printing has given them an opportunity for people to buy onesies and twosies that they could never get before. So the market has grown. You know, and as I said earlier, is that when it recovers, you know, we just don't know how much it will come back and how much it will recover, but it's definitely going to be very opportunistic for us, I think, as we move in. And as far as the supply chain, you know, I guess we're domestic supply. I think that's also going to be a key factor. Look, a lot of the products that we sell are at once. They're in our warehouses. We carry the inventory. So taking the risk to go buy from Asia, you de-risk this whole thing. And all of our shirts, regardless of what brand you're buying, basically we have products for every outlet. We have fashion shirts, basic shirts, and they all have tearaway labels. So it's very easy for any fashion brand to basically take one of our products, tear the label out, put their brand in, and resell it to consumers. So we're well-positioned. I think even from the supply chain to continue growing both from a way of a pre-work perspective and as well as to support our global lifestyle and our regional partners.

Thanks very much. Thank you.

Thank you. And our next question comes from the line of Jim Duffy from Stifel. Sir, your line is open.

Thank you. Good afternoon. A couple questions for me. Rob, to start, Revenues in the first quarter relative to the first quarter of 19 active wear down 2%, hosiery and underwear down high teens. Do you expect that rate of change relative to 2019 will continue to improve or, you know, was there some benefit from restocking that may have made that, you know, artificially high in the first quarter?

And then we did talk a little bit about the restock in the first quarter, right? So from a distributor perspective, we saw about $50 million restock impact in the quarter effectively. If we look at Q2, I'm not so sure that we're going to see that given the way things are unfolding. So I think that's one benefit I would call or one difference I would call out, Jim.

Okay. And then a question on the channel partner inventories. You guys have spoken about the printware market, 40% below 2019. Can you comment on where it stands with retail channel partners? Are retail channel partners yet restocked to be up with demand, or are there more quarters you think of supply chasing demand in the retail channel for the hosiery and underwear business?

I would say they're in bounds. relative to the size of the business we have, because obviously our underwear business is much larger today than it was, you know, in 19, so just a little bit more inventory to support those larger sales, but it's in balance.

Okay. Thank you.

Thank you. There are no further questions at this time. I will now turn the call over back to Sophie. Please go ahead.

Thank you, Rachel. Before we leave you all, just a quick reminder that we will be holding our virtual annual shareholders meeting tomorrow at 10 a.m. Eastern Time. So with that, I'd like to thank you again for joining us today, and we look forward to speaking to you very soon. Have a good evening.

This concludes today's conference call. Thank you for participating. You may now disconnect.