Welcome to the Q3 2014 Gildan Activewear Earnings Conference Call. My name is Angela, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn your call over to Ms. Sophie Argiriou. Sophie, you may begin.

Thank you, Angela. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued our press release announcing our earnings results for the third quarter of fiscal 2014 and our Interim Shareholder Report containing management's discussion and analysis and consolidated financial statements. These documents will be filed with the Canadian Securities Regulatory Authorities and the U.S. Securities Commission and are available on our website at www.gildan.com With me on the call today are Glenn Chamandy, our President and Chief Executive Officer; and Laurence Sellyn, our Executive Vice President and Chief Financial and Administrative Officer. Our call today will begin with Laurence taking you through our third quarter performance and our business outlook for the fiscal year and will be followed by a question-and-answer session, during which Glenn and Laurence will respond to your questions. Before we begin, I would like to remind you that today's conference contains certain statements, which 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 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'll turn the call over to Laurence.

Thank you, Sophie, and good morning. Today, we announced our results for our third quarter and provided sales and earnings guidance for our fourth quarter. Our Q3 results were as projected in May, and our projected quarterly sales and earnings for the fourth quarter would be a record for any fiscal quarter in the company's history, even though the third quarter is the peak selling season for T-shirts. Consolidated sales revenues increased by approximately 13% in the third quarter, compared to the third quarter of last year, driven by strong unit volume growth in all our target markets in both operating segments. Our brands continue to achieve market penetration in retail, in spite of production constraints, which limited our ability to maximize our sales growth opportunities. Branded Apparel sales were up by 16% over a strong Q3 comparative from last year, which included the initial stocking of our national underwear program. NPD data shows that the Gildan brand achieved a 6.5% share in men's underwear in the June quarter in less than one year since the start of our first major national Gildan branded underwear program and is now the number three underwear brand in market share. We generated double-digit growth in all product categories and continue to de-emphasize private label programs. In addition, we began the ramp up of major new programs for global lifestyle brands in both activewear and socks. International sales in Printwear also grew strongly. Sales through international markets in Europe and Asia Pacific region were up over 40% compared to the third quarter of last year. Growth in these geographical markets was partially offset by lower sales through Mexico, where overall market conditions were weaker than last year. Sales growth in the third quarter benefited from the extra week, which we take every sixth year…

Thank you, Laurence. That concludes our formal remarks and now we're ready to take your questions. Since a there're number of you who would like to ask a question, I ask that you limit yourself to two questions and then re-enter the queue. If time allows, we'll circle back for a second round of questions. I will now turn the call back over to the operator to begin the question-and-answer session. Angela?

Thank you. (Operator Instructions) Our first question is from Martin Landry from GMP Securities. Please go ahead.

When we look at cotton prices, they decreased significantly in the last months and I was wondering how does that impact your selling price in the Printwear channel? I was wondering is there a risk that we can see an inventory devaluation in the future?

Well, first of all the price of cotton decreased after the June 22nd timeframe, which is the end of the crop year of 2014. So what's happening right now is that in our cost of goods, and that's what Laurence mentioned in his commentary, that we will have higher cost cotton for the first half of next year, than we did in the second half of this year and then we will start benefiting from lower cost cotton in the second half. Now the thing is that when you look at -- historically when we had a deval, the last big one, which was when the cotton traded at $2 and went down to $0.90, which was a quantum change in price; and even in the current marketing year, this year, in 2014, cotton traded between $0.75 and $0.95. So from where it is today, even though it's gone down, it's not that significant, relative to where it traded in the last fiscal year. So we're pretty comfortable with where cotton is going and as well as that, there's a lot of inflationary pressures in manufacturing in general for us and as well as our whole competitive landscape in terms of labor, transportation, dyes and chemicals. So we're feeling pretty good with our pricing. Pricing has been relatively very stable in the market. So we don't see any big impact in terms of a devaluation in the near future.

And I was wondering if it'd be possible for you to break down the production capacity for your two new plants. I was wondering how much capacity will each of these plants have.

Well, I think that what Laurence said is that the new plant in Rio Nance would be the same size. Rio Nance 6 we're calling it, and it would be the same size as Rio Nance 1. And the plant that we are building in Costa Rica will be more similar to Rio Nance 5. So this will give you an idea of scale, but collectively the capacity -- and this is all based on mix. So the footprint of our new facility will obviously be larger than Rio Nance 1 because of the complexity of some of the products we're going to be making there, which will be more fashion, polo-type products and a lot of different performance-type products, which we're in the process of developing for future product categories. So, in general, I would say that if you just make the assumption when take a footprint of 2014 and you add 40% to that number, I think that's a good realistic view of it. And if you want to quantify that into potential sales, I would say that just under $1 billion in revenue that can be generated from the textile capacities that are coming on.

Our next question is from Anthony Zicha from Scotiabank. Please go ahead.

Glenn, how long will it take for Gildan to double its market share in the men's underwear category.

I'd rather not say that to be honest with you, but I'll just say, look, we're pretty comfortable in terms of increasing our capacity of underwear and doubling it from the current levels at which we began fiscal 2014. We're projecting to have double in terms of unit sales growth in Q4. We're continuing to have more placement amongst other retailers, so we're pretty comfortable with -- we are growing significantly as we go forward into 2015. We are now the number three player in the industry and one of things I think is, we waited before we started giving market share, because we want to have a good visibility on a 12-month cycle, but we will definitely see the share gain grow as we move into 2015. And obviously we're projecting doubling our capacity; we're projecting to have a significant higher market share. Maybe one point even to add in terms of our success in underwear, I know, winding back the clock in history, when we started Gildan in the wholesale market, it took us 10 years to generate 10% market share and that's the time we went public in late 1998. So over -- our ability and our success so far in terms of the share we gained in such a short amount of time just gives you an idea of the huge momentum we have, our capabilities, our cost structure, our quality message. So we're very excited about our growth in underwear as we go forward in 2015.

Okay. And with reference to Q4 results expected to be blockbuster? Could you give us some color on terms of your pipeline of new prospects going into 2015 in the Branded segment? And could we see the GT brand introduced overseas next year?

Well, let's say that -- look is what's happening is that, we gained a lot of shelf space, like we said earlier in our last call but that our programs that are setting and volumes in which we will be selling into Q4, and that's one of the reasons why our underwear is doubling, our Gildan brand is performing fantastically. I mean our Gildan brand now is going to be the largest brand in our portfolio and it's going to increase by 70% this year and in the quarter and we project our Gildan brand actually to increase by about at least another 70% in next fiscal year. And as far as our Gold Toe brand is concerned, I mean it's growing strong as well, because we're levering it not just in the socks, but obviously in the activewear and underwear and we're going to have a strong growth in Q4 of 20%. So as we look at Q4, I think you can see that the momentum we have in all of our brands will go into 2015. I don't want to comment on specific programs at this point in time, but we're definitely in the process of attaining new programs, new shelf space and maximizing the existing programs we have today. As far as Gold Toe in Europe, we don't have any plans right now in the short-term to bring that brand to Europe. We've actually started to market our Gildan brand in retail in Europe. We've had some success in a small way, and we're also selling our Gildan brand in retail in all the markets that we're selling to; our international business and part of our actual growth of our 40% increase in Europe and Asia, some of that has contributed to our retail success as well in those markets with the Gildan brand.

Our next question is from Kenric Tyghe from Raymond James. Please go ahead.

I have just a follow-up on the cotton related questions, could you provide some insights on when you are currently hedged through, through and full and further to that you've been very disciplined in terms of your pricing strategy. You haven't taken pricing in retail. Could you pacify little color on your relative competitive positioning there and your perceptions on that, given your price discipline versus key competitors?

Well, I mentioned before, as far as cotton is concerned, I think that this quarter our cotton costs year-over-year will be the same next quarter. Next year cotton will increase as it will be higher than this fiscal quarter, and in the back half we'll start to benefit obviously from the lower cost cotton. And the second half of next year, it will be lower than the second half of this fiscal year. As far as our pricing is concerned, in retail we've never increased prices based on cotton and as well as based on all the inflationary factors that are out there. So we're very competitively priced. We're priced where we think we can make very good returns. At the same time there will be zero impacts as far as we're concerned in terms of our pricing at retail based on that cotton. So I think we're very comfortable with that in our positioning and as well as our pricing and our positioning within the market.

Great, thanks. And are you – is it fair to assume at this point you're hedged through sort of the end of your second quarter next year or at least into summer of next year? How should we be looking about where you're currently hedged through on cotton?

Well I'd rather not say. To be honest with you I think but what we will commit to is that in the second half of next year, we'll have lower cotton than we did in this fiscal year.

Fair enough. And just switching gears very quickly; Laurence, you highlighted 700 basis points of gross margin compression in your Branded Apparel. Could you break out or provide some sort of bridge as to how much of that was the unexpected repackaging for key new account wins versus the expected pressures in the Branded segment?

Well, we said that the total EPS impact of manufacturing inefficiencies in the third quarter was $0.17 per share and the number that we were projecting on our Q2 call was about $0.15. So the difference is the impact of these repackaging and rework costs. Actually they were slightly higher than that, but slightly offset by more favorable manufacturing efficiencies from our capital investments.

Our next question is from Taposh Bari from Goldman Sachs. Please go ahead.

Good morning, it's Chad on for Taposh. My first question is actually on acquisitions. Obviously got the Doris deal done. You said in the prepared remarks that you are looking at other deals with the possibility of taking on leverage I guess. When you guys think about leverage related to acquisitions, can you give us some parameters around how much you're willing to take on and/or I guess as a follow-up, what are you thinking for the timing of acquisitions or do you need to get this deal completely integrated or how do you think about that?

Well, right now we're looking -- as far as we're concerned our focus is obviously to continue driving our organic strategy. We have huge momentum in every part of our business. Our Printwear business is continuing to grow with new products, our International business is growing and our Retail business obviously has got a huge momentum in all the categories in which we're selling into retail. So we're very happy with our organic strategy. The idea for us in terms of acquisitions as we really look at how we're going to complement our first phase, as to how we're going to complement our organic strategy and Doris is a good example of that where -- we've purchased Doris to get a new product category, which Gildan was not providing before. They gave us a new geographical expansion into Canada and an infrastructure to support that market. It gives us access to the food and drug market, which we think is a big market for not just sheer, but underwear and socks as well. So the idea is that we're going to be a little tactical about how we go around our acquisition strategy and make sure that we can complement our organic strategy and that's really the key focus for us as we go forward. As far as the leverage is concern, I think we've indicated that we are not planning to lever up balance sheet. We want to maintain a conservative balance sheet, but we agree that we can put some lever on our balance sheet. But at this time, we're really focusing on complementary acquisitions that will drive organic strategy and even be the brands as well as something we're looking to acquire. So, I think that's really our focus, let's say, for example/ Now as far as Doris is concerned, and this acquisition will be pretty well integrated in a couple of more months. It's an operation basically of small manufacturing facility in Canada, which we're leaving intact as we see. So the integration of it will be behind us as we go into early 2015. So there's not going to be a question of timing for us, it's a question of what the right fit is going to be.

That's helpful. Thank you. And then just a quick follow-up question on the Gildan brand, internationally. As you guys go to market, both in Europe and in Asia in the Branded kind of product, what do you see as the kind of unique challenges to those different markets relative to the U.S. where you guys have had obviously some great success so far? Thanks.

Well, the markets are relatively similar. Some of the products are a little bit different in fit and styling, but we've already adopted to that. We've had huge growth in all these markets. Our European business has been strong every year for the last five, six, seven and our Asian business is really what's fueling lot of our success. That business was up significantly, I think over 70% this quarter over last year. So we have very good success and what we're doing is just levering the same success that we've had in U.S. and that's really the whole key with our international business is that we're selling the same products to another geographical market. That might be tweaked a little bit, but we're leveraging all of our manufacturing strength and all of our core competency and even levering our brand strength basically to support these markets. So when -- our main volumes in these markets, they're currently wholesale, but we opened up a retail division in Europe, in Germany, where we have a full distribution center to add value services and we've begun to --it's early days for us there but we're making traction. We're shipping our products in Latin America in retail. So it's happening and we think that over time this is going to be a growth driver for the Company basically. But we're just levering our success from the U.S. market right now and growing those markets.

Our next question is from Stephen MacLeod from BMO Capital Markets. Please go ahead.

Just wanted to enquire a little bit about what you saw in the quarter from global lifestyle brands and national accounts, which you've highlighted in the past as good growth opportunities?

Sure. Well, we had in this quarter -- we had another strong quarter actually in both those categories. In the global Lifestyle brands, I mean our focus right now is to continue developing our Anvil facility, where we put in all the new equipment, which is fully installed and what we're doing right now is we're focusing on all the new products and fabrications that we need to provide that division. And we're going to grow significantly in Q4, but we'll have further big growth in fiscal 2015. We also began to sell socks in the global Lifestyle brands as well. So we're levering not just the activewear and underwear, but we're also levering the other product categories and classes that we can provide. And our national accounts businesses, we're working in a soft retail environment, but it showed about a 6% increase in the quarter.

Okay, great. Thank you. And then just as we look forward between now and sort of bridging the capacity gap to Rio Nance 6 coming online, is there any way to quantify like what sales opportunity you're missing out on?

Well, the thing about the missing the sales, and I guess from our perspective right now is that in retail and underwear and socks, when you aren't in stock fully, those sales opportunities basically just go away, right. Basically because it's POS driven. So we definitely in the quarter lost sales in in Q3 because of our lack of in-stocks, let's say for example. So probably it was down $15 million to $20 million, what we figured in Q3. And part of what's happened to us in terms of being able to drive the volume and which were in-stock and just need to separate those two categories. Our socks basically, we were out of stock this fiscal year and we've now installed 600 knitting machines in our Rio Nance facility. We've made a major investment and our sock in-stocks are where they need to be and underwear will be in stock probably by the end of this month, in August, the latest as we complete all the apparels in our back-to-school push. We will be back in stock and our capacity will be in line to support our future needs. So the answer to your question is that in Q3, we lost about $15 million to $20 million and those sales won't come back until next year.

And just finally, as a follow-up on that. Does that impact your goodwill with some of your retail customers?

Well, you know the thing is that our other stocks is a function of the tremendous success we had. I think that we exceeded our own expectations. We've exceeded our -- I think our customers' expectations. But one thing I can tell you is that what we've been able to do in terms of building our underwear capacity and it's not just -- people that say, we're doubling capacity. You need to get the yarns, you need to get the knitting equipment, you need to build all that labor and the infrastructure. So there's probably no other company in the world that can do what we did in three months actually to- we've trained 5,000 employees. So if you look at what we've been able to do as a supply chain partner to all of our customers, basically, I think that Gildan has proven that it can lever its supply chain muscle basically and react quickly to servicing the customer needs. And that's really our strength. And it's not just -- lot of the things that we do in terms of the quality of the products we're making and the yarns that we use are not readily available in the market because that's our whole competitive advantage as we're using better quality fabrics and better quality products than that of our competitors. So it's a combination of building all that together has really given us the, I think the secret sauce really in our supply chain that allows us to grow. So we're very comfortable, we're adding a lot of capacity, we're spending $350 million this year. We're planning to have a larger CapEx in 2015 than we did in 2014. What we said in 2015, our CapEx is going to generate about $100 million of savings over '16, '17 and '18 and next year will be a larger CapEx year in 2015. So there's a lot more cost reductions that are going to come along, make us more effective a supply chain and more importantly to support our customers' needs and continue to grow our Company, but also to make sure that we're a partner for all of our customers. So we hope they understand that. It's not great to sometimes be out of stock, but being successful sometimes is a good problem too.

Our next question is from David Hartley from Credit Suisse. Please go ahead.

Just wondering; the inefficiencies you cited, $0.17, as you continue to grow, I suspect there'll always be inefficiencies in the business until you mature out a bit. So that could be some time. But what would you expect would be omnipresent as a measure of inefficiency in terms of impact to your financials as we look forward into quarters and years?

I'm not sure if we heard you properly there, David. If you could just maybe repeat your question to make sure we understand it properly.

Sure. I'm just trying to get an understanding of what's the innate inefficiency in your production process as you continue to grow that we should expect in the coming quarters and years?

Well, the answer to that is that and I think, Laurence quantified what inefficiencies are in terms of what was our inefficiencies in Q3. We will have some efficiency -- negative efficiencies in Q4, but they're already going to be offset by some of the positive investments we made during the fourth quarter. And I think as we grow, obviously, there's inefficiencies and positive ones and negative ones, but we have a lot of positive efficiencies like I just mentioned in terms of all the capital investments that we're building today and how they flow through our cost of goods sold over the next three years. So there's always a learning curve in any time you are adding capacity or starting a new facility and that's always been the factor for Gildan ever since we've been building capacity every single year. We're always wantonly building plants. So I think that this is a little bit out of the norm in terms of what we have to do to make sure that we serviced our customers and met our commitments and repacked and trained very heavily in a very short period of time, but that's really because of the success that we had and that's something that's a little bit unusual. I can tell you one thing though. even though we've doubled our capacity, we're actually making the investments to increase it significantly from that double, but say for example, right now, so that we don't have to scramble for equipment as fast as we did this year because we actually even -- some people fly inventory in, we flew machines in to get our production up. So that's the type of Company and the type of commitment we made to our customers to make sure that we met their commitment. So what we're in the process of doing, because we just can't measure our success in underwear, we're actually going to be in a position where we've doubled from where we were last year and we're going to add a significant amount of production capacity above and beyond that as we go forward into 2015, just because we don't know how much we can sell. So if sales are stronger, we'll be able to take advantage of that and the cost of capital is insignificant to us. So we think it's a good calculated risk and that will mitigate, I think a lot of things that happened to us this year.

Okay, that's kind of what I was getting at. Thank you. Sorry about the distorting question. Second question I have is just, I would expect as your products become more complex potentially zippers, hooks, Velcro, what have you, I just wonder about the supply chain in Central America as it stands today and as you perhaps move down the road towards more complex products, how well equipped is the supply chain in general in Central America to service your needs and is Costa Rica part of the answer to that?

Well, the answer to your question is that the complexity, was even though we're adding more fashion and more product categories to our lineup, we're actually reducing our complexity as we go forward because we're streamlining our manufacturing. So for example, as we build Rio Nance 6, we make polos, we make fleece, we make underwear, we make a whole variety of different products, but then we can now specialize, because some of these products that we're producing today in which we have -- we're making performance today, we're making polos today for example, they're made in various factories. So as we consolidate those products into other -- like into our new Rio Nance 6 facility, our Rio Nance 2 and our Rio Nance 5 our DR [ph], we're going to be running much more efficiently than we're currently running today. So we actually are going to benefit not only from adding capacity, but we're going to also benefit from an efficiency perspective. So that's really the answer to your question. So as we continue to add Costa Rica and so forth, we continue to streamline our manufacturing and become more efficient and gives us ability to still allow us to have more complexity in our products. And the other thing, I think is a big differential between our businesses between, let's say, what we call retail and wholesale is really the product in the finishing area. Retail basically, it's packed in bags, it's got different finishing features, stickers when it's folded; whereas when we ship wholesale, it's printed six dozens in a solid case. So we've actually separated those activities into separate plants, that just perform retail activities and we have plants that just perform wholesale activities, so we can better capture all of our costs basically and make…

Okay. And if I may just on depreciation. I guess, we would have expected to be a little bit higher. How was that going to trend as we move forward here, particularly as your CapEx budget gets larger?

Well, it's going to continue to grow obviously as a function of how we spend. I think that when you look at our spending, we're going to have two big years of spending in 2014, 2015, and probably pretty significant still in '16 and then our depreciation will grow, but at the same time, we're growing our sales. So hopefully -- or not hopefully, but it should be constant percentage of our sales.

Thank you. Our next question is from Derek Dley from Canaccord. Please go ahead.

Yes. In relation to you guys doubling your underwear capacity next year; is that going to come from new retail wins or market share gains at existing retailers or a combination of both? Can you just give us some more color on that?

Well, a lot of the capacity in which we've increased our underwear is even to service the programs we have today. In this fiscal year, we basically were able to obtain new programs and new wins. That's why our fourth quarter basically we're having a double in underwear sales and 30% increase in our Branded business. So a lot of new programs are coming in now. We still anticipate a lot of new opportunity into next year. The one thing we haven't quantified is really how much opportunity that's going to be and that's the reason why we're pretty bullish in -- we feel comfortable with the capacity we have now in terms of doubling that rate. That's pretty well going to be committed to as we go forward. And then the big question for us is going to be is how much more can we bring on for next year and that's why we're in a position even to add additional capacity as we go into 2015, because we haven't solidified all of those programs past the double. So whatever we put in capacity in place, that's pretty well spoken through the new wins and the new programs we've currently communicated with our retail partners and the question is how much more can we do after that. That's the question that we still haven't answered yet.

Okay. And then just moving on to the margins on the Branded side. The inefficiencies this quarter were about 700 basis points. Going forward, are we going to see that? There's still going to some inefficiencies over the next couple of quarters, but are we going to see that decelerate or should -- we shouldn't be using that 700 basis points going forward?

Yes, I would say, look, we're going to have -- definitely, we're going to have some inefficiencies but we're going to have, as I said -- we're going to have cost reductions going through too. But basically a large share of the training, the rework and those types of one-offs basically, they won't happen as we go forward. But we also have a certain level of building as we go forward because of the new facilities and so forth, but those were really, I would say, one-off.

You should definitely expect to see an improvement in Branded Apparel margins in Q4.

Our next question is from David Glick from Buckingham Research. Please go ahead.

Yes. Question on gross margins, Lawrence. It looks like implied in your guidance is roughly gross margin in the 30% range, which you did achieve one quarter last year. Obviously, you had manufacturing efficiencies and changes in cotton that impacted this year. But based on your comments on FY '15, it sounds like cotton is going to be relatively neutral, if not positive. But how do we think about the run rate of your gross margin? Is Q4 kind of a representative quarter for you? So that's really question number one. And then number two, we have a pretty good line of sight on your capacity expansion through FY '17. Obviously '16 and '17 are big ramp-up years, but how do we think about the capacity in FY '15 versus FY '14? Thank you.

Well, I'll answer the capacity question first. We're still significantly increasing our capacity with the existing footprint. Rio Nance 1 is going to be fully ramped up by the end of this fiscal year. And it didn't run at a very high rate during the course of this year. So all '15 will be supported by the capacity build of Rio Nance 1. And then as we begin '16, Rio Nance 6 will come online and support really our build up for '16 and then we'll be supported through Costa Rica as we get into '17. So we have a good plan in terms of managing our capacity growth. We think we have enough capacity to support the next year and we're also sitting with enough inventory basically we think to also support the year. So part of our inventory build a little bit is to support additional sales as we go into next year as well.

So is that fair to say you have a double digit increase in capacity for FY '15 versus FY '14?

Double digit? I don’t want to -- look, we're going to give our guidance in December, I would say. That's the first point. And the second thing is, is that look, we have significant capacity in '15 to support our demand and I think that's where we're at. But it's a significant increase over '14.

Okay, great and Lawrence, on the gross margin?

So on the gross margin, our gross margins in Q4 will be a little under 30%. Going into next year, I guess; we'll provide our guidance in December, but there will be positive factors impacting margins as we go forward, which will be the benefit of the cost reductions from the capital expenditures, non-recurrence of transitional inefficiencies we've experienced this year, improved mix, but how all the factors will come together in margins for next year, I think we'll leave that till we've done our budgets and we provide our guidance for next year.

One last quick follow-up on Costa Rica. Is that FY '17? Has that plan changed from the original – when it was originally supposed to come online or that was the original game plan?

No, look, we're going to try and bring it on as quickly as possible. The reason why we're pushing forward first with Rio Nance 6 is that it's a new hub. We need to get permits, we need to get certain things. Let's say for example that we just don't feel totally comfortable we can rely on it coming on like we originally planned, in case of some slippage. So we're working to bring it on as quick as possible. So that's why we're saying '17. It may come quicker if we work quicker. We're not stopping to build the plant. We're going full speed ahead as we originally planned. But the fact is that our business is so strong right now, our momentum in underwear is so strong, we just can't take the risk of it not coming on time. And it's a new hub. What we do in Rio Nance is a copy paste basically. And it's – we have the staff, we have the trained people. We can start hiring people and run them in the factory next door and as the factory comes along, just drop them in and we're already got the personnel, the staffing, et cetera, the management. So we don't have that obviously in Costa Rica because when you start a plant, you have to hire new people. So we just want to mitigate exposure. Our business is very strong and we just feel that it's prudent for us to put something incremental before it comes on. And if it comes on like we planned, great. But we're saying 2017 now to be honest with you.

Our next question is from Mark Petrie from CIBC. Please go ahead.

Just first on the Doris acquisition, is there any change required in terms of the sales infrastructure or administrative infrastructure for you to be able to achieve the sales synergies that you expect for the Gildan and Gold Toe brands?

No. I mean, that's the whole reason why we acquired the company, is because they have what we think is one of the best sales forces in Canada. So what we're going to do is we're going to lever their success, their relationships and basically allow them to sell our products obviously. So they are already calling all the customers. They sell every single channel of distribution, from mass to clubs to department stores. So really for us, it's just a quick way for us to build on their relationships and their infrastructure to support our brand strategy in Canada. At the same time, just to lever what they have and their brands in food and drug area in the U.S., there's areas for us to expand their product categories in our existing brands as well into mass and department stores. So it's a win-win. So we're not just going to lever the Canadian opportunity, but we're also going to lever some of their products in the U.S. as well.

Okay. And then just in terms of the retail market in the U.S., obviously, the market share gains have been very strong. Can you just comment on the sort of a level of competitive activity and competitive response to your market share wins, particularly coming into back-to-school, which appears like it's going to be pretty competitive?

Well look, right now we feel very comfortable with our positioning. We've been very competitively priced. We have a lot of promotional products and pallets so forth, which will be hitting the market in the back-to-school period. I'm not sure today what our competitive response is. Typically there is a lot of promotional activity in back-to-school, but we feel very comfortable obviously with our forecast and our sell-through is very strong because we can't keep the product in stock. So I'm not sure and I kind of don't want to comment on my competitors, but at the same time, we're very bullish and excited about our own sell-through. We can't keep the stuff in stock.

Our next question is from Jim Duffy from Stifel. Please go ahead.

Couple of questions. First related to a previous question about increasing complexity. Glenn, can you speak to any systems investments that you're making that might be necessary to better forecast demand and manage inventory flow in support of the scaling retail channel programs?

Well, we're constantly investing in our IT systems and infrastructure and that's an ongoing process for the Company, but we have all the systems in place from I think, an IT perspective to support all of our product categories. So systems is really not the hindrance in terms of what we're doing. We're always investing in there heavily. So even though -- our systems today are more than adequate, but we're constantly looking and spending heavily on capital to improve them and as we go along in the future, we'd make sure that we keep up to the realities of the future. So there's really nothing that's hindering us to produce these products. And a lot of the products that we're actually making today, that we're going to be running in, what we call complexity in Rio Nance 6, we're already running them. We're just making them in various factories and that's the real benefit that we're going to have by managing the complexity in one place, rather sort of than putting it in Rio Nance 5 or making performance, making polo shirts in Rio Nance 2, for example. So as we take these products and streamline them, all the other plants will run more effectively and efficiently. So we feel very comfortable in terms of our ability to continue to add new products. It's going very well for us and we're excited about continuing to add new products as we go forward.

Very good. The Branded margin started to show some nice progress in '13, but you've had these inefficiencies here in '14. So it's been a little bit of fits and starts with the Branded margins. Laurence, when would you expect the Branded margins could begin to close that gap with Printwear and what's a reasonable near-term objective for the Branded margins?

Well look, at the end of the day, our objective like we said is that in the longer-term, our Branded margins and our Printwear margins should be very close to the same margins; at the end of the day. Even objectively, longer, longer-term, we want to get the same type of returns. So we feel comfortable with our strategy in retail. Definitely this quarter we had obviously some negative efficiencies. As we go into Q3, we'll see those margins start to pick up again and as we go into next year, we're going to continue to see margin expansion in that area.

And the other thing is in addition to gross margin expansion, we'll also continue to get volume leverage and SG&A as a percentage of sales. We've put in place the whole divisional infrastructure to support our growth in Branded Apparel and as we achieve more volume, SG&A will continue to come down as a percentage of sales.

Our next question is from Andrew Burns from D.A. Davidson. Please go ahead.

Just a quick follow-up on Doris, it sounds like the educating and ramping the sales force on the Gildan and Gold Toe product is a pretty quick timeline. Just wondering about capacity and the availability to feed that growth initiative in FY '15?

Well, that's obviously -- well, first of all when we're going to be selling into retail in Canada, I don't think anything will transpire before the end of the back half of 2015 as retailers work nine months in advance and we just purchased the company last couple of weeks. So really what our focus is right now in Canada is to start selling for the fall season, which is really typically back-to-school. So we have ample time to adjust for any type of capacity requirements that we would need to support the sales in Canada.

Great. And your pricing strategy sets you apart at retail, but certainly the product quality is a differentiating aspect. How are your efforts going to educate the consumer at the point of sale in regards to the unique product quality attributes?

Well, look, we've done a combination of some extensive advertising programs to continue our awareness in all of our brands, which is both the Gold Toe and the Gildan brands. So first of all, what we're doing is we're advertising the consumer and the consumer awareness and we've seen a huge growth in our awareness numbers basically on both those brands. Gold Toe basically is now number one department store sock brand, again, which we accomplished this year through our advertising efforts. Gildan is now our largest brand in our portfolio. We're expecting to grow that by about 70% next year. So we'll continue to spend more capital in advertising to support it. As far as the in-store presentation, if you walk into any type of retail store, you'll look at our packaging, our product displays, you'll see that not only do we have a better quality in the bag, but our packaging looks pretty good too. We think that we've got the best packaging in the industry, our display cases. So we're spending a lot of time in in-signed stores, store in signs and a lot of our retailers. So we're spending so the consumer can see our product visually and if it's visually appealing to them, obviously it's proven to be successful because of the success rate we had in our sell-through. So I think with a combination of those two things, making sure that the product quality is fantastic when they bring it home, that the packaging looks great, so they want to buy our products in the store and we're spending money on advertising to support the brand, which we will continue to spend and we'll increase that obviously next year as we continue to grow our brand and our sales. We're going to continue to proportionally support that with advertising.

Thank you. Our final question is from Sabahat Khan from RBC Capital Markets. Please go ahead.

Just a quick question on the retail side. When do you think we'll see some of the more innovative and new products that are coming out of the new yarn investments that you guys are making, some of the more higher-end stuff that you guys are being referring to?

Well, we already have some of our better quality products already in our Gold Toe brand. And our Platinum brand if you walk into some of the national chains you'll find our product there. It's in our activewear categories there. So it's already in the stores. Part of our whole big push in terms of retail is to make sure that what we provide to retailers is significantly better than that's available today in the marketplace. We also have a lot of these products now going into Anvil, a performance area where we know we're selling to the global lifestyle brands, so we can support that piece of business. So it's already a big part entrenched in terms of what Gildan is doing. And the big benefit is going to be as we continue to look at driving our Printwear sales basically as we go forward. Part of our whole growth in the U.S. in Printwear is basically to continue looking to add better quality fabrics than we have been in the past and we're in the process of looking at ways to upgrade our existing product lines and use our technology basically to drive sales of Printwear as well. So, it's pretty well everywhere in the organization and we're bringing on these plants as fast as we can to support our business and we're pretty excited about it.

Thank you. And just on the CapEx side, with the Honduras facility announced today, I think you alluded to it certainly, but how does that change your kind of CapEx plans for next year?

What I said is we haven't given guidance for next year, but our CapEx next year will be a little higher than it was this year.

We have no further questions at this time.

Okay, well thank you, everyone. This concludes our call today and we thank you for having joined us this morning and we look forward to speaking with you soon. So, have a great day.