Welcome to the Third Quarter 2016 Gildan Activewear Earnings Conference Call. My name is Paulette, and I will 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 the call over to Sophie Argiriou, Vice President, Investor Communications. Please go ahead.

Thank you, Paulette. Good morning to all and thank you for joining us. Earlier this morning, we issued our press release announcing our third quarter earnings results and the interim shareholder report containing management's discussion and analysis and consolidated financial statements, both of which will be filed with the Canadian Securities Regulatory Authorities and the U.S. Securities Commission. These documents are available on our website at www.gildan.com. Glenn Chamandy, our President and Chief Executive Officer, and Rhod Harries, our Executive Vice President and Chief Financial & Administrative Officer are on the call today. We will begin with Rhod taking you through our third quarter performance and our business outlook, which will be followed by a question-and-answer session during which Glenn and Rhod will respond to your questions. We would like to remind everyone that certain statements included in this conference call my 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 the Canadian Securities Regulatory Authorities that may affect the company's future results. And with that, I will turn the call over to Rhod.

Good morning, everyone, and thank you for joining the call. Today, we announced third quarter results, reporting adjusted diluted EPS of $0.50 on net sales of $715 million. We delivered Printwear sales in line with the expectations we had set for the quarter. The Branded Apparel business turned in a solid performance with high single-digit growth amid a tough retail environment. We're making good progress with the integration plans for our most recent acquisitions Alstyle and Peds, and finally, we're very pleased with the strong free cash flow generation in the third quarter. With that brief introduction, let me now move on to providing more detail on our third quarter results. Consolidated net sales during the third quarter were up 6% over last year, driven by both organic sales growth in our Branded Apparel business and the impact of acquisitions. We achieved strong consolidated gross margins of 30.4%, although the benefits for manufacturing cost savings, generated by our capital investments and lower raw material costs were more than offset by net selling price, mix and foreign currency exchange headwinds during the quarter, resulting in a 100-basis-point decline in gross margins, compared to the same period last year. Adjusted operating margins in the quarter totaled 18.3%, down 150 basis points compared to last year, primarily reflecting the temporary dilutive impact of acquisition activity, which will moderate next year, as synergies start to flow through. Printwear segment sales in the quarter of $462 million were up approximately 5% compared to the same period last year, in line with our expectations. The Printwear sales increase in the quarter was driven by a $39 million sales contribution from the Alstyle acquisition, continued strong POS growth in the faster-growing performance and fashion basics segments in the U.S. with our Anvil, Comfort Colors and Gildan performance…

Thanks, Rhod. Before we move to the Q&A session, I ask that you limit the number of questions to two in order to give everyone the opportunity to ask a couple of questions and we'll circle back for a second round if time permits. I'll now turn the call over to the operator for the question-and-answer session.

Thank you. We will now begin the question-and-answer session. And our first question comes from Kenric Tyghe from Raymond James. Please go ahead.

Thank you. Good Morning. Glenn, I wonder if you could give us a little more color on the new program and the shipment delay into the first quarter. Is this simply a function of retailers looking to be very judicious in their management of inventory and inventory in the Apparel category specifically? And that's really what the timing delay is. It's not a function of any challenges on Gildan's end and it's certainly more just a function of very careful management by the retailer and that's simply what the timing shift is. And any other color you could perhaps give us around the request from the retailer for that shipment delay into the first quarter?

Well, I would say, look, I really don't want to comment on the retailer. I can tell you that we have the product ready and available to ship. So it's not a delay in our behalf. I think it's more combining the whole rollout of this program, because it's quite large, and we have a part of the program, because we manage the sock piece of it, and it's in conjunction with the overall rollout. So it's just a question of the launch earlier in the year, which we anticipated originally was going to be in December and which we have the inventory in our warehouse and ready to be shipped at this point or we will within the fourth quarter.

Great, thank you. And then, just switching gears to cotton and cotton market dynamics. Could you just confirm for us sort of how far out your hedge isn't covered with respect to 2017 at this point?

Well, I really don't want to give that information out, to be honest with you, but I would say that in terms of cotton, there's definitely cotton pressure going forward. I mean during the last call, there were still questions on where cotton was going. It's remained high. I think at this point in time, it's $0.10 a pound over 2016 as people go through 2017. So there's definitely going to be need to cover this cotton, I would say, with price increases as we go through, if cotton remains at these types of levels. So definitely, there is no downward pressure on price. I think that the realities with cotton at the range and where it's trading right now for the period of time it's been trading, there's definitely upward pressure on price as we go through into 2017.

Great. Thanks, Glenn. I'll get back in the queue.

Thank you.

And our next question comes from Vishal Shreedhar from National Bank Financial. Please go ahead.

Hi. Thanks for taking my questions. It's just on the sales backdrop, given slowing sales and understand that some of it's the market. But is growing capacity next year the right thing to do? And if so, will promotional activity or increased promotional activity be one of the tools that you use to drive volume?

Well, first of all, I would say that when you look at the sales, you got to combine them in two different groups. One is the Printwear, we'll start there first. Look, our Printwear business is good. It's not robust, but our POS is still positive. What's really doing very well for us is our fashion basics, our Anvil brand, our Comfort Color, our performance. The little area of disappointment is obviously fleece. It's slightly negative over last year, but we think that's due to weather, and hopefully, that's going to correct itself. So overall, we think that Printwear will continue to grow and take share. Another thing we're really doing in Printwear, as we go forward into 2017, is we have some major product launches and innovation in our product. We're coming out with a whole line of performance fleece. We're revamping our performance polos and adding new products and adding new styles in performance T-shirts, as well as we're significantly expanding our fashion basics segment in terms of the product offering. So we believe that we're well-positioned in Printwear to continue to grow organically with our products. Our fashion basics and obviously our international businesses has done very well. So on that side, and as well as we'll have the full impact of Alstyle and the benefit of over $70 million of sales on that side of the business as we go forward into next year. In Branded, I mean our story is quite simple, is that the market is challenged, but if you look at this year, really, the big disappointment for us is obviously the department stores and national chains really. I mean I think we're winning in a very bad market. Our POS is up in underwear 22%. Our sock POS is up. We've brought…

Okay. And Glenn, you gave us some early indications of 2017 already and you told us some of the growth drivers. But if you look at your uncertainties, as you look at the market today, obviously, we're going to lap the weakness that we experienced in 2016, what are those uncertainties? Is it FX, is it market conditions, just help us understand?

Well, I think look, we're very bullish on 2017. I mean if you look at starting off with really the headwinds we had in 2016, we had distributors destocking, which was significant in the Printwear market, we had a foreign exchange impact, we had mix, and in Branded, we had the $65 million divestiture of our private label business. So those were, I think, pretty significant headwinds we had in 2016. As we go into 2017, we're going to have new products in our Printwear market segment. We're going to continue to expand on new programs. We're going to have the – we'll have the win from the programs in Branded from 2016 going to 2017, but at the same time, we're looking to get more shelf space and new programs launched in Branded. We just launched a new underwear program of stretch cotton underwear. So we're constantly looking to and we feel comfortable we will win new programs and have also the benefit of the programs from 2016. We have $120 million of overall sales between the two acquisitions that will impact 2017. We have the accretion of the acquisitions in terms of the EPS accretion in 2017. We have the balance of the $100 million of manufacturing savings, which is over $30 million that will flow through in our cost of goods sold in 2017. We have the impact of our share buybacks in NCIB in 2016, which will help drive EPS in 2017, and we have higher cotton costs which I think will definitely make room for upward pressure on prices as we go forward or definitely stabilize and not see any price reductions in 2017. And I think, most importantly is we have very strong free cash flow. We're going to see a reduction somewhat from our historical CapEx. We're definitely focusing on our working capital reduction, and we're going to have increased earnings in 2017 as well, which will generate free cash. And what we've been pretty successful in over – not just in 2016, but in 2015, is investing our free cash in complementary acquisitions. The last two acquisitions, which is Alstyle and Peds, will be fully integrated in Gildan by December 31 of this year. So we're ready to look for new opportunities to continue complementing our organic growth, and additionally, we'll have enough free cash, not only to do acquisitions, but as well as to continue with our NCIB and returning capital to shareholders. So even in a bad market, we're going to win, and we'll continue to grow as we go into 2017. I think we're very bullish and feel very comfortable with our positioning at this time.

Thanks.

And our next question comes from Martin Landry from GMP Securities. Please go ahead.

Good morning. It's pretty clear that brick-and-mortar retailers are suffering and, to that end, I was wondering if you could talk to us a little bit about your online strategy. Just wondering are your online sales progressing as well as you would expect?

Yes. Look, I mean we're making – like I said in a previous call that our e-commerce is a big focus for the company, and this year our e-commerce business is going to be significantly up. It's going to be about 5% approximately of our retail sales. We're in the process of actually investing in our e-commerce. We're launching new websites in our Branded group this year. We're building a new distribution capacity, and we're re-lighting our sales force to continue to drive and penetrate future opportunities. So it's definitely – it's still in the small base relative to our overall size of our business, but it's definitely a growth opportunity and we're definitely going to capitalize on it, as we go forward.

Okay. Can you comment on the growth of your online sales 2016 over 2015 year-to-date?

It's up significantly. It's over 50%.

Okay. Okay. And just on the retail side, looking at next year, how's your pipeline for bidding for new programs? Are the programs, for example, for Spring 2017, have they already been decided by retailers?

Well, most of 2017, I would say, is put to bed. Look, we're excited about our positioning right now. Our products are selling very well. We're the fastest growing underwear brand in the United States. And we think that we're poised to continue to expand our products and expand our placement within the retailers. So we're pretty excited about our placement. I mean look, we're in a tough market, so we're cautiously optimistic, but we think that we're well-positioned in this environment.

Okay.

And we'll bring you more guidance when we come to, obviously, give you our guidance in February.

Okay. Thank you.

And our next question comes from Sabahat Khan from RBC Capital Markets. Please go ahead.

Thanks and good morning. Could you maybe talk a little bit about – you mentioned some of the warehouse consolidation in the Printwear segment by distributors as having an impact. When do you think we'll kind of cycle through that? Is it still a couple more quarters into 2017? And is that having an impact on margins in addition to sales in your view? Thanks.

No, because first of all, it's complete in Q3, so it's over now. And the fact is that's just a reflection of the amount of inventory that we have on the channel. So our inventory got reduced because there's a consolidation of warehouses. It didn't affect our POS. Our POS is still positive. It's just a question of – last year, we had X amount of dozens in the channel; this year, we have less than X, because there's less warehouses supporting the product as the consolidation occurred.

Okay. And then, on the Branded segment, you mentioned some unfavorable mix shift at department stores. Can you talk about maybe what products that was, and is that what you expect into Q4 as well in terms of the lower sales that you expect?

Well, it's typically a product that we sell to the department stores and national chains, which is relatively (25:40) Gold Toe as well as that big license program which is also going to that channel as well which was moved into 2017.

All right. Thank you.

And our next question comes from Mark Petrie from CIBC. Please go ahead.

Hey, good morning. Sorry, just a bit more on the Branded side. Is it fair to say that the retail environment, particularly in national chain and department store, deteriorated over the last few months and is in worse shape than when we spoke in the Q2 results?

Well, it's a little worse than we thought it was going to be. I can tell you that. Obviously, that's part of the reasons why our sales are a little weaker. And I would think even the overall back-to-school, I mean every category is down. Underwear unit shipments are down, sock shipments are down, and I think the overall Apparel segment is down. So the market is not robust, but we're continuing to be, I think, doing very well in the bad market, with 22% share gain in underwear and share gain in socks, and our Gold Toe is maintaining its number one leadership position, but just in a down market, so that's really what the way (27:02) we have to look at it.

Okay. Thanks. And so, the reduction in the Branded revenue guidance for this year, how much of that is the deterioration in the market and how much of it is the deferral of the program from Q4 to Q1?

So Mark, if you look at the reduction, I mean the softness that Glenn was talking about, again, hit us in Q3, right? So it was about $10 million that hit us in the third quarter. And then, as we look forward to Q4, we've taken about $30 million out and there's a decent portion of that that's related to retiming and the balance is related to the softness in the market in the new tier channel.

Okay. And then, I also just wanted to ask about the progress in the Mexico facility, in terms of what percentage capacity or effectiveness you're at in terms of total capacity. And then, your expectations for capacity in 2017, is it still Rio Nance 6 in the second quarter?

Yeah. So look, the Mexico plant is running as we scheduled. We've increased capacity there and we also have, I think, really got a great cost structure, which is the most promising part about everything in that acquisition, to be honest with you, it's turned out to be very good. And we have Rio Nance 6 will come on in the second quarter 2017. And look, we're still putting in the capacity that we originally planned. Obviously, we'll manage our volume growth based on our sales opportunity, but we're in a very good position right now to capitalize on all of the opportunities, our new product launches, our international growth and continue to drive share in our retail. And the Alstyle acquisition for us in the Mexican facility has not only brought us additional capacity, we think, at very favorable cost structure, but it's also allowing us to further expand our sales in Printwear in the Mexican market, which we're focusing on as we go forward in 2017, and as well as look at retail opportunities in Mexico. And also, it opened doors to other international markets outside of our current capabilities. So it's going to bring us, we think, significant synergies, and it's going to, I think hopefully, drive top-line growth for us. So it's been a great acquisition all-in-all.

Okay. Thanks very much. That's helpful.

And our next question comes from Stephen MacLeod from BMO Capital Markets. Please go ahead.

Thank you. Good morning. I just wanted to just circle in on some of the bridge that you put between 2016 and 2017 in terms of sales growth. Can you just remind us what the Printwear destocking impact was in 2016 and also, what the new product and program wins are, how it splits out between 2016 and 2017?

You want to do the destocking first?

Yeah. I mean I think...

I'll take the next (30:15).

Yeah, I mean if you look at the overall 2016, right, and effectively, what we've shown, effectively, you've got the impact of the – we took prices down, we got mix and FX that's flowing through, and we've got destocking that's rolling through our numbers. So if you look at the overall impact of that in 2016, probably about $70 million in total being driven by all of those different factors. Mix and FX is a pretty big impact. We talked about that on previous calls and we provided guidance as to what the impact will be for the full year, and we're really seeing that sort of flowing through as we move quarter to quarter.

And then, on the Branded side, in sales, there's about $60 million of wins in 2016 that will annualize in 2017.

Okay. And did I...

Plus, you'll have the full year of the acquisitions which is approximately $120 million annualized as well.

Okay. And did I understand correctly when you said that, is most of 2017 already in place in terms of potential new program wins or should we expect that there could potentially be some upside in terms of additional programs?

Well, we're still finalizing our plans for 2017 right now, and when we give guidance in February, we'll bring everybody up to date.

Okay. And then, just circling back, so on the 2016, that $70 million price declines, FX, destocking, are you fairly confident that you've cycled that heading into 2017?

Yeah, I mean I think that Glenn talked about the upsides – I talked about the upsides and Glenn reinforced the upsides for 2017, and you can see that we see that a lot of those headwinds, we're going to make, will largely be behind us, as we go through 2017. So...

Maybe the same, but the only one that's probably really, we don't really have visibility on right now is FX. I mean (32:30)...

Yeah, we don't control it obviously.

...as we get closer to the selling period.

Right. Okay. And then, you did cite for the Printwear distributor inventory destocking in the quarter, is that related to consolidation that's going on in the channel? Is there some other impact on fleece or other categories?

No, that's strictly consolidation.

Okay. Okay. That's great. Thank you.

Thanks.

Our next question comes from Derek Dley from Canaccord Genuity. Please go ahead.

Yeah, hi guys. Can you just talk about your priorities in terms of capital allocation? I mean your balance sheet here is very healthy, it's at the lower end of your sort of leverage target range. What are some of the priorities for that capital in 2017?

Well, I would say look, our number one priority is to continue to look at complementary acquisitions like Peds and Alstyle that really help support our organic growth strategy. I mean that's really I would say is the number one priority and use of cash for the company. And depending on the size of any type of acquisitions, we also will repatriate cash to our shareholders through additional share buybacks to balance our capital structure as we go forward.

And I think we see strong cash flow when we've got good leverage availability within our framework. So I think we have the ability to do, as Glenn said, focus on acquisitions and return of capital, as we move into 2017.

Okay. Okay. That's great for me. Thanks.

Thanks.

Our next question comes from David Hartley from Credit Suisse. Please go ahead. David Hartley - Credit Suisse Securities (Canada), Inc: Yeah, thanks. Good morning. Just three questions for me. First on – I'll just list them off, you can answer them as you go. First on the new doors. You expanded your (34:33) your doors late last year, early this year. Just wanted to kind of get some color on how those new doors are contributing. And maybe, you can give some color as to some doors being more important than others, and how those particular channels are doing. Second question, I just noticed online at one of your, I guess would be a, major customer, if not now but in the future, the pricing of your product tends to be higher than that of your competitors' where, as I look elsewhere in the channels, your pricing is definitely lower on some of your key products. Maybe you can provide some color there. And then, third, in terms that you mentioned about a reduction in your historical CapEx numbers maybe going forward, could you provide maybe some color there as well? Thanks.

Okay. Well look, I think the expansion of our doors is a reflection, obviously, of our POS growth. So I mean the net impact of the expansion in 2016 is driving a 22% share in our underwear business and is also driving our share in socks. So under the Gildan brand, which is what we're talking about here, that's really the result of these new doors or shelf space gains that we had in 2016. As far as the pricing is concerned, look, our pricing is – we're the price leader, I think, in both those categories. There are, time to time, you'll see a rollback or promotional activity in the market. But every day, we have a significant price advantage and value proposition relative to anybody else in the market. So we're very comfortable with our positioning. And as far as CapEx is concerned, what I refer to there is that this year, more historically, we had a range which was we spent a lot of capital, $1 billion in the last three years. As we go forward, mainly because of the acquisition of Alstyle that it's able to bring on additional capacity virtually at no capital cost for the company, we will have a reduction in CapEx next year, lower than 2016. David Hartley - Credit Suisse Securities (Canada), Inc: Great. And so, just back to the pricing issue. So you're saying that in that one particular channel then maybe it's just a promotional type event and just keep an eye on that, that should normalize?

Was it brick-and-mortar or was it online? David Hartley - Credit Suisse Securities (Canada), Inc: It was online.

Yeah, okay. So it's just promotional. David Hartley - Credit Suisse Securities (Canada), Inc: Okay. Thank you.

Yeah.

Our next question comes from Brian Morrison from TD Securities. Please go ahead.

Yeah. Good morning, Glenn. I just want to understand your 2017 comments about cost savings vertical yarn integration. You restated it's a $30 million benefit next year. It sounds like Printwear pricing may offset cotton, but I really want to understand is it your view that this benefit should flow right through to the bottom line in 2017.

Well, look, right now, we think where we feel very comfortable is that, just like this year, we've got significant cost savings going through. Historically, a lot of the cost savings were offset by price and other factors. We think that price is going to have more upward pressure than downward pressure. So there's a very good chance that this will flow through and be a benefit in 2017.

Okay. And then, second question. Just want you to talk maybe a little bit about the opportunities with the premium global sports brand. When we were down in Charlotte, we discussed a narrowing of suppliers on certain programs. I just want to know how this opportunity is progressing and could it be meaningful?

Well, it's meaningful now. We're continuing to expand and develop those customers. We have very few of them. And then we can narrow down our customer base and it's a growth part of our company. That area also hasn't been robust, I would say. If you look at the earnings of some of the big national brands basically, I mean, it's all going into the better, higher-end department stores and specialty, which has really suffered this year a little bit. So it's not robust right now in terms of our sales in 2016. Really what's driving our volume this year is our Gildan brand strategy, our underwear, our sock market share gains, but we still think that that's obviously a longer-term, viable, big opportunity for the company.

Thank you.

And our next question comes from Neil Linsdell from Industrial Alliance. Please go ahead.

Hey. Good morning, guys. I just wondered if you could comment on the international side. You talked about Bangladesh as far as increasing the capacity there, expanding the facility. Can you talk about timing of potential capacity improvements there through building – the building or any kind of acquisitions that you'd be doing and how that might influence internationals, the European, Asian growth, either from a revenue side or efficiency side?

Okay. Well, starting off with Bangladesh, I mean Bangladesh supports a big chunk of our European and all of our Asian business. So what we're doing is we're expanding the plant there. We're doubling the capacity because we need that Bangladesh capacity really to service those markets in terms of the supply chain. Our business is very strong. We grew again 15% this quarter. And one of the things that we'll continue to expand our sales will be as we introduce new products. So like we discussed in Charlotte is that we have very few product – our product offering is limited in some of these markets like China, Japan and so forth. And China, today, is our third largest market. So it's going very fast. And there's a big opportunity there for us, and we'll support that through capacity expansion. We're definitely looking to grow. Acquisitions could be part of our opportunity to grow and to accelerate the growth in our international space. And that's one of the things that we'll continue to look as we look at ways to invest our free cash as we go forward into 2017.

Could you remind us what the SKU availability is in those international markets right now? And is that going to increase as you get this (41:21)?

Well, Europe is our largest market and most mature, and today, it's half of what we have in the United States. And the other markets are less than half of what we have in Europe at this point in time. So we have a long way to go, to continue to add new products in each one of these functional markets.

I'm just wondering how much of that Bangladesh expansion is going to help that or is it really just a matter of (41:45).

Well, it's going to help huge, because look, we didn't have the capacity, right, so the plant's been sold out. And by doubling the capacity, it's going to help us to put and expand our product offering, which we're doing in conjunction with the expansion of the plant. So we'll have definitely more product in our line and available in 2017 in all those markets.

Okay. Thanks.

Great.

Our next question comes from Keith Howlett from Desjardins Securities. Please go ahead.

Yes. Thanks. I had a question on the printwear market in the United States. First thing, I'm wondering if the total unit volume of that market is still growing at what sort of rate. And secondly, I was wondering if the basic T-shirt component of that market is growing or flat or going down.

The overall market's still positive. It's not hugely positive, but we're in positive territory. It's been driven by the fashion basics segment, which is our Anvil brand, our Comfort Colors and our performance really, which are doing extremely well. That's been partially offset by the basics which are down somewhat and fleece which is a little bit negative in terms of POS because of the weather. But overall, when you take the total POS of all products, we're still in positive territory.

And is the POS measured in dollars or units?

By units.

Units, okay, thank you.

So obviously, we have less fleece POS, we have – it becomes a dollar percentage and a mix issue.

Right. I see. And then, just a question on the promotion in the Branded channel. Was the promotion larger than you originally anticipated given the weak conditions or was the promotion about as you'd planned entering the year I guess?

It was a little more than we anticipated, because – and it's different in each market, so the promotional spending in department stores and specialty channels is more of an at-once, you go as you play type thing a little bit, whereas the promotional spending in the mass is usually providing value to consumers by additional pack sizes, et cetera. So one's more planned, and one is basically a function of the weakness in the market.

Thank you.

Okay.

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

Yes, good morning, Glenn. Considering that next week a U.S. President will be elected, are you concerned that there may be a change risk that will be tied to Central American Free Trade Agreement, the Caribbean Basin Initiative and Trans-Pacific Partnership legislation?

Well, obviously, we're not – nothing has been said so far about CAFTA in terms of this race, in this presidential race. We think that even if there's an impact in our category, in our segment of labor and we're in the labor business, we're not in the industrial, auto type scenario, even in NAFTA, I don't think that we'd be impacted, because I don't think that the U.S. could provide consumers with product. So we're neutral at this point in time in terms of the – but we think the impact will be on us. And TPP, basically, is really not an impact for us one way or the other.

Okay. Thank you, Glenn.

Our next question comes from Chris Li from Bank of America. Please go ahead.

Hi, good morning. I think your biggest underwear competitor recently said that they were stepping up their investment in marketing and advertising for their new technology. I guess I've two questions on that. First, in light of this, what is your level of confidence of achieving your 10% market share target by year-end? And second is how do you factor this increase in competitive intensity in your 2017 guidance in terms of maybe having to potentially step up your investments to continue to grow share over the longer term?

Well, we continue to make investments. And we've made significant investments in our value offering even this year. And that's a reflection of the growth we have in underwear. I mean our growth rate is at 22%. I mean we're out by far stripping any initiative from any one of the other two manufacturers in terms of actual unit growth in the market. So we're winning. A lot of the – of – I guess, they're reacting, obviously, because we're successful. We like to be in a position of leadership. We have the leadership position in value, quality and price. And we're going to continue to invest like we did this year, in terms of continuing to grow our share as we go forward to next year. And we're very comfortable that we will be at our 10% target in Q4.

Okay. That's great. Maybe just a question on clarification, Glenn. Do you expect – you comment about the upward pressure on Printwear pricing next year. Do you expect some of that to flow through to the earnings line or would most of that going to be absorbed by the higher cotton costs?

I think – look, I don't want to say it now, but I think, look, if you looked at all the other aspects, the manufacturing savings, the mix, the destocking, I mean the thing I would think we would look at is that what's deteriorated Printwear this year is also negative pricing. So we have all these positive factors going in and without having negative pricing, that in and of itself will be a big windfall for us next year. And depending on the market conditions, we'll see how much of that pricing will actually be benefit in 2017. I also would say that, look, these headwinds are not just a Printwear phenomenon, because obviously, every underwear that's sold, and most of them are sold, they're 100% cotton. So there's also going to be price pressure in retail in all categories, as cotton continues to go up and inflation continues to materialize. So I think that that's not just a reflection of our Printwear business, but that's going to be over a broader overall apparel space in general.

Okay. That's helpful. Maybe just maybe quick one for Rhodri. Just on the share buyback, I noticed there was quite a slowdown in terms of your share buyback activities from Q2 into Q3, and then, I think into this quarter so far, despite the fact obviously, the share price has been kind of sideways to down. Can you maybe kind of explain to us sort of the rationale for the slowdown in the last few months, why haven't you kind of stepped up your buyback to take advantage of your under-levered balance sheet?

Yeah. Look, I mean we bought shares in the quarter. We bought 1.7 million shares. Obviously, as we go forward, we've got strong free cash flow, we've got the balance sheet capability and, as we've said, we've got the ability to focus on the various parts of our capital allocation framework, right? So basically, as we go through the year, I mean it's a big area of focus for us. And I think you'll see that time to time, we put different focuses on different parts of the framework, but over time, we're really focused on all of the legs and you'll see that come through.

And also, we're also – look, the acquisitions are still our priority that we're going to balance our NCIB with the opportunity of doing acquisitions. So we're managing these two pieces working together at the same time.

Okay. Thanks, guys.

And our next question comes from Stephen MacLeod from BMO Capital Markets. Please go ahead.

Hi. I just wanted to follow up on the last line of questioning around the NCIB. Does your guidance for 2016 currently assume that you're active through the balance of the year?

Yeah, look, we've given guidance based on where we are, as far as what we've done so far. So I think you can presume that that's upside as we go forward.

Okay. Thank you very much.

And our next question is a follow-up question from Keith Howlett from Desjardins Securities. Please go ahead.

Yes. I just had a question about rationalization within the department store channel. I guess Macy's would be a large customer of yours. I'm just wondering how you factor their store closures or closures by others into your expectations.

Well, we're obviously – our expectations have been reduced due to the weakness in department and specialty channels, right? So that's the first thing. And what we're doing now is we're obviously looking at ways to offset that decline, but like anything else, the overall market is down, and I think that's more the issue. At the end of the day, consumers will continue to buy product and find product available, and the question is which outlet or which retailer they purchase the products at. So there might be a change in the distribution, but at the end of the day, we think that we'll be well-positioned one way or the other. So they're down within a broader market as well. So I guess that's how we look at it. We're moving and we're looking at ways to continue to improve and bring new innovation and expand with all of the retailers to offset any negative impact.

Thank you.

And I'm showing no further questions. I will now turn the call back over to Sophie Argiriou for closing comments.

Thank you. Once again, I'd like to thank all of you for joining us this morning. This concludes our call and we look forward to speaking to you soon. Thank you and have a great day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating, and you may now disconnect.