Welcome to the Q2 2018 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 of Investor Communications. You may begin.

Thank you, Paulette. Good morning to all, and thank you for joining us. Earlier this morning, we issued a press release announcing our earnings results for the second quarter of 2018. We also issued our Interim Shareholder Report containing management's discussion and analysis and consolidated financial statements. These documents will be filed with the Canadian Securities and regulatory authorities and the U.S. Securities and Exchange Commission and are available on our website at www.gildan.com. On the call today, I'm joined by Glenn Chamandy, our President and Chief Executive Officer; and Rhod Harries, Gildan's Executive Vice President and Chief Financial and Administrative Officer. The conference call will begin with Rhod taking you through the results for the quarter and our business outlook for the year, after which a Q&A session will follow. Before we start, let me remind you 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 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, Rhod, I'll turn the call over to you.

Thanks, Sophie. Good morning, everyone, and thank you for joining the call. We were pleased with the results we announced today having generated record second quarter sales and EPS and all on an organic growth basis. Our sales increase for the quarter was driven by strong double-digit sales growth in activewear reflecting increases in several areas. We saw continued strength in higher-margin fashion basic products, a 35% sales increase in international markets, higher global lifestyle brand sales, and increased activewear shipments to retailers. Sales growth combined with SG&A leverage and the benefit of a lower share count translated to higher than anticipated EPS growth in the quarter, even after absorbing higher raw material and other import costs, as well as the impact of some supply chain headwinds which we have been managing through well. More importantly, our year-to-date financial performance gives us increased confidence that we will be able to deliver mid-single digit sales growth for the full year and the higher end of our EPS guidance range. In addition, free cash flow is coming in ahead of plan, well on track to feed our initial guidance. During the quarter, we made good progress in executing on our share repurchase program and completed it in July. Consequently, we're increasing our normal course issuer bid to up to 10% of our public float. Now, let me take you through the details of our second quarter results before elaborating further on our updated guidance. We generated $764 million of sales this quarter, up 6.8% over last year, which was driven by a 17.3% rise in activewear sales. The growth in activewear was due to higher unit volumes, higher net selling prices and favorable mix, driven by fleece and fashion basics shipments. As I mentioned earlier, sales growth momentum in international markets continue…

Thank you, Rhod. That concludes our formal remarks. Before moving 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 question. We will circle back for a second quarter of questions if time permits. I'll now turn the call over to the operator for the question-and-answer session.

And our first question comes from Kate McShane from Citi. Please go ahead.

Hi. Thank you. Good morning. I was wondering if you could walk us through some of the primary drivers of the higher input cost and how you're thinking about efficiencies within the supply chain to offset that and pricing going into the second half and next year?

Kate, it's Glenn. The higher costs are mainly related to establishing and building up capacity. We basically have significantly increased the capacity this year on some of our core products. To give you an example, our fleece men's capacity we've increased since the beginning of the year by over 50%. So, its cost associated really with training and some raw material purchases but mainly in the training area. And there's also – at the same time, it's not only supporting a big increase in our core business supporting our basic fleece volume in our printwear channel, but we're also supporting launch of two new fleece private label programs and one large underwear program. So, it's more a function of training really at the end of the day and the time it takes us to build up the capacity and train the people. So it's – once it's established and running, I mean, that will go way as we go forward in 2019.

Okay. Great. Thank you very much.

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

Thanks very much and good morning. Glenn, just with respect to your activewear performance, both in quarter and looking to your revised or raised guidance for the rest of year, could you speak to what's driving that outperformance? I mean, are there also some shelf space or new program wins in this? And how should we perhaps think about the evolution? And then part two of the question, the $85 million drag on sock, higher than it was, but are you comfortable that it's now contained or any ripple effect from the mass program exodus contained? If you could just help us think about those two issues.

Okay. Well, look, I think we've – as a company, we've grown our business really from the base of our growth is somewhat the acquisitions that we've made over the last three, four years – I mean, Comfort Colors, American Apparel, our Anvil brand – I mean, these brands – our investment in yarn spinning that we made to build up our ring-spun capacity. Just taking it back, we're producing today – just give you an idea, in fashion 30% of our volume today is in the fashion segment in terms of our yarn capacity. So three years ago, we didn't produce any of those products, and we've made capital investments we thought were to support the future opportunity in the market, and we complemented that with acquisitions and products in our line to support the growth. So, we're just reaping the benefits of our positioning and seeing our fashion basics grow in all categories. At the same time, we're very excited about our international growth. It's up 35%. Our e-commerce business is growing as well. We had over 100% increase in our e-commerce sales in the quarter. So, we've really positioned ourselves, I think, to support growth. And at the same time, we're looking to also support additional opportunities as we move and look at taking advantage of some of the shifts in the market in terms of private label. So, in all these areas, we think we're well-positioned. It's reflected in terms of the growth that we have this year, and we see that that continuing through 2019. And on the sock side, we planned obviously to have reductions in socks. I mean, our licensed branded socks are a little weaker than we anticipated. But overall, I think we really planned to take that out of our forecast.…

Great. Thank you, Glenn. And then, if I could just switch to supporting some of that growth, obviously your selling capabilities and the challenges in Nicaragua currently. Could you frame up for us the flexibility within your system or within your capabilities with respect to sewing? And perhaps how much worse it would have to get in Nicaragua for it to become a real point of concern or put at risk some of your thinking?

Okay. Well, maybe to start with is that we haven't lost any production based on our production plan. In fact, we've actually increasing it because, like I said, we're expanding our fleece production, we're focusing on these new programs we have. So, we're actually exceeding our expectations in production that we set forth in the beginning of the year in our internal manufacturing plan. So, just putting that as a moot point. Now we've definitely incurred a little bit higher cost because we've transporting goods instead of using road to get to Nicaragua. We're going through Costa Rica. We pretty have a pretty diverse supply chain. We keep enough flexibility in our supply chain to absorb these types of situation, so it's really not, I think, affecting our ability to service; it's more affecting a little bit of our cost that's going to flow through, and it's minimal in terms of what the actual cost is from the Nicaragua situation, it's a couple of pennies in Q3.

Great. Thanks, and congratulations.

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

Hey. Good morning. I actually just wanted to follow up on a couple of the topics that you've already touched on. First, I guess just on the SG&A side, wondering if you could quantify the amount of savings from your efficiency programs that were realized in Q2. And then how should we think about 2019 in terms of the programs that you've already established and are going to impact Q3 and Q4 flowing into 2019?

Right. Look, we're still in the integration mode. As we know, we're basically in our organizational realignment. It won't really be fully complete before sometime in Q2 next year. So, we're going to continue to have additional SG&A savings based on our realignment. So, our objective is as we go forward to next year to continue investing in our distribution, our e-commerce, and our activewear growth, but at the same time, we think there's still opportunities to leverage our SG&A. So, in a perfect world, we'll be trying to keep our SG&A actually flat for 2019. That will be a challenge, but we're going to be pretty close to flat as we go into 2019 to answer your question.

Okay. That's helpful. Thanks. And then, I think you said on the private label side you've secured three contracts in fleece and in underwear. Can you just confirm that and sort of an outlook for private label over the course of the next 12 to 18 months? And then, of the contracts you've established to this point, how different did the economics look on those projects versus your existing printwear business?

Well, what we said is that we're going to invest our capital where we can get good returns. Part of getting good returns will be making sure that our business is right-sized to support that business, and that's what we've done since the beginning of the year. So, we're very confident that with our low-cost manufacturing and everything we have in place that we can get good returns on capital to support this opportunity in the market. One thing I can tell you is that, again, part of our long-term planning, I think, and where we realigned our business, we saw the world changing six months ago, to be perfectly honest with you. And one of the strengths of our company is how we react. And I would say that there's a couple of key drivers to that, and one is that e-commerce is never going to go away and it's going to continue to grow. So, we need to be – establish ourselves to be able to support that opportunity. Two, I think is that brick-and-mortar is basically going to continue to focus on private label, and we see that throughout all of our customers, they're expanding the private label brands. Three, I think that brands that are going to survive in the future will continue to focus on a direct-to-consumer strategy. And we believe that nobody is immune to this that even well-established brands in all segments, including mass, are going to continue to lose to private label. So, we've taken this and looked at how we can invest in our e-commerce strategy, our distribution, and as well as making sure that we right size our SG&A to support the opportunity, and make sure we can capitalize on future sales in this segment. So, I think we're we'll-positioned and we're very confident to deliver our mid-single digit growth as we go move into 2019.

Okay. Appreciate the color. Thank you.

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

Hi. Thanks for taking my questions. Just on your view on the future of branded programs; obviously, Gildan has a significant base of branded programs still within its business, so maybe your thoughts on how that unfolds. And in future years, should we expect that branded business to continue to taper? I'm talking about the residual Gildan programs and Gold Toe programs and maybe some of your license programs.

Well, look, we're definitely 100% focused on all these activities. I mean, really, if you look at the way our business will unfold in the future, I mean, our license business we feel very comfortable on its growth trajectory. I mean, it's just sort of in, I guess, a wait-and-see mode right now in terms of new opportunity and expanding our distribution as we look forward into the future. Our Gold Toe business, we're still driving it. We have the – we're reinvigorating the brand and spending money to support it. Our Gildan brand is still relevant in a lot of channels and distribution from mass all the way up to e-commerce. So, we're going to continue to support all these initiatives. But the one thing I think is where we see really the opportunity is how we can support the e-commerce side of the business because that's really where we think the market will be in the future, and that's where we're really investing our capital right now. So, American Apparel brand basically is growing tremendously in e-commerce. We've launched basically a direct-to-consumer in over 200 countries. We've expanded our footprint and product offering in the American Apparel – product offering to direct-to-consumer customers. So, we're going to continue to look at selling our products in every one of the channels and distribution and supporting our brands. And the only nuance of that is that when you look at mass and as mass consolidates into private label, they're still selling 70% of all the underwear that's sold in the United States today, they're selling 70% of all the socks. So from a volume side, that's really where we still see private label opportunity being a big opportunity for us because it's just the sheer volume of opportunities. So, these other areas are going to continue to grow, but we're going to move them into e-commerce and better stores, the upper department stores tier. So, I think that's maybe where you need to look at it in terms of where you really see the opportunity that's going to move the needle for the company as we go forward.

Okay. And I just want to just dig a little bit deeper on your thought about what the future looks like with respect to private label particularly in some of these more basic categories. So, if we look at the data for – and you can correct me if I'm wrong, Glenn – but if you look at the data for decades in some categories call it men's underwear, private label has never really seem to take off. There's been a variety of initiatives and attempts to have private label occupy a bigger portion of the mix, but it hasn't really seem to have done that. So, is there any evidence today aside from perhaps what is a new wave of private label like is e-commerce really the difference maker in this?

Look, I think what we'll end up having is that you'll see expansion in private label amongst mass retailers as you go forward. Definitely, it's traditionally been a branded business, but as you go forward, I think that the investment and the commitment amongst major mass market retailers is there. And at the end of the day, they're the gatekeeper to the consumer. So, if they can drive consumer behavior just like e-commerce companies can drive consumer behavior based on where your positioned on their page. So, both of these are somewhat the gatekeeper ultimately to the consumer. So my belief is, is that the commitment in terms of driving private label is going to be something that will continue to grow. You can see it as you walk in the stores, there's – to more relevant brands. There's more commitment. It's not no-name brands. There's more thought process in merchandising and developing putting into the product. So, I think it's here to stay personally. And the other thing you have to take into account too is that most mass-market retailers also have extensive e-commerce sites and invested heavily in e-commerce, where they're looking for brands or looking for product to put on their e-commerce sites. So, on the other side, that's the opportunity where because from the e-commerce perspective it's a virtual world where as you're working on your floor basically, you have limited floor space so you want to sort of control the consumer to sell the products that are sort of your own house brands. And I think that's maybe the way you look at it That's why we're investing so heavily on our e-commerce side because there's not one retailer that we cannot sell all of our brands to if we wanted to. That's from the Walmarts, the Coles, the Penneys, Amazon. I mean, there's companies popping up every day that are e-commerce sites. So, once you have the distribution capabilities, the world is endless in terms of opportunity to sell your brands. The issue is that, I think mass is going to consolidate and brands are going to become less relevant in brick-and-mortar. That's just my view of it, and that's sort of where we're betting our future and we're willing to support those brands as we go forward.

Okay. And just one quick one here, Glenn. I'm just having a little bit of trouble following the messaging. So, your view is that Gildan has brands and those brands are – they may be under review in some cases but Gildan's view is that if they are they can replace that with private label. Is that a fair way to characterize it?

Yes. That's correct. And I think that the brands that we have, if you look at the Gold Toe or our licensed brands, they're really not mass brands, right? They're national chain and department store brands. So, they're going to continue to survive in our world, right? When you look at where the other Gildan brand in mass it's going to continue to survive. The question is, is it going to be as relevant in brick-and-mortar as it's going to be online through the Amazons, for example, or through a walmart.com or et cetera. I think that's maybe the way to look at it. So, a combination; we'll continue to drive not just our Gildan brand but we have Anvil, we got Comfort Colors, we got American Apparel. We have a slew of brands basically that I think are relevant to support e-commerce. At the same time, we'll focus on mass market private label.

Thank you.

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

Thank you. Good morning. I just wanted to dig in a little bit further on the private label shift, and I just wanted to get a sense as to, you've cited certainly like an impact on socks from a retailer shift towards private label. Can you just talk about what you've actually seen so far on the underwear side?

Well, right now, we haven't seen a big shift in underwear. We see some underwear private label growing in some of the mass market retailers, but we haven't seen – there hasn't been a major shift yet. I think that's still on the incubator stage. There's been quite a bit of activewear that I think has already made that shift and all across the mass market channel, but I think it's in the process basically of growing.

Right. Okay. So, you would expect that, just based on your previous commentary that it's something that you would anticipate happening over the next sort of 12 to 18 months or whatever the case may be?

I think in every category in mass, you're going to see extensive private label.

Okay. Okay, thank you. And then just secondly, just want to talk a little bit about the gross margin evolution and kind of how you see that impacting or evolving through the year. I mean, clearly, you've had some higher raw material costs and some input costs from disruptions in Nicaragua. Are you able to put through price to offset that in the back half of the year, or do you think the situation just sort of resolves itself, I guess, price with respect to cotton, and then also Nicaragua situation, is that something that is improving?

Well, I guess the incremental costs that we have associated with the build-up of our manufacturing capacity to support our activewear growth as well as these new programs, I mean, that's factored in to our margin in the second half of the year. As far as future pricing will be based on other input costs, cotton, inflation, and we'll see how that plays out as we move into 2019.

Okay. That's great. Thank you.

Our next question comes from Patricia Baker from Scotiabank. Please go ahead.

Yeah. Thank you very much. I have a follow-up question on the private label. The contracts that you said you've already secured, will we see those rolled out into your customers in the fourth quarter? And then, secondly, do you anticipate securing even more than those four contracts throughout the second half of the year?

No. At this point in time, we won't secure anymore business for this year but we're definitely looking for securing new programs for 2019, obviously. And these programs will roll out end of Q3, beginning of Q4.

Super. And then just another, I'd be interested in your viewpoint. Glenn, you've talked a lot about your view that the mass channel is really moving extensively towards private label and I'm wondering what your view of the private label is. Do you think that there's a shift on the part of mass from going from what was in the past a generic approach to private label, and now they're looking at private label to have a more differentiated and exclusive product as opposed to just simply private label?

I think private label is more the way I think the market will materialize, to be honest with you, because it's – if you see, like for example, some of the other mass market names that are coming up, the marketing strategies, it's definitely much more professional and it's not a no-name brand like it historically was in the past. So, I think there's a lot more energy, investment, and thought put into building these private label brands. You see that on online retailers as well as the brick-and-mortar today. So that phenomenon, I guess, is going to make that marketplace, I think much more brand-oriented even amongst the private – like a private label becoming a brand and the investment behind it – I mean, that's just the way I see it happening. And I don't know if that answers your question, but it's definitely relevant.

No, it definitely does because you're thinking about it the way that I'm thinking about it which is that in the past there was little effort put behind it, it was low-cost, and it was just, as I said, simply generic, and it's got a lot more involved in it at this point. Thanks.

And even more so that it's looking – it's going to become more even premium like – although it's been generic in the past, now I would say you'll find better quality products, more features in the garments, things that will differentiate even traditionally you saw from brands. So, there's a lot of emphasis put on the quality of these products as well. So, it's really changed – I think it's going to change the landscape as we see in the future because it's not just going to be a price. It's also going to be a value and quality proposition as well.

Exactly. Thanks a lot.

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

Thanks. Just a quick one on just kind of the operating margin outlook for the back half of the year. With kind of pricing you've taken in the first half and higher input cost that you're alluding to, how do you expect that to float in Q3 and Q4? How should we think about margins coming through?

So, if you look at the margins in the back half of the year, Saba, I mean, as we've said, we've taken our guidance in the operating margin which we think is going to be strong, from a slight improvement to slightly down. And what's driving that really in the back half is, as we've said, we're supporting all this growth, we've got effectively manufacturing costs that's coming through to support that growth as we drive our system. We do see some higher inflationary cost coming through but you would expect that in this overall environment. And then, we have the impact of the supply chain that we commented on earlier. So, if we look at the back half of the year, we probably have in total about $0.08 of negative headwind that previously we hadn't planned that were reflecting in our numbers, and that's coming through in both quarters. But again I think – what I'd like to emphasize is that for the most part, most of this is being driven as we respond to growth. And as we move through the year, as we've upped our overall view of growth. And then obviously you got all that good SG&A reduction is also coming through. So, I think we feel very good really about the way our margins are evolving, again, as we respond to the environment and we drive for that growth.

All right. Thanks. And then just one on the sales side. In terms of your comfort with the mid-single digit growth for the back half of the year, can we maybe talk about is there any potential upside from American Apparel? And then on the flip side, it looks like the underwear and hosiery sales are, I think, down about $70 million year-over-year, if I got that right. Now, do you see a bit more of a flattening in the back half of the year there, or is there any risk at all to the hosiery side?

So, just to clarify, we've taken our guidance for the full year to mid-single digit growth. And if you look where we were in the front half of the year, so in the back half we're seeing high single-digit growth from a growth perspective. So, we see a strong back half driven by the activewear growth. On the hosiery business, we've called out the $85 million. The $85 million, I mean, obviously we're – as we roll through the year, we started to see the movement out of those programs in mass in the back half of last year, and then we see it in the front end of this year, and so that'll abate, that'll slowdown in the back half. Then we've got private label coming on. So, I think we feel good about the way things – the underwear and hosiery category, the way its evolving, we've called it out, and we think that that's – we've got a good view on that. On American Apparel, as I said in my comments things are going well in American Apparel. Glenn talked about it. We're expanding globally. We're in 220 countries now. The brand is really building very nicely. And I think as you look at the evolution of the brand, I mean, we had high double-digit growth rates in the second quarter, that's going to continue as we move through the back half and it's – the brand just continues to build as we move through 2018 into 2019.

Thank you.

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

Yeah. Hi there. Just switching gears a little bit. You guys had really strong growth in your international markets. Can you just comment on which markets were notably strong? And are you seeing similar trends internationally that you see in North America in terms of strong fashion basics growth, strong fleece growth, and then so on and so forth?

The answer is all the markets are growing well. Our European markets are growing, our Asian markets are growing, and all the markets are growing basically in through – first of all making sure that we've allocated enough capacity for these markets for the first time, I think, which is really a reflection on our growth opportunity. But also the products and the brands expansion, we've got American Apparel in Europe now. We basically are bringing Comfort Colors there. We're expanding our product offering in China. So, we really have good momentum in all markets, in all products, in all categories really to be pretty honest with you. So, we're very excited about the future of our international sales.

Okay. And sorry, and what about the trends internationally. Is like fashion basics outperforming similar to what we are seeing.

Yeah. It's almost the same story, right. I mean, American Apparel, Comfort Colors, these are all our fashion-type products basically. In Europe, because it's more mature, we're bringing more products and brands. In Asia, we're just adding more product because when we started in Asia with a pretty limited SKU base and that's our fastest-growing market right now. So, it's not as mature between fashion, non-fashion because we're just keeping up even with the core basics in that market is a challenge for us because the growth we're having. But in our European markets we're basically establishing our American Apparel, our Comfort Colors, and more fleece. Basically fleece has been a big driver of our success in Europe. So, it's a combination of both that, to be honest with you.

Okay. And then this is more just a housekeeping question, but with your increased guidance or tightening the range up on the guidance, does that include full completion of the additional 5% NCIB?

Well, if look at the NCIB, we've completed the first tranche of the 5%. And then as we go forward, we've upped now the buyback to 10%. Really, it doesn't reflect all of the completion of that program. As you look at the higher end of the range, it reflects some additional share buyback but not the full completion of 5%.

Okay. That's helpful. Thank you very much.

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

Hi. Good morning. So, wondering, you're increasing your share buyback program and trying to see what's the read-through in terms of acquisitions. How does your pipeline for acquisition looks like currently?

Well, I think that what we said earlier in the year is that our focus this year is to consolidate and realign our business units. It's obviously – it's quasi in acquisition for us from a systems integration et cetera perspective, so that's really our focus. So, I wouldn't expect any acquisitions for the balance of this year, but obviously as we complete that realignment, we'll continue to look at opportunities as we move forward into 2019. We have a full slate of opportunities. I mean, we always keep, obviously, our eyes on the market. We know what types of products or brands or distribution that can support the growth of the company, to support our organic growth. So, it's a question of timing and what's available at the time, and making sure that we can – whatever acquisition we do in the future that we look at making sure we get good returns on capital like we have on the previous ones. So, we're continuing to drive our strategy. I would say, for this year, we're going to continue to consolidate, and acquisitions you can look forward to as we move into 2019 and beyond.

Okay.

I think, Martin, the one thing you should note about upping the share buyback, that reflects the strength of our balance sheet. It reflects the strength of our cash flow. It reflects our view on intrinsic value, driven by growth longer-term. So, I think you shouldn't get confused about why we think buying back stock is a good idea effectively with these factors and then, obviously, we'll make sure we have very good flexibility to go after acquisitions that's required when we're ready.

Okay. That's fair. And just a clarification on your international sales growth, I think your sales internationally are up 30% year-to-date. How much of that is related to American Apparel?

American Apparel is still relatively small in our international volume. We just launched our direct-to-consumer strategy to provide reach in other countries, so it's relatively small. Most of our American Apparel growth is coming from the U.S. today.

Okay.

Direct-to-consumer. Yeah.

Perfect. Thank you.

Our next question comes from Jim Duffy from Stifel. Please go ahead. James Vincent Duffy - Stifel, Nicolaus & Co., Inc.: Thank you. Good morning. My question is on the activewear acceleration, it's really notable and it stands out relative to what seems a trajectory for the market. And I'm curious is pricing and perhaps anticipated pricing having any influence on the activewear volumes. Is there anything you can say about channel inventories and sell-through?

Well, inventories are in good shape. The price increases that we took in activewear were early on in the year. So, basically our momentum in the second half of the year is based on the demand for our products, the growth of our fashion business which is driven by our American Apparel, our Comfort Colors, our Anvil brand. Our fleece growth not just the North American market but that's even international markets that's one area we've really seen international grow is in fleece. Our GLB business is growing pretty good. So, it's everywhere, international is up. So basically, our e-commerce has doubled in the quarter. So, we're growing in every single category. I mean that's really what's happened and what's driving our business, so it's not necessarily the price has done it and the inventory and the channel is in good shape relative on a year-over-year basis. James Vincent Duffy - Stifel, Nicolaus & Co., Inc.: Do you characterize this as share gains, Glenn? When we look at the revenue growth how much of that is higher price per unit versus unit share gains relative to the growth of the market?

Price is not very impactful to us this year. I mean, it's couple of points; it's nothing really on the overall business. So, I mean, basically mix is driving our sales because we're selling better, more expensive items like fashion basics, more fleece, more GLB. International is growing, obviously e-commerce. So, again, it's just all the initiatives that we put forth and the strategy of the company that's driving the sales. James Vincent Duffy - Stifel, Nicolaus & Co., Inc.: Okay. Thank you.

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

Yeah. Good morning, Glenn. Just on the operating infrastructure. I want to understand timing of full support of your e-comm strategy. So just, first, is the distribution infrastructure and consolidation in Carolina, is that complete, or what is outstanding in the infrastructure investment reorg that needs to be complete through next year? Second, how long 'til we get to full capacity on RN6? And then, the Alstyle facility, just update us on the surplus capacity, and is there surplus sewing capacity in Mexico?

(00:48:26)

Just RN6 getting to full capacity.

RN6. Okay. RN6. Okay. Sorry. Okay. As far as the reorg is concerned or our investment, first of all, we've invested 100 basis points so far this year in our e-commerce capabilities, as well as our distribution capabilities. We've opened up two distribution centers to support our e-commerce. They will be fully functional. One of them is really fully functional. The second is going to be fully functional probably within the end of this quarter in Q3. So, we've really put that foundation in to support our growth in e-commerce because when we look at our e-commerce growth, we're not just supporting the existing brands. We think that there's opportunities for other brands we haven't brought to the e-commerce world which is like our Comfort Colors, our Anvil, American Apparel. For example, we have a whole slew of opportunity to continue growing that space. So, that investment is going. At the same time, the consolidation of our organizational realignment, we've jettisoned distribution centers, and other distribution centers that were supporting really our innerwear and mainly our sock business, and to have made a major consolidation. That's underway right now. And we're also investing in systems, which is the other probably the drag on our ability to move as fast because systems are always a drag but they're being implemented at the same time. So, as we move into early next year, we will be 100% realigned, having our systems on one platform and that's not just from a front-end of the business but that's also from a distribution's perspective and having the capabilities of shipping products from different warehouses, et cetera, et cetera. So, we're going to have three different types of distribution. We're going to have our mass-market brick-and-mortar customers, we're going to have our big-box distributors, and we're going to have our pick to the piece e-commerce capabilities all put in place once this is all said and done. So, it will allow us to execute on even the existing products we're selling, our Gold Toe, our Under Armour socks, and all the other products that we want to bring to the e-commerce world as we go in the future. So to answer to your question will be sometime at the end of Q1 into Q2 next year until it's fully ramped up and completed.

That's helpful.

As far as Rio Nance 6 is concerned, the factory's being ramped up. We should be fully ramped up, I would say, in the next 12 months from today. And we'll have quite a bit of capacity up and running as we start the year next year. And that's a very important part of, obviously, our growth strategy because it's going to gives us a lot more flexibility to support the fashion basics and our performance opportunities in the marketplace. And as far as our overall capacity including Alstyle, look, we've got enough capacity in place to support over $800 million of additional revenue. I mean, that's what we said in our Investor Day. All these things are in place. We're expanding not just in Rio Nance 6 but we have an expansion going today in Rio Nance 5, we're expanding Rio Nance 1, and we have a lot of growth opportunities in Mexico, which we're just waiting to see obviously how trade plays out. But we basically have room to more than double the size of that plant, we are. So, everything's in place to support the growth in the market. Obviously, we'll continue to add capacity as our sales will allow, but the capacity will not be an issue for us to support our future sales as we go forward in the next couple of years.

And that's going to lead to further efficiencies in the back half of 2019 as well then, correct?

Yeah. And that will lead to further efficiencies and also further working capital efficiencies too, believe it or not, because a lot of the fashion products and there's a big difference between producing a fashion product and a tubular basic T-shirt. So, will give us a chance with open width to keep inventory levels down, respond quickly to the marketplace. So, there's a lot of other activities that are taking place for us, the ability to improve our service to our customers. All these things will materialize as we move into 2019, and also allow us, I think, to manage our working capital in a much more effective way.

So, if I can, just one further question, just the success you called out in global lifestyle. Can you just confirm, is that about $150 million run rate and just how material that opportunity is?

Well, it's higher than that. And the opportunity I think is there. I mean, it's a function of working with our partners, but we think that's a good growth opportunity in the company. As the world changes, I mean, one thing I guess is when you look at what's happening in trade and you look what's happening in the world today, the world is becoming smaller, I think we're well-positioned for the North American market particularly to support the global lifestyle brands as they look at de-risking what's happening in China. And also what's going to happen, I think, is maybe one other point is that as you look at what's happening in China, what will end up happening is that there's going to be significant inflation in areas where people will go to, to leave China, and mainly, I would say Vietnam, for example, which would probably be the number one area where you'll see a lot of inflation because the telecom, the shoe companies. I mean, things where – China has built up a big infrastructure, they're going to move into more structured type environments. They're not going to move to Myanmar or Bangladesh or something like that basically because it's very difficult to operate in those countries. So that's again another changing environment, we think, that will well position us in where our manufacture is located and our ability to support not just our global lifestyle brands, but as well as our private label customers in the future.

Thank you.

Thank you.

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

Yes. I wondered if you could speak about the sourcing that you do in China I think for some of your Gold Toe or your Peds brands, and so how you're viewing that going forward with U.S./China trade situation?

Well, one of the things that we've done is through our divesting of the sock business that we had and we talked about, we were outsourcing, like you just mentioned, quite a bit of volume. We're actually insourcing more volume. So, although our sock business is down, we're still running our plants at full capacity by insourcing products basically that we're outsourcing in the past. So, our Peds, our Under Armour products, and a lot of our Gold Toe products are being insourced. So, we've reduced significantly our reliance on our socks that we've been importing in the past from China. At the same time, China has not been part of – as the dumping and classified as duty raise with already duties on socks coming in from China. So, from both of those areas, I mean, we really don't have any concern in our sock business.

And then, I wonder if you could just help us understand the retailer shift to private label, just in sort of procedurally, how much notice a branded player would typically get that a retailer is going to delist them or move to private label? And on the flip side of that, how long it takes to develop and implement a major private label program for a major retailer?

Look, I can't speak on the timing of it, but look, at the end of the day, when you're looking at the mass market, it's usually significantly big volumes. So, they obviously have to be planned in advance in order to support the launches of these products. It takes usually a year before they would commit to doing something with that. But we're working today to continue looking at the opportunities for 2019 still as we speak. So, you need to work pretty much like a year in advance in order, I think, to solidify and make this transition to be able to support the transition and the capacity build-up.

Thank you.

And we have a follow-up question from Stephen MacLeod from BMO Capital Markets. Please go ahead.

Thank you. I just wanted to follow up very quickly on just the situation in Nicaragua and I just wanted to get a sense as to what you've seen evolve over the last couple of months, where we are today versus where we were three months ago.

Well, look, I mean, the political situation has not really changed a lot. I mean, obviously there's a little bit of unrest. But as far as we're concerned, our plants are operating normally. We're running actually more than 100% of our capacity there today as we speak. And at same time, we did declare transportation efficiencies, and we have to work some of our plants during – we lost a little bit of production in July where we worked some of our other facilities in overtime and extra shifts to make up for what we did lose. But I don't think it's really something that I'd be concerned about as we go forward.

Okay. That's great. Thank you.

And we have a follow-up question from Keith Howlett from Desjardins Securities. Please go ahead.

Yes. On your new sewing – I presume its sewing capacity for fleece and activewear, where that new capacity is located?

Well, that capacity is mainly in Honduras which it always has been. So, we're expanding the existing facility that we had and we're actually moving product into one of our other facilities in Honduras as well just to support the growth and the opportunity.

Thank you.

I will now turn the call back to Sophie Argiriou for closing remarks.

Again, I'd like to thank everyone for joining us this morning. This concludes our call, and we look forward to speaking to you soon. Have a great day.