Sophie Argiriou - VP, IR Laurence Sellyn - EVP and CFO Glenn Chamandy - President and CEO.

Kenric Tyghe - Raymond James Sabahat Khan - RBC Capital Markets Stephen MacLeod - BMO Capital Markets Derek Dley - Canaccord Genuity Vishal Shreedhar - National Bank David Hartley - Credit Suisse Andrew Burns - D.A.

Davidson Mark Petrie - CIBC Chase Bethel - Desjardins Securities Gerard Feinstein - Buckingham Research Jim Duffy - Stifel Chris Li - Bank of America Brian Morrison - TD Securities Stephen MacLeod - BMO Capital Markets.

Welcome to the Q4 2014 Gildan Activewear Earnings Conference Call. My name is Collette 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 the call over to Sophie Argiriou, Vice President Investor Communications. Please go ahead..

Thank you Collette. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued our press release announcing our fiscal 2014 earnings results for our fourth quarter and full year and the initiation of our guidance for 2015.

Early next week we will be filing our shareholder report containing management’s discussion and analysis on our 2014 audited consolidative financial statements with the Canadian Securities Regulatory Authorities and the U.S. Securities and Exchange Commission, these documents will also be made available on our website at www.gildan.com.

With me on the call, I am joined by 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 fourth quarter performance and our business outlook after which a Q&A session will follow.

Before we begin, I would like to remind you that today's conference call 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. I will now turn the call over to Laurence..

Good morning.

We will review our fourth quarter results which we reported today, then our rationale for our change to a calendar year-end, our strategic pricing actions to reinforce our industry leadership position in Printwear, our guidance for the December quarter and the 2015 calendar year and our use of cash to further enhance our projected EPS growth and returns on capital, including our initiation of a normal course issuer bid to repurchase shares.

We will also discuss our positioning in EPS growth drivers for calendar 2016. To begin with the fourth quarter we have reported record results for any fiscal quarter in the company’s history and EPS growth of 20% compared to Q4 2013. Sales growth in the quarter was 6.4%.

The 20% growth in EPS in the fourth quarter compared to the fourth quarter of 2013 was due to the higher year-over-year sales revenues in both Printwear and branded apparel, the acquisition of Doris, higher operating margins in both operating segments and the year-to-date true-up adjustment to our income tax provision due to lower than projected sales for branded apparel in the fourth quarter.

Sales in Printwear grew by 3% in the fourth quarter due to higher net selling prices and more favorable product mix, partially offset by slightly lower unit sales volumes including the impact of inventory destocking by European distributors despite of strong POS.

Compared to the fourth quarter of last year, the impact from branded apparel sales of 60% growth in underwear and close to 30% growth in Activewear, together with the contribution of the Doris acquisition was partially offset by lower sales in socks.

The decline in sales of socks was entirely due to lower sales of private label and our decision to exit from a licensing arrangement. Sell-through to consumers of underwear and Activewear remained strong. And the company continues to gain market share in men’s underwear reaching 7.5% in the month of September. Market share increased to 7.8% in October.

Sales volumes for Goldtoe brands were also up from last year in spite of weaker market conditions and Goldtoe continued its upward trend of gaining market share in men’s and ladies socks. However, although up from last year, sales and earnings were both below our guidance provided at the end of July.

The shortfall compared to guidance was due to lower than projected sales growth in branded apparel. Shipments to retailers in all product categories were lower than projected primarily due to inventory destocking by the retailers and the delayed timing of servicing these programs. In addition, overall market demand was weaker than anticipated.

However, we are now seeing good replenishment orders in the December quarter. In addition, the company continues to have strong momentum in gaining new retail programs for 2015 as well as additional shelf space within retail stores and penetration of new retailers.

We will later review our assumptions underlying the strong organic sales growth in branded apparel which we are projecting in calendar 2015. As a result primarily of the lower than forecast shipments and branded apparel in the fourth quarter, inventory levels at the end of the fourth quarter were approximately 50 million higher than planned.

Consequently the company used approximately 25 million of cash for the full fiscal year after capital expenditures of close to 300 million. Before discussing our guidance, we would like to discuss the decision to change to a calendar year-end. Our historical September year-end has been based on the seasonality of the Printwear business.

The September quarter is the end of the annual selling season for Printwear, the December quarter is the lowest seasonal quarter for sales of T-shirts in which wholesale distributors issue their catalogs with their product offerings for the following year. The reason for changing from September to December are as follows.

Firstly, the seasonality of the overall consolidated sales revenues for the company is changing due to the increasing importance of the branded apparel segment.

Secondly, the company is budgeting and business planning cycle is becoming more aligned with the calendar year, which will provide better visibility on the retail environment and retail program placements. The company will also have better visibility on cotton fixation.

And thirdly, the timing of our financial year and initiation of guidance will be aligned with industry comparables. For statutory reporting purposes, fiscal 2015 will be a five quarter financial year ending in January 2016. 2016 will be our first fiscal year on a calendar basis.

However, we are providing guidance for calendar [Audio Gap] [2015] [ph] and we are providing recast comparators for prior years on a calendar year basis in the Investor Relations Section of our Web site.

Subsequent to the end of the 2014 fiscal year, we’ve decided to take major strategic pricing actions in Printwear to reinforce our leadership position in the industry.

We have decided to significantly lower base selling prices and reduce and simplify our discount structure in order to be responsive to distributors and enhance their ability and visibility to plan their business.

In addition, our strategic pricing actions will reinforce our industry leadership position and stimulate end-use demand in order to drive unit sales volume and earnings growth in calendar 2015 and beyond.

We have historically followed a strategy to continue to invest in low cost manufacturing capacity, and cost reduction project and pass-through a portion of the resulting cost reductions into lower selling prices.

The selling price reductions announced today reflect the pass-through of a portion of the expected cost savings from our investments in new yarn-spinning facilities into lower selling prices, in order to drive further growth and market share penetration.

The pricing actions are strategic, and anticipate our projected manufacturing cost reductions, but also reflect further reduction in the price of cotton futures in recent months.

We are applying the benefits of the reduction in selling prices announced in December 03, 2014 to existing distributor inventories in the form of a distributor inventory evaluation discount, projected to be approximately $45 million, which will be reflected as a deduction from sale in the quarter ending January 04, 2015.

As a result of these actions we are projecting a net loss of approximately $0.30 per share on projected sales revenues of approximately 400 million for the three months period ending January 04, 2015, compared with EPS of $0.35 and sales revenues of 451.4 million in the corresponding calendar quarter of 2013.

Sales revenues for Printwear are expected to decline compared to the corresponding quarter of last year due to the impact of the distributor inventory devaluation, and anticipated slightly higher than normal seasonal distributor destocking in the quarter due to the changes in the company’s incentive programs.

The December quarter is normally the lowest sales quarter of the year for T-shirts.

We are projecting strong organic growth in sales in Branded Apparels for the quarter ending January 04, 2015 due to new programs and the resumption of inventory replenishment by retailers after the retailer inventory destocking which impacted sales in the fourth quarter of fiscal 2014 and continued into the beginning of the current quarter.

Sales for the first quarter also include the impact of the acquisition of Doris. However margins for Branded Apparel in the quarter are projected to be negatively impacted by inefficiencies in the manufacture of retail products related to the consumption of inventories produced during fiscal 2014.

In addition higher brand marketing and advertising expenses in Branded Apparel are projected in the quarter to support holiday sales programs. Margins in both operating segments are projected to be negatively impacted by slightly higher cotton cost than the corresponding quarter of last year.

Our initial EPS guidance for calendar 2015, as per EPS of $3 to $3.15 on sales of close to 2.65 billion. Printwear sales for calendar 2015 are projected to grow by approximately 3% after reflecting the impact of lower selling prices, and sales revenues for Branded Apparel in fiscal 2015 are projected to grow by approximately 38%.

Consolidated EBITDA in calendar 2015 is projected to be approximately 525 million to 545 million.

Compared to fiscal 2014 the projected growth in EPS in calendar 2015 is due to projected sales volume growth in both operating segments, lower manufacturing cost resulting from capital investment projects and declining cotton cost in the second half of the fiscal year.

These positive factors are projected to be largely offset by the impact of lower Printwear selling prices, the impact of transitional manufacturing cost in Branded Apparel as we consume inventories in the first half of the year, inflationary cost increases and higher SG&A expenses including the impact of increased investment in brand advertising and marketing and higher income taxes.

We would like to provide more detail in some of these assumptions underlying our guidance. Firstly we are projecting a strong recovery on Printwear unit volume growth due to our pricing actions which are expected to result in improved end-use demand and increased market share penetration in the U.S. Printwear market.

In addition sales growth in Printwear will be driven by the continuing development of the Anvil product line for fashion basics which is performing strongly and other new high valued products such as Performance Polo Shirt, as well as continuing penetration in all of our international markets in Europe, Asia-Pacific and Latin America partially offset by fewer shipping days compared to fiscal 2014.

Secondly, our sales assumptions for Branded Apparel include only existing programs, the annualization of new programs obtained for 2014 and further new programs which have been confirmed.

Our projected sales growth in 2015 on this basis is driven by increased penetration in Gildan branded underwear and Activewear, growth in Goldtoe and Gildan branded socks and increased sales for our licensed brand. We have recently further expanded our licensing relationship with Mossy Oak.

The EPS impact of volume growth in Printwear and branded apparel in calendar 2015 compared to fiscal 2014 is projected to be approximately $0.60 per share. Selling prices in Printwear reflects the pricing actions in the December quarter. The projected EPS impact of lower Printwear selling prices is projected to be approximately $0.70 per share.

No change is assumed in selling prices in branded apparel. The EPS benefits of lower cotton cost in calendar 2015 compared to fiscal 2014 is projected to be approximately $0.35 per share, including the impact on branded apparel as well as the impact of Printwear.

Because of our high level of opening inventories, it will take longer than previously planned to consume high cost cotton. Cotton cost will start started to decline in the March quarter and we will increasingly benefit from low cost in futures in the second half of calendar 2015.

We are projecting manufacturing efficiencies in calendar 2015 from capital investment projects including the impact of increased depreciation to be partially offset by inflationary cost increases and continuing manufacturing inefficiencies in branded apparels due to consumption of inventories in the first half of the fiscal year.

The net effect of these factors on EPS in calendar 2015 is projected to be approximately $0.20 per share. We are on track to achieve our projected three year target of 100 million in annual cost savings from our manufacturing investments which are currently underway.

All of our new yarn-spinning facilities are projected to be in operation by the end of calendar 2015 and benefit our results in fiscal 2016. The other important factors impacting our projected results for calendar 2015 compared to fiscal 2014 are increased SG&A and income tax expenses.

As a percentage of consolidated sales revenues SG&A expenses in calendar 2015 are expected to be comparable to fiscal 2014. The higher income taxes are due to the projected higher operating income in branded apparel. The projected effective income tax rate in calendar 2015 is 4.5%.

Finally, our guidance for calendar 2015 includes the full year of EPS accretion from Doris. We are continuing to pursue further acquisitions to complement our organic growth strategies.

Earnings in the first half of calendar 2015 are expected to be flat or slightly lower than the first half of fiscal 2014 due to the margin pressure resulting from lower Printwear selling prices before the company has completed the ramp up of yarn-spinning facilities and while still consuming higher cost cotton.

Earnings growth is projected in the second half of calendar 2015 compared to the second half of fiscal 2014 due to the impact of unit volume growth, manufacturing cost reductions and declining cotton cost.

During fiscal 2014, the company has essentially completed its capital investments in the refurbishment of Rio Nance 1 the upgrade of the former Anvil textile facility, the Honduran distribution center and the new South Way North Carolina ring span yarn spinning facility.

The company plans to spend 350 million to 400 million in capital expenditures in the 15 month 2015 fiscal year and approximately 250 million to 300 million in calendar 2015. The 100 million which is the invested in the December quarter is primarily for our new yarn spinning facilities which will be ramped up during calendar 2015.

In addition to the continuing investments in yarn spinning, the other main capital investment projects in calendar 2015 are for our two new textile facilities, the new Rio Nance 6 facility and the new Costa Rica facility as well as the new cost reduction project to further significantly reduce energy cost, the expansion of storing facilities to support growth in retail and the expansion of our Eden North Carolina distribution center.

We are projecting a reduction of inventory levels in calendar 2015 although our intention is to maintain inventories at higher than historical levels in order to ensure that we’re in a strong position to serve replenishment demand throughout the year in both Printwear and branded apparel.

Our investment in inventory will also be reduced by the declining cost of cotton and lower manufacturing cost. The earnings momentum in Q4 of calendar 2015 is expected to continue into calendar 2016. The drivers of earnings growth in fiscal 2016 are expected to be the following.

Firstly sales unit volume growth in operating segments, secondly further significant manufacturing efficiencies from capital investments in new facilities and cost reduction projects including the benefits of ramping up our new yarn spinning facilities.

And thirdly we currently expect better alignment between Printwear selling prices and cotton cost in calendar 2016. Due to our confidence in our outlook and long term strategic growth drivers we announced today that the Board has approved a 20% increase in our quarterly dividend.

We have also announced that we have reinitiated a normal course issuer bid to repurchase up to 5% of our outstanding shares.

We would consider a further increase in our share repurchase program as we believe that the long term drivers of growth in our share value are not reflected in the stock price while still continuing to pursue further complementary acquisitions.

In order to ensure that we are financing flexibility to pursue acquisitions and undertake share repurchases we have increased the amount available under our bank credit facility to $1 billion.

In summary we are confident that we will regain a positive trajectory in EPS growth in the second half of calendar 2015 and that our businesses are well positioned for strong organic sales and earnings growth in 2016.

In addition we will continue to use our free cash flow and unused debt capacity to further increase our EPS growth and further enhance our returns in capital.

We are confident that our pricing actions in Printwear will reinforce our strong leadership position in this business as in the past and that we will maintain effective operating margin and returns in capital in this business as a result of our continuing major investment in our vertical manufacturing and our commitment to our brand positioning and our customers which we are reinforcing with our pricing actions today.

Also we have continued and are continuing to generate strong momentum in our branding strategy in retail with new retail programs, continuing market share gains and increasing brand equity.

And expect to continue to improve our operating margins as we complete the integration of new retail products into our manufacturing and leverage our SG&A infrastructure with continued growth in sales revenues. Before opening Q&A we believe we are close to appointing a new CFO.

The extra time has been helpful to Glenn and our new CFO should be in place for our Q1 call. I will stay on after December 31 to support my successor and ensure a smooth transition of responsibility..

Thank you Laurence. This concludes our formal remarks. Before moving to the Q&A session of the call I ask that you limit the number of your questions to two in order to give everyone the opportunity to ask a question. We’ll circle back for a second round of questions if time permit. Thank you operator we are now ready to start the Q&A session..

Thank you. [Operator Instructions]. And our first question comes from Kenric Tyghe from Raymond James. Please go ahead. .

Thank you good morning.

Laurence wondering if you could help me reconcile the conversations in terms of inventory and its impact on your realizing lower cotton cost and I think what I am trying to reconcile is you had I think you have highlighted inventory from $15 million higher than expected but because of that you would only be realizing lower cotton cost in the fourth calendar quarter.

I am just trying to reconcile the normalcy of that gap against your normal hedging position and the fact that your also carry on inventory wouldn’t appear to sort of support a push of some two plus quarters on your realized cotton cost..

What I said is that we would be expecting to absolutely max out in our cotton cost in the fourth calendar quarter. But we expect to be in very good shape in the third quarter as well in line with cotton futures and our cotton cost will start to decline after the March quarter we did cover cotton on the way down..

Thank you and just a follow up on your comments with respect to maintaining high average inventory going forward.

Could you give some sort of indication on that as to was this year a reasonable proxy of what would be sort of higher average as a percent of sales or do you think that there is still further increase to the upside looking forward by way of what will be your normalized inventory or commitment to inventory in any given year..

This is Glenn, we are planning to have reduction of inventory this year and reduction is going to come to obviously reduction in cost and as well as reduction in some categories.

But overall our inventory is in line with our growth at the same time as we exit this year and we increase our sales into '16 it will normalize the inventory levels that we need to operate on a go forward basis and it’s definitely paying dividends in terms of our service and our ability to increase market share in both segments..

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

Are you able to provide maybe some additional color on the various components of your $0.70 impact to pricing like how much of that did you get back in cotton and how much is this maybe perhaps competitive action or anything on those lines?.

I’m not sure if I really understand the question, but as we said on the call, the reduction in selling prices and the resulting distributor evaluation is more driven by our anticipated manufacturing cost reductions that will generate from our capital investments and particularly the ramp-up of our yarn-spinning facilities more than declining cotton costs.

So what we said is that the decrease in pricing in calendar ‘15 is $0.70 a share in Printwear and we said that the cotton benefit is $0.35. And then as we go forward into calendar ‘16 of the $100 million of savings that we project in our manufacturing, we obtained about 25 million of those savings so far.

The balance of those savings, the larger impact of them will come from our yarn-spinning initiative and will be benefited in 2016, so when all those pieces align, that will sort of tell the tale in terms of our positioning and pricing and our cost position in the market..

And on the branded side, can you maybe highlight some new programs that you have in place as you said some of them you have secured for 2015 calendar year?.

Well right now as we look to start off with is that maybe just looking at the big pictures and the moving pieces of that, based on the programs we attained last year, about 50 million of that will be annualized and anniversaried in 2015.

We have about $70 million of sales coming from the acquisition of Doris and we have new confirmed programs of $120 million that will flow through in calendar ‘15 which are obviously greater in size than that because that’s a portion of a flow through our calendar ‘15.

We’ve actually expanded and obtained programs in every category, we are expanding our underwear, we’re expanding in socks Activewear in all of our brands, we are getting expansion in Gildan, Goldtoe even our Secret Silks brands are expanding and we’ve expanded our Mossy Oak license which we’ve just now increased the genders in which we are able to sell from socks and underwear to Activewear and other product categories and we’ve expanded the license agreement with Mossy Oak to have an exclusive for the next 10 years based on the performance and the commitment we’re working together with the company.

We're also expanding in every single channel of the distribution. Our mass is expanding, national accounts, department stores and food and drug.

And even in genders and not just in men’s underwear, but we’re expanding in other categories like ladies and boys and girls, so all of our expansion plans in terms of being a family brand of supplier in both all categories we’re seeing expansion and the programs that we have in place, the 120 million are really all in place today, we have a significant opportunity we think in terms of still obtaining new programs for calendar ‘15 that we’re actively pursuing.

And we’re very excited about our momentum and one other thing I think is important from our overall branding strategy and particularly as we expand in our Gildan Goldtoe brands is that we’re making a major commitment to increase our advertising spend and that’s really not -- is partly to support the existing programs, but is really support the future programs which we’re going to obtain as we go forward and our commitment to build our brand strategy and position ourselves and to be a leader in market share.

We’ve seen huge growth in our underwear segment. I mean we went from 0 to 6.5% from our first program launched through July. We’re seeing continued improvement through this fourth quarter. Our market share at the end of September in underwear was 7.5%, we see another tick-up in market share in the 7.8%.

We’ve expanded and doubled our production during 2014 of our underwear, so we’re well positioned both in inventory as well as manufacturing capacity to support future sales.

And we have aspirations to see that market share continue to grow through calendar 2015 in excess of 10%, so we’re very excited about our whole retail branding strategy and we’re committed and we’re all in. .

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

Just wanted to -- just get a little more color around the de-val that you took in the -- or that you’ll be taking in the Printwear segment. And I’m just trying to really get a sense of what was the driver of that.

Was there a demand impact, was demand slowing down or was it sort of we’re seeing push back from distributors based on the cotton price declining?.

Well first of all look, we’ve always reinforced our leadership position in the channel and our decision to de-val was a combination of a couple of things, one is that we've realigned our discount structure and how we are going to market with our customers.

The way we go to market today is that we have a price list and we have significant discounts that we offer our customers that they need to obtain for various incentive programs that we have for them.

And that discount structure has grown over the years and its encouraged really a lack of visibility and our customer’s ability to plan their business, to manage their working capital, and it did well in its time but right now we think it’s time to actually change that and support it, and this is something that we work with our customers and communicate with them as we've gone through this year and listen to them and it’s our commitment to reunite our leadership position and our support to them.

We are combining this with really the strategy that's made Gildan success is to reinvest and leave our low-cost manufacturing position.

We are making significant capital investments and we spent $300 million in ’14 we are planning to spend 400 million approximately in the next 15 months, and these capital investments are basically allowing us to lower our cost, add value in our garments because there is a big part of that by we are developing our whole reinvestment strategy in other product categories in our line.

And what we have historically done is pass these savings on to our customers and allowed us to benefit from gaining market share and making it difficult for competitors to energize in this industry. So we are very committed to making sure that we continue to drive our leadership position.

We are not happy with our POS in Q4 and so far into the beginning of Q1, and we think that this is going to energize and allow us to continue to drive market share.

As our yarn-spinning comes on next year we are going to have the significant reduction in our cost structure, and as we outlined the future cotton those elements are going to continue to give us very good returns in this division as we go forward, despite the reduction in pricing.

And even in this calendar year we are still going to have very good returns in our Printwear business. .

Okay, and in terms of realigning the discount structure, is that something that was -- are you getting a lot of push back from distributors about the current discount structure?.

Our distributors definitely did not feel comfortable with the old discount structure. I think so what we have done right now is more in line with what their aspirations are in terms of going forward and allowing them to be able to have more visibility in planning their business.

One other key point is that, now we have what we consider maybe more of an everyday low price so that they can actually determine what their mark-up structure needs to be, so they can better plan their business on a go forward basis. At the same time we think that they will make our brand and our customers more competitive in the industry. .

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

Can you talk, just switching up a little bit just in regards to you guys' balance sheet, are you going to be with the big capital investment again this year, even with free cash flow positive, and then in terms of looking at potential acquisitions, what would be a comfortable leverage level that you will be willing to carry?.

Well used cash in the December quarter and calendar 2015 we indicated on the script that we are going to generate very strong EBITDA and that should result in very strong cash flow after the capital expenditures that we indicated.

And we are also in addition looking at generating cash from inventory reductions including then impact on inventory value of our manufacturing cost reductions and lower cost cotton. So we should -- strong EIBITDA should translate into a very strong cash flow in calendar 2015.

And we mentioned although I can't add anything to this but we mentioned that our uses of cash would be in addition to the increase in the dividend that we announced today we will continue to explore further acquisitions that complement our organic growth strategies. And we've initiated a normal course issuer bid to repurchase shares. .

Okay.

And then can you maybe just comment on your comfort leverage level?.

We have always said that we are comfortable to go up to two times or maybe a bit higher if we felt that we had good visibility on our free cash flows. We are going to generate a lot of free cash flow once we finish our major investments in yarn-spinning.

So even if we were to lever up beyond two times, we’d have a lot of confidence in reducing our leverage very quickly based on our free cash flow generation..

Okay, great. And then just sorry, one more, just on the retail pricing environment, I mean, the price devaluation discounts you guys are implementing are on the Printwear.

How do you see the retail pricing environment? Is it stable? Are you comfortable with the current pricing level?.

Our pricing retail is still very aggressive out in the market, we’re significantly priced under any of the other national brands and we’re very comfortable with our position to-date and we’re going to continue to drive market share.

We’re going to continue the price aggressively and we’re very comfortable with continued expansion new programs where I can’t tell you how excited we are with our developments of our retail strategies. It’s all coming together right now and we’re going to see major shelf schemes as we go through in the 2000 calendar ’15..

Our next question comes from Vishal Shreedhar from National Bank. Please go ahead..

Thanks for taking my questions, just on the strategic initiatives in Printwear.

Will the pricing reductions result in a permanent impairment in economics relative to where you were prior and then you require these ongoing efficiency initiatives to stabilize economic levels to where they were in the past? Is that the way to think about it?.

The whole basis for the pricing reductions, whilst our anticipated and manufacturing cost reductions of $100 million over three years that we projected, so based on these material significant manufacturing efficiencies, we expect to maintain very high returns in capital and Printwear in line with our historical returns..

Okay.

So the efficiency initiatives we should think of them as covering the pricing initiatives and you will get some benefit as cotton declines as well?.

That’s exactly, and the fundamentals of the business have not changed. And one of the things I think that is important is that we’re not stopping to invest in our low cost manufacturing base.

We’ve committed to have a $100 million of savings over the three year period but we’re continuing making other strategic investments to further enhance those savings and our low cost manufacturing basis.

So, that’s the strength of our company and we’ll just take those savings and we’ll reinvest part of them into better lower prices, better quality products for our customers. And in order to drive share.

And we’re very committed that we think that structurally the vision is in good form and the operating margins will continue to be as good as they have in the past..

Okay.

And in terms of buyback, just to be clear you intent to execute on that?.

Yes..

Okay.

So the entire 5%?.

We’re not going to commit to that but we’ll definitely start to buyback..

And then just lastly in terms of the cadence of ramp up for these new facilities, so that’s unchanged?.

Unchanged yes everything is on track. We've completed the Rio Nance 1 expansion when the process of building 6 which will come online in ’16 and Costa Rica will come on line on ’17..

And our next question comes from David Hartley from Credit Suisse. Please go ahead..

Thanks.

Just curious about the marketing cost commitment, what type of increase are you projecting there?.

Well, the increase is pretty significant for us, that’s in the range about 10 million to 15 million. That’s we think is relative and part of the increased marketing spend for us really is partly to support the programs we have now but is really to invest in the brand’s future.

A large portion of the spending is going to come from our Gildan initiative and we think it’s going to pay huge dividends not only to support the sell-through of our existing products but as well as to allow us to continue to generate more market share at every single one of our market segments as we go forward..

Is there some kind of pressure as you move into dealing more and more with the mass channel or larger accounts that you step up your marketing even further over the coming years?.

No, look it I mean, like anything else we invest in manufacturing, we’re investing in our brands and that’s the one great thing about our company is that that we’re always prepared to make investments for the long term. And I view this and our company views this as basically making a strategic investment to support our future opportunity.

And as we lever our success we will then build the distribution and build our brand strength. And it’s paying dividends and we’re excited about the placements we have today. We have a lot of placements that we think that we’re going to paint during the course of this year that are not in our forecast.

And we’re going to continue to drive success in our brand group..

Okay. And you mentioned in the remarks in the release about a bit of a softening of demand. Could you characterize that in terms of product categories in Printwear brand et cetera..

Well I think in both cases and in our POS in Printwear was softer than we wanted to be to be perfectly honest with you and that’s the part of our rational is to continue to look at ways to increase our unit volume which we think we will accomplish through our niche structure and pricing initiative and structures we look forward in to the channel.

Our retail environment back to school wasn’t robust, we perform well in our POS the fact is that our market share has gone up pretty good over the last three four months.

But overall in the retail climate it has not been robust, the Black Friday was mixed, mass was up and we’ve done again very well I think in the products that we sell but it's not as robust obviously as it should be, you can see that from the retailers and the ones that have given guidance in earnings, but most important thing I think from our perspective is that we’re taking share.

Our share is going up, we're getting new programs and we are very excited about the opportunity in 2015 and we’re continuing to look for new programs that we haven’t obtained yet.

And we’re not just getting our programs and or shelf space from the existing customers we’re getting new programs, new customers in all product categories so we’re expanding our branch strength but Goldtoe, our Gildan brand, our Mossy brands.

We are expanding in every single channel distribution in all segments, all genders, so we are very excited about the outcome and as we go forward to calendar '15..

And last question if I may, just price gaps in some of your key categories in branded.

How do you see them versus some of your key competitors? Aare they expanded, tightened up with or without promotional activity?.

Well in back to school there definitely was promotional activity and pricing actions from our competitors. But the good news is that we continue to take market share and that I think is really in our case is the most exciting thing about our whole retail strategy is that we’ve been typically price relatively aggressively against our competitors.

And during back to school I would say that the competitors and pricing actions were probably aggressive. But we still grew share which is the power of our brand, the quality of our products and we are really excited and this is what’s leading us to new opportunities and more market share gains. .

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

Good morning this is Chad on for Taposh. My first question is on the price cuts again, I guess I wanted to get a sense obviously you are not happy with the POS. Are these prices cuts defenses in any way? What are you guys seeing in the competitive environment because you are obviously the market share leader here.

So if you could touch on that, that would be really helpful..

The de-val and the reason why we are going to market is strategic in nature reinforcing our leadership position with our customers and making it easier for our customers to do business and have more visibility. So that’s part of it, the second part is that like I said earlier that our POS is just not what we wanted to be.

And the way we go to market today by having a higher price let’s say for example allows for I would say people to make deals, [indiscernible] and our buyers let’s say our competitors actually to move and cut deals with other customers and what we are doing is we’re actually taking our price down to an everyday low price.

So we flush anything out of the market that people can afford to do. So what is going to end up happening is that our pricing actions are going to be aggressive and they will allow our customers to have an everyday low price with our products. But it will deter any competitor from trying to undercut our pricing strategy in the market.

At the same time as we continue to make our investments in yarn-spinning and other manufacturing efficiencies, we can afford to be more price aggressive and to continue to take, to consolidate or to take share in the market. And we feel comfortable with that.

We will continue to see a trajectory in growth not only in probably our basic category which has the largest decrease in price. But also as we reinvest in our technology in our yarn-spinning and the new products that we’re bringing to market, we’re also looking at enhancing our sales through new product extensions, our Anvil brand.

So it’s much as one dimensional it's really what we’re doing is we’re making sure in the basic segment that we're priced to win and we're reinvesting our low cost manufacturing to support product expansion and innovation for our customers to give them a full package and to really develop our branch strength within the channel.

Just one last thing I think is also is that at the same time we’re reinforcing our position as well in all the other markets. Our international businesses have grown by 20% this year. We’re growing significantly in Latin America, we’re expanding and adding product in Europe and our Asian business basically is growing at a much greater clip.

So we’re continuing not just to focus on our U.S. market, but our U.S. market is our largest market and we are reinforcing our leadership position here and we will lead in every one of the markets in Gildan sales..

One follow-up, just on the Doris acquisition, is there anything embedded in the guidance in terms of the expansion of Gildan brand into retail in Canada?.

There’s nothing in our guidance except for the historical sales of Doris, but through the Doris acquisition we believe that we will have significant new opportunities for us as we go forward that are not embedded in our guidance today. And that’s maybe just to qualify that, that’s going to be an expanding share into the U.S.

expanding their brand strategy and other product segments and as well as developing and driving our existing Goldtoe and Gildan brands into Canada..

And our next question comes from Andrew Burns from D.A. Davidson. Please go ahead..

Just a couple of questions in terms of 2015 guidance, is any sort of share account reduction factored into the 2015 guidance provided? And then additionally the 125 million in new programs that you talked about, that’s less than the annualized rate, is that sort of a half year contribution and nine months contribution, what’s the magnitude there? And then lastly, you talked about the potential for unconfirmed programs, could that be material given your capacity ramp? Thank you..

Okay, as far as share repurchases, what’s included in there is negligible, couple of pennies from some immediate actions that we’re planning to take.

Can you go through the other two questions?.

Sorry, in terms of the new programs that are confirmed for 2015, the $125 million impact, didn’t know if you could characterize that, is the half year contribution or nine months contribution.

What the full annualized benefit of those new programs would be? Secondly, the unconfirmed programs given your capacity ramp, could that be material for 2015 if you do get more unconfirmed programs?.

Well I would say that typically about 70% of the programs we get in here, so I would say that of the 120 that would represent annualizing their 70% of the total annualized opportunity. And as far as the unconfirmed, look we don’t want to speculate on things we don’t have today, that’s why we didn’t put into our guidance.

But we have the capacity to support obviously and the inventory to support additional programs both in branded as well as if our Printwear POS exceeds your expectation, we have room to enhance our sales opportunity through these two avenues, so we’re going to be very aggressive to pursue new programs. We’re committed to driving this strategy.

All the stars aligned are in place and we’re making the right investments not just in our manufacturing, but we’re investing in our brand strategies and we think that the capacity is in place. And hopefully we’ll achieve and exceed the sales guidance..

Thanks and then just a quick question in terms of Printwear market share, I’m not sure if you’re willing to provide current, but either way in terms of with the price changes, is there a potential for material market share gains from current levels in your orders, your priorities when making this decision, how important was market share gains in that decision?.

We look at the overall market and one of the things that we’re going to do is by having our price strategy, the way we structured it today. One of the things that we're going to benefit from is allowing our distributors to reach out markets that they weren't able to reach out to before.

And that’s a fundamental change I would say a little bit, because they are going to be more competitively priced with our products and there are other factors and other competitors outside of our distributor channel today that we’ve always measured, so now our customers are going to have a product and a price from Gildan really to reach out to new customers they weren't able to reach out to before, so indirectly that should increase our share with our existing customers, provide them with better earnings power and better sales.

So it becomes a win-win, its win for them and win for us. .

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

Just a few follow-ups.

I wonder if you could just talk a bit about the manufacturing efficiencies, the 100 million and what you expect to achieve in ‘15 and then how much is still to come in ’16, I understand the yarn-spinning isn't until ‘16, but if you could just put some dollar numbers on it, that would be great?.

Well, we’re going to have 25 million of the 100 million going through in ‘15. And then of the balance a large portion of that will flow through in ’16 and then the balance of that will go through in ’17.

The majority of the savings we have so far are from the energy projects and other things that we've invested in, and the big yarn-spinning initiative will really impact us in the ’16 and the balance of ’17. .

The yarn-spinning is really sort of a flip of the switch at the end of ’15?.

Well right now, what’s happened in yarn-spinning is that we've ramped up a 100% our Salisbury 1 ring-spun plan, we modernized our two other facilities which is Clarkton and Cedartown, that’s what we did this year, but the major new capital investments that are really going to drive the savings for us is our Salisbury 2 plant, which is the largest yarn facility probably in the world, it’s being ramped up as we speak and will be fully ramped up over the next probably six months to seven months-eight months and then our Mocksville plant which is going to be probably one of the largest ring-spun plant is going to be start in our calendar first quarter and basically be ramped up through ’15.

So both of these initiatives are going to make a major impact on our cost structure and as well as allow us to continue to add value in our garments and drive our sales in ring-spun yarns for example as we go forward into the future. .

And which one is ring-spun? Are they both ring-spun? Or is one open-end and one is ring-spun?.

Well Salisbury 1 is ring-spun, Salisbury 2 is an open-end facility and our Mocksville facility is going to be the largest ring-spun facility in this hemisphere. .

Our next question comes from Chase Bethel from Desjardins Securities. Please go ahead. .

On the CapEx side, Glenn can you just maybe in broad terms talk to us about just the discipline you have given during the middle of a multiyear CapEx program, that's the biggest in the company’s history, to see the dollars invested well.

And then also, I think you mentioned the 250 million to 300 million being mostly the balance on the textile facilities but then Laurence in your comment, possibly new energy savings program.

So how much is there may be allotted for new energy savings programs that you may not have really spoken to yet?.

The large part of our capital is in yarn-spinning, as well as -- I mean the big projects that we mentioned are the yarn-spinning projects. We are expanding our two major new initiatives in textiles which is Rio Nance 6 and Costa Rica.

We are expanding our distribution centers in United States and then in Eden, at the same time we are investing in energy, but that energy position is completing the programs that we have put together in terms of biomass and also part of our electrical saving program that we put together.

But the bulk of the saving, a bulk of the investment is going to be in yarn-spinning in textiles, I say it would be the bulk of the capital that we are going to be investing in from this point on. .

Okay, great. And then on the Branded Apparel side, I was hoping that you could maybe help me with -- what would be the private label mix exiting calendar ’15. And then you mentioned the 10 million to 15 million of marketing spend, if I put roughly a 12% SG&A rate on the 2.65 billion, it looks more like 35 million incremental SG&A.

So maybe Laurence, can you talk to where the balance is going?.

Sorry I didn’t much understand the question. .

If you are going to have a similar rate of say 12% SG&A rate and your guidance is 2.65 billion, the difference that I am coming to is around 35 million year-over-year and there is 10 million to 15 million earmarked for marketing. .

There is the Doris acquisition and we paid lower incentive compensation this year that would be more normal next year. .

Okay and private label mix exiting 2015 in terms of the proportion of Branded Apparel?.

Look as far as the private label is down 15% probably will be our rate. Our focus is to divide, divest ourselves of private label and part of that also is we have stopped selling one of our licenses, we gave up a license that we had in socks under the new balance license. But our whole focus is obviously to continue to driving our brand strategy.

And we basically are pushing to sell Gildan and Goldtoe products, so we've given up some private label. .

Okay, if I can seek one more in.

Laurence you used to give a sensitivity of a 1% change in Printwear pricing, do you have a number like that today?.

Well, it’s 1% of the Printwear sales.

Are you talking about the pricing or are you talking cotton? What are you talking about pricing?.

1% change in Printwear price, the EPS impact of that, I think last time it was around $0.11 or so..

So more like ’15 today..

And the next question comes from Gerard Feinstein from Buckingham Research. Please go ahead..

Hi Laurence this is Gerard Feinstein on for David Glick. Can you help us bridge the gap between the consensus EPS of $0.42 for Q1 and the $0.30 loss that you’re looking for. I know the inventory devaluation is like 45 million I believe.

So if you could you break out the balance of the difference how much is marketing, how much is price reduction, manufacturing efficiencies, et cetera. Thank you..

Okay, well the de-val as we mentioned is 45 million, we also mentioned the Printwear destocking which is about $0.10. The impact of higher cost cotton and the consumption of inventories with the transitional manufacturing inefficiencies between the two of them that would be another $0.10.

SG&A including the brand advertising and marketing to support holiday sales would be maybe $0.03 or $0.04. And then on the positive side, we have growth in branded apparel sales volume and the accretive impact of Doris. So these are the positives that will drive the branded apparel growth in earnings in the December quarter..

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

Thank you, a couple of questions.

Glenn if cotton cost goes higher does the Printwear market accept the price increase?.

Our pricing actions are really not a function of cotton, that’s a byproduct of it. I mean right now we’re focusing on changing our discount structure to our customers and driving our low cost manufacturing.

I mean obviously cotton is a big component of our cost of goods sold and if it was going to be materially going up that definitely prices would follow in the future. But really that’s not the driving force behind what’s made our decision to be more aggressive on price..

Okay.

And then Glenn what’s the probability that new CFO comes in has a different view of margin structure and feels the need to take a more conservative view on the outlook?.

Well, the margin structure our company is still very successful. I think that even despite our pricing actions we’re getting returns probably in one of the best returns in the whole apparel segment as a company if you look at our forecast for calendar ’15.

So I think he is going to be pretty happy working for a company that is growing its top line sales at the rate we are, is investing heavily in manufacturing and investing in their brand strategy and still making these huge returns, generating huge amounts of cash flow, great place to come work.

Once you're on the winning team, come work for Gildan, that’s the way to look at it..

Well that makes sense. But I guess the way I interpret this, this is Laurence’s guidance.

Is it also your guidance and you’re going to stand behind this?.

This is my guidance. I am the one who….

I work for him..

He works for me. I am fully responsible for making the strategies, setting the strategies of the company, setting the strategies in our pricing, working with our branded group on our advertising making our capital investments. There is probably not a CEO in our industry as is involved in the day-to-day operations as I am.

So, I stand 150% behind our guidance. I am committed to delivering the guidance to the market not myself and that trickles down to every one of the Gildan employees. It’s a team effort here at Gildan and everybody wants to be on the winning team, so we’re excited about the future.

And one thing for sure is that we’re never scared to make the decisions to drive the long term shareholder value. I am a shareholder of the company.

I still have a significant stake in stock in this company and I am committed to making sure that we succeed in the future and that all the employees at Gildan are successful and happy working in our organization. .

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

Good morning.

Sorry if you’ve said this already, what is your 3% sales target for Printwear imply in terms of unit volume growth for calendar ’15?.

Well, I don’t want to give that but I can you tell you, look as we said that we have about $0.70 decline in pricing and our unit growth is $0.03 so you can sort of do the math..

Okay, that’s fine. And my second question is you mentioned you're going to see about $0.35 of EPS benefit from lower cotton cost in calendar '15 but it's only partial because you're still cycling through some higher cost inventory.

If you assume cotton sort of stays where it right now, what will be the incremental EPS benefit in calendar '16? Should we expect it is going to be higher than $0.35?.

Yes..

Okay that’s fine for now. Thank you..

And just to go back to the first part of your question. We mentioned in the call that our projected impacts of higher volume between the two deviations on our guidance for our projected earnings growth in calendar 2015 compared to fiscal 2014 is $0.60 share. So we’re looking for good growth in Printwear as well as in course branded apparel..

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

Good morning just a few follow questions. Just on that cotton question with respect to '16, is it fair to say that $0.35 benefit that you're getting in the back half of '15, you should get now $0.35 benefit in '16 assuming cotton prices stay constant..

That’s math..

Yes..

Okay and then in terms of last year when we were down [indiscernible] we talked about global lifestyle major customers in potential for 400 million to 500 million incremental revenue over the next three to five years and I wonder if we’re progressing as planned on that front?.

Yes we are, we’re growing that business that is projected to be up about 25% next year..

Fair enough and then Glenn just last question in terms of acquisitions, you’ve set for a few quarters the strategic priority, you’ve increased your credit facility through NCIB and potential acquisitions. Is it fair to say that an acquisition it's a necessity rather than an option just to enhance your brand position just based on your relative size..

No I would not say that. I think where we are today, we can grow significantly in every single one of the categories. We’ve made a huge investment over the last couple of years in building our brands and our distribution, our relationship with our customer. So there is a lot of opportunity for us for organic growth.

You can see this year we have a lot of organic growth, the tune of over 20% something, 23%, 24% just organic growth with still the possibilities to obtain new programs that which haven’t solidify yet.

So organic opportunity and that is continuing to accelerate because as we get more placement and our strong brand presence we are going to continue to grow organically. There is market that's so large and branded that there is a huge opportunity and I was saying that we did an acquisition with Doris.

Although the acquisition is relatively small, its opening up huge doors for us, it is giving us doors in the U.S.

we are going to place shares and as much as going in and let’s say for example saying I got shares it’s actually signed a full product category to our customers which allows them to have more confidence in growing the other things that we really want to grow like our underwear and socks and Activewear product.

So the acquisitions don’t have to be large in size, they have to be strategic in nature and I think that’s the key. So it’s got be something that will give us a product category our brand strategy, a channel distribution, a new market, we’re always going to be very tactical about how we approach the acquisitions.

We don’t want to do acquisitions just for the sake of looking for top line growth because we think we can do that with better returns by driving organic sales and we can just by buying companies for top line sale.

So everything is strategic and I think so far if you look at every one of the acquisitions we’ve done over the last five, six years basically that sort of our MO. So we will continue to look.

We obviously have some things that we continue to look at but nothing is embedded in our guidance today and we’re excited about our balance sheet and the ability for us to continue to look at these opportunities. .

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

My questions have all been answered. Thank you. .

I will now turn the call back over to Sophie our dear you for closing remark..

Thank you everyone once again for joining us. This concludes our call today and of course we look forward to speaking to you very soon and we also like to wish you the very best for the holiday season. Have a great day..

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