Sophie Argiriou - Vice President-Investor Communications Laurence Sellyn - Executive Vice President, Chief Financial and Administrative Officer Glenn Chamandy - President and Chief Executive Officer.

Sabahat Khan - RBC Capital Markets Anthony Zicha - Scotia Bank Chase Bethel - Desjardins Securities Martin Landry - GMP Securities Kenric Tyghe - Raymond James Derek Dley - Canaccord Genuity David Glick - Buckingham Research Taposh Bari - Goldman Sachs Stephen MacLeod - BMO Capital Markets Mark Petrie - CIBC Vishal Shreedhar - National Bank Andrew Burns - D.A.

Davidson David Hartley - Credit Suisse Jim Duffy - Stifel Brian Morrison - TD Securities.

Welcome to the Second Calendar Quarter 2015 Gildan Activewear Earnings Conference Call. My name is Lorraine, 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 would now turn the call over to Ms.

Sophie Argiriou. Ms. Argiriou, you may begin..

Thank you, Lorraine. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the second calendar quarter of 2015 and our interim shareholder report containing management's discussion and analysis and consolidated financial statement.

These documents will be filed with the Canadian Securities Regulatory Authorities and the U.S. Securities Commission and are available on our Web site at www.gildan.com.

With me on the call today are Glenn Chamandy, our President and Chief Executive Officer; and Laurence Sellyn, our Executive Vice President and Chief Financial and Administrative Officer.

Our call today will begin with Laurence taking you through our second quarter performance and our business outlook, followed by a question-and-answer session during which, Glenn and Laurence will respond to your questions.

Before we begin, please note 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 result. And with that, I'll turn the call over to Laurence..

Thank you, Sophie and good morning everyone. EPS for the second calendar quarter was $0.42 per share, slightly below our guidance range of $0.43 to $0.45, due to lower than projected sales in both operating segments.

In spite of the short term issues which resulted in the sales shortfall, we were encouraged by our continued progress in the quarter against our long term growth and value drivers. And we continue to be positioned for earnings growth in the second half of the calendar year and in 2016.

I will highlight the positive business trends in the quarter and then discuss the short term issues which negatively impacted sales and earnings. The positive developments in Printwear were firstly, demand for the Gildan brand in the U.S. Printwear market continue to recover strongly following the pricing actions implemented in December of 2014.

Sales volume in the U.S. Printwear market were up by approximately 8% on a comparable basis compared to the equivalent weeks in 2014. The June quarter of 2014 included an extra week included every sixth year to realign the Company's 52 week fiscal year with the calendar year.

Number two, we are achieving good penetration in the high valued higher growth fashion basics segment of the U.S. Printwear market, due to the even better than anticipated performance of the Comfort Colors brand and the successful repositioning of the Anvil brand.

Number three, sales revenues in our newer higher growth international Printwear market in Asia-Pacific and Latin America were up by over 30% and over 40% respectively. And fourthly, operating margins in Printwear started to recover to historical level as we began to benefit from declining cotton cost in cost of sales.

Margins are expected to continue to improve further in the third quarter. The positive developments in Branded Apparel were firstly, sales of Gildan branded products to retailers were up by approximately 70% compared to the second quarter of 2014, in-spite of the fewer number of weeks in the quarter.

The growth in Gildan branded sales was due to new programs and the conversion of our largest private label sock program to Gildan brand. Sales of the Under Armour and Mossy Oak licensed brands were up by approximately 20%.

Number two, we continued to gain new branded programs including programs with new retailer, which will primarily impact 2016 and significantly enhance the national exposure of the Gildan brand.

We are continuing to follow a policy of not preannouncing new programs with specific retail partners, but you will see importing new programs in retail stores later in the calendar year. As indicated in the press release, Gildan branded underwear is expected to be sold in approximately 18,000 retail doors in the U.S.

by the end of the holiday season, almost double the number of doors compared to the June quarter. Thirdly, we have begun to leverage the Doris acquisition in the U.S. We will begin shipping the Secret Silky Kushyfoot solution and Gildan brands in the U.S. food and drug channel in the third quarter.

We began shipment of Gildan branded products in this channel in May. Our next step is to leverage Doris's sales and distribution to build the Gildan and Gold Toe brand in retail in Canada.

Number four, operating margin for Branded Apparel increased to 8.2% for the June quarter, including the impact of an approximate $5 million increase in brand, advertising and marketing expenses compared to the June quarter of last year, which impacted operating margins by approximately 2%.

We are excited about the impact of Blake Shelton’s role in promoting our brand in television commercials and other brands marketing initiatives including in-store pallets. We believe that the issues which negatively impacted our calendar Q2 sales and earnings performance and resulted in the sales shortfall compared to our expectations are short-term.

Firstly, sales or Printwear in Europe declined by approximately 30% compared to the second quarter of last year, due to lower unit sales volumes, the devaluation of the euro and the non-recurrence of the extra week of sales in the quarter, partially offset by increased selling prices.

Our selling price increases were not fully matched by competitors and we have seen improved sales volumes in June and July, as we began promoting of the higher sales selling prices.

In addition, we were impacted by some short-term logistical issues with one of our distributors in the UK, in the June quarter, which negatively impacted sales volume and which are now being resolved.

Secondly, in Branded Apparel, shipments in the June quarter were negatively impacted by significant destocking of socks and underwear by a major retailer, which limited our ability to satisfy strong consumer demand for Gildan branded products and impacted our opportunity to continue to increase our market share.

Many of you raised questions regarding empty Gildan packs in retail stores during the quarter. We’re working collaboratively with our retail partners to find the appropriate balance between retailer objectives to manage working capital.

And at the same time, ensure sufficient inventory level to support a fast growing brand with higher inventory turnover. However, we have assumed in our sales guidance for the third quarter that retailer replenishment continues to be below optimal level to support sell through to consumers. And number three, consumer demand in U.S.

department stores and national chains has been weak, which negatively impacted sales for Gold Toe in the second quarter. Although, we maintained our leading market share position in men sock in this channel and continue to grow in the ladies category.

We have provided sales guidance of close to $700 million and EPS guidance of $0.51 to $0.53 for the September quarter, compared to sales of 666 million and EPS of $0.50 per share in the September quarter of last year.

The impact of strong growth in sales volumes in both operating segments and lower cotton and manufacturing costs is projected to be largely offset by lower Printwear selling prices and more favorable product mix in Printwear. Results for last year included a $5 million income tax recovery.

EBITDA in the September quarter is projected to increase by 15% to 19% compared with last year.

When we introduced our full year earnings guidance in December, we indicated that the first two calendar quarters of 2015 would be impacted by margin compression in Printwear due to our strategic decision to implement selling price reductions in advance of projected manufacturing cost reduction and the flow through of lower cost cotton into cost of sale.

Printwear margins in the third quarter are projected to be in line with historical level due to the benefit of low cost cotton and projected lower manufacturing costs. Operating margins in Branded Apparel are also expected to continue to improve sequentially compared to the June quarter.

The transitional manufacturing inefficiencies incurred and inventoried in 2014 to support the fast ramp up of new retail product have now been fully consumed in cost of sales.

We have revised our full calendar year EPS guidance to the bottom end of our range of $1.50 to a $1.55 to reflect the lower than projected earnings in Q2 and provide for the continuing impact of lower retailer replenishment and lower than projected growth in Europe in Q3.

Results for the third and fourth quarters are projected to be materially impacted by the timing of fleece shipments compared to 2014.

As we previously indicated earlier in the year, the change in our distributor incentive programs will result in the later shipment of fleece and searching other high valued products and therefore shift sales and earnings from the third quarter to the fourth quarter.

Although we have not provide specific earnings guidance for the fourth quarter, our full year guidance imply that earnings in the December quarter will be by far a record for this calendar quarter, due to the timing of Printwear sales, the benefit of low cost cotton and further manufacturing cost savings from our yarn-spinning and other capital investments and the initial impact of new retail programs in Branded Apparel.

Results for Branded Apparel are expected to be significantly improved from Q4 in the last two years, due to higher sales volumes and higher operating margins. Consequently, we expect to end 2015 with positive momentum in earnings growth and to be well positioned for strong earnings growth in 2016.

Earnings growth in 2016 is expected to be driven by unit sales volume growth in both operating segments and lower cotton and manufacturing costs. Cotton costs in 2016 are projected to be significantly lower than 2015, especially in the first half of the calendar year. Cotton fixations for the first half of calendar year are essentially complete.

Results in 2016 are also expected to benefit from the further manufacturing cost savings from our capital expenditure program as well as the non-recurrence of the manufacturing inefficiencies in Branded Apparel, which flow through cost of sales in the first half of calendar 2015.

We expect to generate significant free cash flow in the balance of 2015 and reduce bank indebtedness by year-end, due to our strong projected EBITDA in the second half of the year. Capital expenditures for calendar 2015 are still projected to be in the range of $250 million to $300 million.

Our current major strategic capital investment project are our new vertical yarn-spinning facilities in North Carolina, the expansion of distribution capacity on Printwear, further manufacturing cost reduction projects in textiles and our planned new textile capacity expansions in Honduras and Costa Rica.

Rio Nance 6 is expected to begin production in the fourth quarter of 2016 and Costa Rica is currently planned to begin to ramp up in the fourth quarter of 2017. In addition, we are further expanding production capacity at our facility in Bangladesh to support our projected growth in international markets in Europe and Asia-Pacific.

Use of cash will continue to be a focus for the company as we continue to grow our EBITDA and as annual capital expenditure decrease after completion of our capital intensive yarn-spinning investment.

We have stated that we will continue to seek further new complementary acquisitions such as Gold Toe, Anvil, Doris and Comfort Colors which complement our organic growth strategy and lever our competitive strength as well as seek to continue to grow our dividends.

Finally, we have announced that my successor as Chief Financial and Administrative Officer Rhodri Harris will assume his new responsibility with effect from August 17, 2015.

Glen and I are fully confident that Rhodri will play an important leadership role in the company as we implement the next stage of our growth strategies and continue to build Gildan as a leading consumer brand in basic family apparel.

I will continue to support Rhod for a period of time after he takes over in order to ensure a proper transmission in my role and responsibilities. Back to you Sophie..

Thank you, Laurence. That concludes our formal remarks. Before we move to the Q&A session, I ask that you limit the number of question to two in order to give everyone the opportunity to ask question. If time permits, we will circle back for second round of questions. I will now turn the call over to the operator for the question-and-answer session..

Thank you. We will now begin the question and answer session. [Operator Instructions]. And our first question comes from Sabahat Khan from RBC Capital Markets. Please go ahead..

On the retail side, your expectation for the branded environment to be more modest for the rest of the year, is there retailer specific issues? Is it the economy, if you could maybe talk a little bit about that?.

Well, I would just say that I think people are pretty cautious in terms of -- there is obviously different channels.

You have mass and national chains and so forth, but I would say that back-to-school is on its way, it's not off to better start, but we’re being optimistically cautious right now and its early days, so we'll know a little bit more as we go through.

But I think the more important thing for us is that everything’s intact for our growth for the balance of this year based on the over $120 million of new programs which we stated in previous calls and the development of all of our brand strategies within the market.

So we feel very comfortable with our position, but we think the retail environment would be -- is cautious at the moment..

And on the Printwear side, if you could maybe talk about what’s happening in Europe and overall share, like are you seeing improvement as a result of the new pricing that you took?.

Well, exactly. So look I mean what happened was that we raised prices in line with the decline of the Europe. Obviously, not all of our competitors matched our prices and it has affected our POS in the quarter as well as with the one of our largest UK customers went through a warehouse transition that affected shipments to him.

Since June, we’ve been promoting our products and up for higher price list and our POS is back on track is close about 20%. The other part of our international sales which has really been exceeding our expectations is our Asian business is now -- was up 30% and it’s now our -- it’s our third largest market in the quarter.

And our Latin America business is growing substantially as well, so we’re still very comfortable with our whole international exposure and commitment, but unfortunately the pricing and exchange rates affected this quarter.

Saying that though I mean overtime, pricing and currency will get an alignment and we expect that as we go through the balance of this year, we’ll have a more equivalent balance between the two of them..

Thank you. And our next question comes from Anthony Zicha from Scotia Bank. Please go ahead..

Glenn, is there a risk that other retailers may follow suit with lower inventory replenishment?.

Well, look I mean, I guess, we can’t predict what every retailer is going to do, but I mean maybe just to address the issues that we have and how it affected us is two-fold is that we can -- when you reduce inventory, it’s a one-time non-recurring event, right, because destocking, you can’t destock to zero, you can destock and bring your inventories levels down, that’s the first thing.

So once you’ve been destocked, I mean theoretically, you should continue to sell based on your POS on a go forward basis.

Where we are and sort of how it affected us maybe a little bit more is that because of the velocity and the turnover our products in both underwear and socks are probably they have the highest turnover, products within our major mass retailer.

And it's not a question what we’ve been working with them and it is not a question of the inventory levels, it's the question of how they get the inventory back into the stores to be replenished? So one of the things we’ve been working on is to move more inventory from the warehouses into the stores, so to balance the inventory better because of new system and the system just doesn’t and couldn’t understand may be the velocity of sell through some of our products.

So that really resulted in two things, one is we got destocked obviously, which is it's a one-time event, but two is it affected our POS for the consumer because we didn’t have enough goods in the stores. So from March till June, our share is relatively flat around 7%.

It's up 10% over the last year, but it didn’t grow where we wanted do particularly in April and May.

As we got into June and we worked closely with this retailer to bring more products from the warehouse to the stores, we’ve seen a big improvement in our POS, so we’re very encouraged by that and hopefully this will concur to strong sales going forward.

But saying that, I think look at the end of the day, we’ve expanded our space in the existing retailer that we have had been doing business with last year and as well as we continue to take new programs with new retail partners basically as we go through the year.

Now one of the things which happened is we also set a lot of our new retail programs in the month of June, so they are not really have been recorded in terms of our market share and as we continue to sell our underwear in the over 18,000 doors, which will double from the June quarter, we will continue to see our market share grow to our state objective 10% by year-end.

So we feel very comfortable that we’re on track, I mean obviously we're working through very closely these issues, but we feel very comfortable with our positioning and everything is pretty much in place to hit our objectives that we stated earlier in the year..

And maybe we should add with regard to the replenishment issue that we and our retail customers have a common mutual interest to be positioned to drive growth in sales to consumers..

And Glenn just one quick one.

Your new retail wins in terms of speed, is it good as you expected or is it better? And then maybe, if you could give us some color on the market share data when it relates to men underwear?.

Very well. Men's underwear market share like I said is around 7% is flat from the June -- from the March quarter and it's up about 10% on a year-over-year basis.

As far as our new wins in retail, we are on track from our stated $120 million with the new programs and that's a combination of growing within the existing customers as well as new program in mass, food and drug and sport specialty. We doubled like I said, we doubled our store count in Gildan underwear.

We have completed the transition of the starter sock private label program into Gildan.

The Gildan brand shipments in the June quarter were up 70% on a year-over-year basis and we are very excited about the development of obviously Blake Shelton and the TV ads we have been running and as well as you will see a lot of pallet displays in the retail stores for back-to-school.

One of the things we have been very successful on this year which is included in our 120 million is leveraging the Doris acquisition.

Doris has opened doors to us in the food and drug category and we've been able to obtain new business and share under the Kushyfoot and Secret Silkys brands but as well as we've levered socks into therapy plus and we levered our Gildan underwear and activewear into this category, so it's been very successful for us into levering.

We are also looking at levering the Doris acquisition into other product categories under Gold Toe which is shapewear and sheer and looking at also expanding the sheer category into mass. So we have been very excited about everything we have set forth. I mean our strategy is right on track.

We are looking to expand going forward as well as the Doris, in levering the Doris acquisition to Canada. So we have a great momentum I think everything is intact, we have got all the business and we set our guidance earlier in the year. We really set our guidance for all the programs that we obtained.

We are still working on new programs which we will probably obtain in the holiday season. It won't be material to the impact our sales and earnings growth for this year, but it will be material for 2016. So everything is on track.

With the bump in the road a little bit, but with the destock in the market share in our European pricing, but all in all we feel very comfortable. And I just want to maybe just go to Printwear for a second because I don’t want to underestimate where we have and how successful we have been in Printwear.

I mean our growth was up 8% this quarter, which is obviously significant on a large base.

And we really reinforced our leadership position in the category and not only driving our basics which we realigned our pricing strategy, but also reinforcing all of our fashion products which is through the acquisition of Comfort Colors and the Anvil -- redevelopment of the Anvil brand and really also developing all of our ring spun products by levering our success in the yarn-spinning.

So we feel very comfortable with our positioning, sales are strong in Printwear and we’ve got all the brand positioning and placement in the branded category..

Thank you. And our next question comes from Chase Bethel from Desjardins Securities. Please go ahead..

So I had a follow-up on the Printwear commentary that you just gave, Glenn I was hoping that you could maybe go a bit deeper and maybe talk about where you are seeing that volume growth? Are you seeing at mostly through your distributors or are you seeing some of that national accounts business grows well?.

Well, where we look at the market is an aggregate today, so basically look with our new pricing strategy a lot of the growth is driven through our distributors as they are able to reach more customers because of our pricing.

And that was really our objective is to work with our distributor partners basically to make sure they can broaden their reach and using our pricing in our low cost manufacturing in our value proposition for them to achieve that goal. So we look at everything in aggregate today.

At the same time, big focus for us is developing our fashion segment, basics has historically been about 60% of the market, fashion being 40% of the market and with Comfort Colors, Anvil and our ring spun program, T-shirt program, I mean that's also driving significant share gains for us.

So we’re really positioned to what we think it's been -- we've been off to a great start and it's the combination of two because having the right price also helps drive the overall brand image and everything else we’re doing, so it's a combination of all the events..

And then, are we at a point now where all of your yarn plans are in ramped or in the process of being ramped and how soon could we see you make further investments in yarn-spinning?.

Well, what we’ve been so far is completed the ramp up of the two major facilities we have in Salisbury, so they are up and running at 100%. The last big project that we had which is in the Mocksville, North Carolina which is a very large ring spun plant started production in June and is going to be fully ramped up over a nine month period.

So lot of the production will come online obviously for the balance of this year in '16. A lot of that however we'd say that a lot of the savings from our yarn initiative will flow through in ’16.

And because the major initiatives that we had in Salisbury as we brought them on, I mean that a lot of that savings is in our cost of goods sold and flow through our costs into '16 as well as Mocksville will continue to allow us to have additional cost savings in '16 and '17. So we’re on track for a $100 million cost initiatives.

We will have 25 million of that flow through this year and the balance of our cost initiatives which is really baked into all of our yarn facilities will happen in '16 and '17..

And are you at a point where you think it's time for another wave of investments in yarn or do you think you still want I guess get some of these savings through before you take the next step?.

Well, we’re always constantly looking at it, but look we’re going to manage our expansion of our yarn based on we manage our capacity expansion in textiles. And as we expand our textiles right now, we’re expanding textiles in twofold, we’re building our Rio Nance 6 facility which will come online at the end of '16 to support '17.

Now this plant is going to be a little bit different than the traditional Gildan plant because it’s going to be producing a lot of performance type products and fashion products, okay, so which is a complete different.

So like for example when you’re making performance, you don’t use spun yarn, you use texturized polyester which is not something that we’re producing today.

And the idea with driving Rio Nance 6 is that we’re really looking to develop new innovation and new products that will drive top-line sales both in the Printwear and in the branded segment in activewear. And this is going to be I think is going to be pretty important to the overall success as we continue to drive our sales.

What we are in the process of doing that was we’re actually developing a lot of these products because as you remember when we bought Anvil, we put in technology to produce a lot of this performance type product.

So a lot of the development in new products and new innovation are actually being developed as we speak, so that as we bring on Rio Nance 6, we can commercialize these products and obtain large top-line sales through the innovation that we’re developing in our textile facility.

So a lot of that we will take in account, so we won’t support yarn to answer your question to make some of those products, but as Costa Rica comes on in at the end of '17 to support '18 that’s going to be more of a basic type product with the combination of ring and open end and we will definitely consider bringing on new capacity in yarn spinning to support that build up..

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

I would like to get little more color on your Q3 expectations. You mentioned that there has been some destocking in Q2 that was a one-time item.

I'm not too clear as to why you are still expecting destocking into Q3 and I'd like to hear a little more colors just on that?.

Well, the first thing is we are not 100% sure to be perfectly honest with you. Inventories have come down. We are not sure if our retail partner wants to bring the base inventory down a little bit further, so that's something that we don’t know so it may or may not happen.

So just being prudent just to in case of Doris and the other thing is that we are working through obviously making sure that we get our POS up and that's going to be the key which we are very comfortable based on what we see in June, but again, we are just being a little bit prudent to in terms of how long that's going to take let's say for example, to get it to where it needs to be.

So it's more being conservative I think than anything else..

And just on the timing of Rio Nance 6, I think you mentioned that the production is going to start in Q4, calendar Q4. I was under the impression that it was going to start in calendar Q3.

Are you behind the schedule or am I mistaken?.

No I said last time the end of Q3 was what I said in the last call and it's going to be close to that, but couldn’t fall into Q4, but you're months..

So everything is on schedule and is going well..

Yes..

Thank you. And our next question comes from Kenric Tyghe from Raymond James. Please go ahead..

Glenn in your earlier comments you referenced generally cautious retailers, looking beyond the rebalancing on a retail specific basis and just at the broader landscape.

Would generally cautious retailers not actually be a relative positive for Gildan, given your proximity to market and security of supply? And is that not something that perhaps could actually play to your advantage as we look sort of through the back end of the year and if this persist into next year?.

Well, look I mean if the weaker environment is somewhat flattish I mean that means that the consumers are looking for value. And I think that plays into our hand because what Gildan stands for is the best quality products at the best price. So where we are positioned, we feel very comfortable that we will still maintain significant POS growth.

I mean that's why we are confident in driving our POS than our market share in underwear from 7% to 10% by year-end. So we think we are positioned, I think the overall broader market is somewhat I think questionable in terms of how strong back-to-school would be.

We definitely think that the department stores in specialty chain areas are little bit weak. We see that with some of our Gold Toe sales, but although we're still taking share in that category, but as far as the mass is concern we will continue to drive I think market share and be very successful in any environment..

And then just very quick one the sock program and the sock program conversion, is that particular program now fully complete or there is still sort of couple of loose ends to be tied up through the back end of the year or can we now move forward on that as a completed transition?.

At our end it's fully complete. We’re only shipping Gildan brand today, but there is still some starter that actually going through the retail stores as they flush it through, but as far as we are Gildan is concerned, we’re only selling Gildan at this point in time..

And so just one quick one to put in there, just correct me if I’m wrong.

Was Europe last year or Europe and Asia-Pacific last year were up some 40% if I’m correct? I’m just trying to look at this on a two year stack basis in terms of it I’m not incorrect in saying it was a particularly tough comp in Europe aside from the specific issues in the UK, is that correct?.

Yes, definitely. And look at the -- we don't look at it like that because look we need to get growth every year, every quarter and that's really though how we measure ourselves. I mean, last year somewhat history, but at the end of the day look that we feel very comfortable with our positioning.

We started promoting in June and POS's backup close to 20%, so we’re back on track to where we need to be and once the currency gets aligned with pricing I mean we should be able to have actually margin expansion again as obviously we’ll see that as well.

So we’re spending a little bit more money to make it happen right now and we still feel very comfortable with our positioning, but to answer your question that's definitely correct and we're positioned we think to continue growth..

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

Just wanted to be clear in terms of your higher cost cotton inventory, was that completely cycled through in Q2 or was it actually cycled through a little bit ahead of Q2?.

Well the cotton costs are coming down through the year, so each quarter the costs are coming down as we go through each one of the subsequent quarters. And that's we'll see margin expansion continue to grow as we go through the year..

And then in terms of the pricing at wholesale, is it relatively in line with your current cost of cotton into Q3?.

Well, we said, when we establish new pricing basically, we establish it based on the future price of cotton, so the answer is yes and our pricing in wholesale is very stable and has been stable all year..

And then I just wanted an update I know its early days, but can you give us any color any update on the integration of Comfort Colors?.

Well Comfort Colors is almost a 100% integrated. I mean all the order to cash, a back office has been totally integrated. This acquisition has been great success for us.

It’s been seamless and there hasn’t been any major restructuring at all in terms of integrating the acquisition, so we’re really excited about how well we’ve done in integrating Comfort Colors into Gildan. We started to produce garment dyed products in Central America to support the growth in 2016.

We’re expanding the brand and the product we're offering in the brand. And we’re also going to be introducing Comfort Colors in international markets in 2016, so we really-really-really are excited about it.

It has been a total homerun and it's hit all of our objectives both top-line and bottom-line and we think we’re going to lever this for years to come..

And our next question comes from David Glick from Buckingham Research. Please go ahead..

Laurence, just a question on free cash flow. Obviously, the number has bounced around a bit for last several years, just given changes in working capital and levels of CapEx and this year being the peak of your investment cycle.

I just wanted to get a sense for what you see is the free cash flow this year, is 200 million a good number? And then, what’s a normalize level of free cash flow once we get beyond this peak year? How much do you expect capital expenditures to pullback and what kind of return on invested capital are you targeting once you start to get some returns on these investments? Thank you..

So your estimated free cash flow for this year is in the ballpark. Going forward, we would see free cash flow increasing as I said in the introductory comments, because our EBITDA is going to increase as we continue to implement our growth strategies and CapEx should decrease because we will have completed our initial investment in yarn spinning.

So we’re looking at more and more cash flow and so a big focus will be our reinvestment of cash. We’re going to continue to invest in high return project to support our organic business. Our main use of excess free cash flow will be acquisitions like the ones that we’ve done that complement our organic growth strategies.

We will also seek to keep increasing our dividend..

Is there kind of a level of normalized CapEx, I know it can be lumpy, but obviously 300 million or so over the last couple of years it's really bounced around a lot just trying to get a sense for what’s a reasonable kind of run-rate?.

Well the reasonable run-rate for us is about anywhere to 150 to 200 million I think is an ongoing number you should use Dave..

Thank you. And our next question comes from Taposh Bari with Goldman Sachs. Please go ahead..

Laurence I was hoping you can provide some more context into the quarter itself.

Looks like you missed revenues by about $35 million, can you segregate how much of that was a function of European Printwear versus the branded restocking or destocking? And then as we think for the rest of the year, it looks like you are reducing Printwear sales by about 30 million versus the prior guidance and branded about 42 million versus your prior guidance, I’m hoping if you can give us a sense of how of that was kind of 2Q versus for the six months reduction?.

Well there are a lot of pluses and minuses in sales in the second quarter and I think it is helpful to provide more detail in that. On the Printwear side, our sales compared with last year were down about $5 million.

The 8% growth in sales in an equivalent weeks basis contributed about close to $30 million to sales in the quarter, which was largely offset by the non-recurrence of the extra week for net of about 5 million increased sales volume. As Glenn said, Comfort Colors was a very strong contributor to our sales close to 20 million of sales in the quarter.

Europe and Canada were both down by a combined $20 million and other international markets as we mentioned were up by close to 10 million.

And across all the international markets, impact of currency was negative 10, pricing was negative close to 20, so on the Printwear side the positives were volume in the U.S., other international markets in Comfort Colors and the minus is where the extra week, Europe and Canada and pricing.

On the branded side, we had about 70% growth in Gildan brand which contributed about 35 million to sales and that was offset by something like a 30% decline in private label which reduced sales by about 15 and the balance of 6 million was mainly Doris. Replenishment in branded negatively impacted sales, we estimate by $15 million to $20 million.

So our sales instead of being 236 in branded would have been 250 to 256, up more than 20%. So in terms of the sales shortfall in Q2, it was let’s say 40 million relative to our expectations which was equally divided between Europe and the replenishment issue..

Very helpful.

So as we think about the four, six months period, it sounds like the European issues are largely behind yet you’re reducing your Printwear guidance by about $30 million, is there an element of conservatism there? Can you help me better understand?.

Well we have as Glenn said assumed that these two factors do continue to impact our sales in the third quarter. So in the third quarter, we’re assuming double-digit volume growth in both operating segments, continued positive sales and types of Comfort Colors similar to the second quarter. Pricing in Printwear will be down similar to Q2.

ForEx will be again about 10 million negative impact compared with last year. Mix, will have a big impact, big unfavorable impact in Q3 versus last year. I think I misspoke when I was going through the script, I said favorable, but it’s unfavorable Q3 because of the shift from Q3 to Q4. So that’s a big negative in the third quarter..

And then last one for Glenn. Sounds like there is some cautious commentary on U.S. retail particularly in the department store channel.

Your Printwear business seems like it’s performing quite well and I was curious why that would be -- why that channel would be unaffected by what seems to be a fairly mixed retail environment and I guess the question implicitly is how comfortable are you with level of inventories in that distributor channel? Thank you..

Well I think that the Printwear growth has come from reinforcing our leadership position on price really at the end of the day and it's driving our success and is really is what’s driving our POS as well as align with all the new products and Comfort Colors, the ring spun T-shirts I mean so we are actually going after other segments that we never even went after which is that whole 40% of the basic categories, so it's combination of two things that's really driving that market.

And we feel very comfortable where we are. As far as the inventory and the market and the channel it's very imbalanced I mean and we are projecting to have considerable levels of inventory throughout the year, including the year-end.

So we are very comfortable with our positioning, our inventories and balance and our businesses are doing very well and performing and we will continue to be successful there.

As far as the retail environment, look, I give you a general comment, I mean just like Printwear I mean I'm not sure if all my competitors are doing as well as we are, but at the end of the day in branded, we feel very comfortable with our positioning, so I don’t want you to misunderstand what I said.

I mean we definitely feel we are on track to achieve all our objective and we've got the new programs in place, a $120 million of new programs. We are driving new programs for holiday that are not in our forecast.

They won't be significant to this year, they will affect more 2016 and with our pricing strategy today in mass retailer, it only is going to benefit us in a weaker environment one way or the other, so we are priced to win. We are very comfortable with our positioning. We will have strong POS.

We are still projecting our market share to go from 7% to 10%, so I just gave you an overview of the overall macro market, but as far as the Gildan is concerned, we think we are well positioned to continue to take share and grow the top-line..

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

I just wanted to follow up on the weakness in Europe.

And I'm just curious, how much of that was driven by FX and how much of that was organic declines in sales?.

It was driven by three things. It was driven by the exchange and the fact that that we lost POS because we raised prices and obviously not all our competitors matched.

And those were the main two contributors as well as we had one of our customers that put up a new distribution management that wasn’t able to take product in that affected shipments to him. So those three things combined were really the negative impact to Europe..

And in terms of the distribution disruption, is that now behind you?.

Yes..

And then just wondering if you could talk a little bit about -- you referenced strength at Anvil and -- is that coming from national accounts, the distributor segment or both?.

Mainly distributor segment and that's -- we repositioned the Anvil brand which is basically more contemporary today. We put in some new fabrications this year that have been very successful and lion's share of all that product is being sold to our distributors today, yes to answer your question..

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

Wondering if you could just comment about your comfort with your relative positioning coming into back-to-school and certainly how it's progressing vis-à-vis your competitors and the relative sort of price position there?.

Well we’re very comfortable, because we’re the price leader at the end of the day, so we have promotions for back-to-school where you will see pallets dropped in the retail stores, but typically we are price leader and the value product on the floor. So we’re positioned where we need to be..

Obviously there is issues just in terms of the destocking and that's hitting everybody, but are you seeing competitors respond to your market share gains and is that in line with your expectations?.

Well, I don't always talk about my competitors, but I think look that we’re building a business for the long term.

A lot of what we’ve been able to do is start off with our product and we think our products are far superior than what’s available in the market and we are able to do that by levering our low cost manufacturing in all the investments we’re making and that's really the backbone to our strategy, so how I would I look at it is that it's taken us years and billions of dollars of capital investment to build to developed -- what I'd say the secret sauce basically and that's really been our brand positioning and that's what we stand for in the market is best quality, best value and we’re positioned perfectly.

Now we're combining that with brand strength with Blake Shelton basically supporting our brand, the advertising on TV as well as the pallets you'll see on the floor, so as we continue to resonate our brand and we have the starter sock transition where we have more Gildan products in the store and our Gildan sales being up over 70% over last year.

These are all things that will continue to reinforce our positioning in the market and allow us to continue to grow the top-line for years to come..

And I know its small, but on the Bangladesh, what are you planning in terms of the capacity expansion? What’s the timing on that?.

Well the timing is now, I mean we’re expanding plant over next six months, so it's going to expand.

Bangladesh is still our smallest plant, but we’re going to increase the size of the plant by both 50% and that’s going to continue to support our growth that we have in Asia, which is up over 30%, which right now are our third largest market and growing relatively fast and as well as we’re going to continue to support continued growth in Europe..

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

Just wondering what your thoughts are on the acquisition market, if you’re continuing to find suitable companies to acquire and prices are reasonable and if the focus is still on tuck-ins?.

Well the first thing is that our focus is on obviously driving our top-line sales, I mean that’s been our strategy from day one and that’s why we purchase doors which gave us product category expansion, distribution expansion both in food and drug and sales infrastructure in Canada, shapewear, Comfort Colors gives us the fashion segments or everyone in the acquisitions we really has done over the years has always been I would say relatively strategic in nature to help our top-line growth and organic growth strategy, so we’re going to continue to look for acquisitions that meet that criteria.

And so it’s got to be their new products, new channels of distribution, brands. I mean those are all the things that are our criteria and that’s really what’s going to drive our acquisition criteria.

So I don’t want to say anything right now this second, but I mean that’s really we’re focusing our energy on and as we see things that will fit our criteria, we’ll look at them..

In terms of the POS, [indiscernible] at the retail level. You said that the POS was better in June. You’ve given us some data kind of 7% market share data. I was just wondering if you can give us some indication of how POS track through the month, so we can gauge kind of what the trajectory is..

It was up pretty good in June and it wasn’t so good in April, May to be perfectly honest with you. So we ended up flat, but a lot of that came towards as we fixed the in-stocks in the store, so we’re in a good position so far in July. So it’s improving -- it’s not where we wanted to be, but it’s improving steadily as we go forward.

So we’re cautiously optimistic on that..

So was June market share, I know it’s a piece of it, but was June market share better than the total quarter and is July better than June?.

The answer is yes..

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

I was hoping for a little more clarification on the doubling of retail doors by year-end to 18,000.

Though you don’t want to disclose a lot of specifics, but was hoping for some incremental color in terms of what types of doors they were in terms of food and drug or mass in department store or largely the Doris expansion or any color on men's underwear, Gold Toe or Gildan Platinum would be helpful. Thanks..

4,000 of those doors were basically food and drug, I can tell you that. The rest of them were mass and there was some sport specialty expansion as well. So the bulk of the growth is in the mass channel..

And in terms of your market share target exiting the year at 10%, is the bulk of the lift from 7% to 10%, the sock program transitioning to Gildan brand or does it also include some step ups in your men's underwear market position?.

That number is only underwear, men's underwear basically and that's what we are measuring right now, so we haven’t reported sock brand share yet and that's something we will do once the transition obviously for starter is complete and we will start giving you some sock share, but if you combine even today the Gildan socks and Gold Toe socks were pretty much -- pretty close to being a leader in the industry..

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

Just really on capacity utilization and your low cost manufacturing.

First of all, how comfortable are you with capacity utilization and your ability to stay at the low cost benchmarks you want to be at, particularly as you transition into some new facilities during next few years?.

Well, our track record has proven that adding capacity has been the company's success factor, so that's something that we have proven we have done time to time again with Rio Nance 1 all the way to Rio Nance 5, so I don’t think that's a concern for us.

What we also do in terms of how we add capacity is we make sure that we understand what products are being made in what facilities, so for those you that visited our facilities, we have different product categories going into different plants to make sure that we, A, maximize our cost structure and B, manufacturing efficiency as possible.

So when we bring on Rio Nance 6, it's going to a different [Technical Difficulty] we did with Rio Nance 5, which is a basic commodity type plant.

Rio Nance 6 is going to be producing a lot of performance type products and fashion products stretch like all kinds of different product categories that will support really the fashion segment and performance segments of our growth strategy.

So -- and Costa Rica will be more of a basic plant to continue driving our basic underwear and activewear sales growth. So for each one of these plants, we bring them on an incremental capacity expansion, but we have the infrastructure and the skill set that's been proven in track record to bring on capacity..

And with your low cost abilities -- I mean, what's your sense in terms of the mark your competitors catching up to you in getting their cost lower and perhaps closing the gap with you and how are you able to measure that?.

Well I think that the only way you can measure is how much money we're spending. I mean at the end of the day we’re spending close to 250 million to 300 million this year. We spent about a billion in the last three years.

And the one thing I can tell you is that anybody can write a check, but it's not writing the check that is important and you’ve seen lot of companies try and move offshore into low jurisdiction manufacturing jurisdictions that failed, so we combined continuous development of our manufacturing capacity expansion and continuous [Technical difficulty] capacity as well as low -- cost reduction programs like our yarn-spinning, our energy projects, et cetera.

It takes management time and energy to do this thing, so that's the way where we can measure it and we are continuing and committed to making sure that we invest significant portion of our free cash into constant cost reductions and that's what’s engrained and everybody in this company this is a part of our DNA basically that we continue to look at how we drive cost to add value to our products and give consumers a better value..

And just final question on the new facility Rio Nance 6 where you will have more I guess performance [indiscernible] in there.

Is there opportunity to introduce a new brand to kind of fit that kind of product offering or will you stick with the existing brands and how is that going to start to take shape?.

Well the answer is we can add brands to our portfolio and that's part of our growth strategy and potentially even part of our acquisition strategy, so we have a diversified manufacturing portfolio today. I mean we are making different quality products at different price points, we're servicing different channels of distribution.

I mean Gold Toe is the high-end, you got Gildan basically being in the mass, we’ve got Anvil being contemporary, so look at we got Secret Silkys, we got Kushyfoot, we got therapy plus.

We have a [indiscernible] of brands and portfolio brands, we have Mossy Oak that we’re producing those products which are a little bit different in terms with our technology, so we’re building up a portfolio of brands and that’s the most important thing and we just talk a lot about Gildan because that's driving our core share in underwear and socks which is really our mission statement.

But at the same time, we’re surrounding ourselves with other brands, because there is other categories that are important and one brand can't do everything and we need to have a multitude of brands to be successful and a multitude of different products.

And we’re not just investing in manufacturing of one item, we’re investing in manufacturing to support all brands, all categories and all products..

And our next question comes from Jim Duffy from Stifel. Please go ahead..

I’m hoping you can help build the bridge to the implied fourth quarter guide. I recognized there is a unique compare against the price action in the December quarter of '14, but that makes a pretty good [indiscernible] for us to assess the Printwear outlook.

How much [indiscernible] things make the shift of fleece expected new branded program shipment for the fourth quarter that would be helpful? Thank you..

I think it’s probably for the reason you say easier to bridge against the fourth quarter two years ago, because the fourth quarter, December quarter of last year was a stop quarter, that was impacted by all the charges.

And in the fourth quarter, there is growth in the Printwear side which will benefit from the lower cost and the manufacturing cost savings. And the real driver of growth is on the branded side where we’ll have a significant volume growth as well as expansion in operating margins from the lower cost cotton and the manufacturing cost reduction..

I guess I was hoping there would be more specifics around that Laurence in terms of like new program contribution perhaps the expected increase in volumes in Printwear. You talked about a shift of fleece from -- shipments from timing from the third quarter to fourth quarter.

Can you put a number around that please?.

So fleece will be up compared with the fourth quarter of last year.

I don’t think we necessarily want to guide to the magnitude of that increase, but fleece is down compared with last year in the third quarter and up in the fourth quarter compared with last year and as we said, we have new branded programs which we can specifically talk about, but they all drive strong volume growth in the fourth quarter in branded.

And the main impact of these new programs will be in 2016 when we will have a full year benefit..

Fair enough. And then my next question is more conceptual. Just thinking about this large retailer which has reduced inventories.

With inventories as tight as they are, do you think that's manageable both for the retailer and can Gildan, can you pace with the expected velocity given your systems and infrastructure?.

Our systems and infrastructure are adequate to support significant growth in the category. We have good inventory levels right now, so if you look obviously, we will carry ample amount of inventory.

And it's just a question of getting the shelf sold and making sure the consumers have enough product to buy, but we feel very comfortable with our inventory levels and it's just a question from our major partner to make sure that we can get the product on the pace and fill those plates in Q4..

Thank you. And our next question comes from Brian Morrison from TD Securities. Please go ahead..

Provided a lot of detailed answers recently, so I just have two very brief questions. First, when you talk about new branded wins and the 120 million in new contracts. Last quarter you talked about a split of about $60 million of that following into 2016.

Has anything changed with that commentary with the ongoing this quarter or could you at least update the incremental branded sales that are in the book for 2016 at this point?.

Well, the answer is that the ones the 120 on an annualized basis gives you that extra 60 million I think that's the point, so those programs will flow into next year because we're shipping a lot of these new wins, the 120 million.

We have always set a lot of the new floors and programs in June, July and some are coming actually even in the holiday season, so that's how you have to look at it and as we anniversary these for the full year, we will pick up additional volume.

At the same time, look we are still looking at obtaining new programs for '16, we are working very hard with our retail partners to continue looking for new programs that will -- this is a consistent thing we have done.

I mean in '15 we had new programs go to '16, '16 will go into -- '14 to '15, '15 to '16 and '16 will [indiscernible] as we get new significant new programs that will continue our momentum in years to come..

Just wanted to know if anything had been pushed around that front it sounds like it has?.

No, not at all. In fact we are looking to expedite and bring in new programs to be honest with you..

And then just the last housekeeping question.

When you take a look at cotton and you look at your manufacturing gain, is it fair to say that $35 million of cotton benefit and then the lion's share which would be probably another $35 million plus from cost savings, that should just fall straight down into operating income for 2016, there shouldn't be any offset to that?.

Well we're not giving 2016 guidance right now, so I don't want to clip myself with that. So, but there's definitely significant opportunity in terms of cost reductions both in cotton and manufacturing cost..

Thank you. We have no further questions at this time. I would now turn the call over to Ms. Sophie Argiriou for closing remarks..

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

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