Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2021 Gildan Activewear Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Sophie Argiriou, VP, Investor Communications.

Thank you. Please go ahead..

Thank you, Gail. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our earnings results for the third quarter of 2021.

We also issued our interim shareholder report containing management's discussion and analysis and consolidated financial statements, which will be filed with the Canadian Securities and Regulatory Authorities and the U.S. Securities Commission and are available on the company's corporate website.

Joining me on the call this morning are Glenn Chamandy, President and Chief Executive Officer of Gildan; and Rhodri Harries, our Executive Vice President and Chief Financial and Administrative Officer. In a moment, Rhod will take you through the results for the quarter and a Q&A session will follow afterwards.

I would like to remind you that certain statements included in this conference call may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve unknown and known risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. We refer you to the company's filings with the U.S.

Securities and Exchange Commission and Canadian Securities Regulatory Authorities that may affect the company's future results. And now I will turn it over to Rhod. Rhod, go ahead..

ESG and the current market environment. On the ESG side, we were pleased this past week to rank 8 overall in the Investors Business Daily Top 100 Best ESG Companies list which was published on October 25.

Further to our top 10 ranking, Gildan placed first in the consumer goods sector, strong recognition of our focus on ESG, which is a fundamental part of our overall business strategy.

On the current environment, although there are various dynamics in the marketplace today, including supply chain disruptions and inflationary pressures, which are creating headwinds for many companies, we believe we are well positioned to manage through these factors and continue to deliver on our financial objectives.

Our relative positioning is strong given our vertically integrated model and the geographical locations of our manufacturing supply chain. The vast majority of our sales are internally manufactured predominantly in our facilities in Central America and the Caribbean.

Consequently, our exposure to manufacturing delays for sourced products from the Eastern Hemisphere, specifically countries like Vietnam and other regions in Asia that have been experiencing pandemic-related shutdowns, is low.

Similarly, our dependence on West Coast ports where we are seeing heavy backlogs is also limited, as the largest proportion of our ocean shipments come through ports in the East Coast.

And although we are seeing some inflationary pressure on transportation costs, our exposure to the level of freight inflation for goods coming in from Asia is limited in the context of our overall supply chain. On the other side of the ledger, our yarn supply has remained constrained due to U.S.

labor market tightness, although we are seeing improvement. Overall, we have done an exceptional job managing through these constraints, and we are confident that our team will continue to navigate through this environment.

Finally, on raw material costs, obviously, many of you have been following the recent rise in cotton prices, which is a meaningful input for many apparel companies.

Typically, we like to maintain a certain level of visibility over our future raw material costs, and we try to mitigate or offset rising raw material costs through a combination of hedging, cost reductions driven by our scale and vertical integration and through pricing.

In this regard, we believe we are well positioned to manage through current inflationary pressures primarily due to Back to Basics cost efficiencies, combined with recent pricing actions we started to implement in the fourth quarter of this year.

In particular, having lowered pricing last year in order to drive market share, even with the recent price increases we have announced, our current pricing levels remain only modestly above 2019 pre-pandemic levels, providing us with strong flexibility to manage inflationary pressure as we go forward.

So in closing, our continued focus on execution and our strong performance to date in the context of the current environment, together with the positive progression in demand which is now driving POS trends in North America above pre-COVID levels, leaves us feeling good about the momentum we're seeing in our business.

In spite of supply chain tightness in certain areas and rising inflationary pressure, our positioning gives us confidence that we can manage through these near-term factors.

And as we continue to shift our focus to our capacity, innovation and ESG-driven sustainable growth strategy, we believe we are well-placed to capitalize on market share opportunities and create long-term value for our shareholders. This concludes my formal remarks. And with that, I will turn it back over to Sophie..

Thank you, Rhod. [Operator Instructions] I will now turn the call over back to the operator to start off the question-and-answer session.

Gail?.

[Operator Instructions] Your first question comes from the line of Paul Lejuez from Citigroup..

Curious if you can give us an update on the additional manufacturing capacity you expect to come online for '22 when you might be able to start taking orders under the assumption that, that additional capacity can fulfill orders in '22 or maybe you have already? And then second, just on the price increases, just curious, what have we seen so far? Did any of your price increases impact the third quarter? And what sort of increases are we talking about that will impact the future quarters?.

Okay. Well, I'll take the capacity question, it's Glenn. Well, what we said in previous calls is that we were repurposing all of our equipment from Mexico into Central America. And we were going to expand our capacity in the neighborhood of about $500 million in potential revenue.

And that equipment was going to be installed towards the end of this year, which was what we are on track for. The bulk of this equipment will be installed by the end of fiscal '21. We have already started to ramp up the capacity. I mean, as you can see, we're already producing past 2019 levels as we support sales as we move forward.

And that's being balanced out by our ability to bring on our yarn to support the price -- the capacity increase.

So that's what we're really managing through right now as we -- which is improving every day as we get more folks back to work in our capacity and training and everything else in our yarn facilities as well as our yarn partners, which experienced really the same type of shortfall in their yarns.

So we're moving forward and the capacity we ramped up during '22 and will be a function of really the availability of our yarn, which we're working and focusing on. So we only have really one major focus right now is just making sure we secure our yarn requirements to support this capacity buildup because everything else is in place.

Do you want to answer the first?.

On the price increases, Paul, I mean if you look at our pricing and when the third quarter and if you want to compare it versus pre-COVID levels, really, we didn't have any net price increase in the third quarter. We're basically flat to 2019. As you move into the fourth quarter, we did take some price increases.

They will start to kick in at the beginning of the quarter, but it's pretty modest, as I called out in my comments. So overall, we're effectively looking at price -- net price in the fourth quarter of between 2% and 3% versus 2019. And then if you move to next year, we'll see where we are.

I mean obviously, as we think about our whole system, our vertically integrated manufacturing system and our Back to Basics, that's the first place we look to offset cost pressure and increases. And so we'll look at that, and we'll use that scale and Back to Basics efficiencies to offset as much cost as possible.

But we will take whatever cost that we need ultimately as we move in -- or sorry, whatever price we need as we move into 2022 in order to manage our margin profile. And we've talked about this many times before, that we are really driving this operating margin target of 18%.

We believe that's the optimal place for us to be as we run the business, as we drive to use our capacity. And so we will effectively manage as we move into 2022 to focus on that and take what price we need in order to manage that. But again, that will be after we use all of our efficiencies.

And I think given our overall price set up, we're very well positioned to manage that as we move forward..

Rhod, just as a follow-up, what do your price gaps look like versus the competition right now? And how do you see that changing over time as you make your price adjustments? And how do you think your price adjustments might match up to the competition?.

Well, look, we think that the price gap is widening. That's why we feel very comfortable there's just lots of room if we choose to raise prices. But keeping in mind that we have a lot of capacity coming on, and our focus is to be capacity-driven company and drive our top line sales.

So where we are right now, I think we've got all the flexibility in the world. The gap in terms of pricing in the market, our products versus our competitors is increasing. And our big focus right now is gearing up and delivering and build up our manufacturing capacities of $500 million we have available.

But don't forget, we have Bangladesh, which is going to be coming on at the end of Q2 -- Q4 '22, which is also a big incremental $500 million of capacity. So we have a lot of capacity available to us, and this is a chance for us to, we believe, to take market share.

So we want to balance all these pieces together and as long as we can deliver top line growth with 18% operating margins and take significant market share over the period of next couple of years, we think we feel very comfortable with that position..

Your next question comes from the line of Vishal Shreedhar from National Bank..

Congrats on the quarter. In terms of the outlook, management has performed very well on Back to Basics, probably better than I would have anticipated at the outset.

Can you give us some comments on where you are Back to Basics? What remains to be done? And that 18% margin, is management going to manage to that using inflationary pressure and drive towards that 18%? Or are there other levers that you may pull as it goes forward?.

Well, the 18% is our focus, and we're going to continue to manage against the 18%. I think that's a given. And that's a long term. It might moved up a little bit like it did this year. But I mean our focus is the 18%. And look, I mean, Back to Basics is -- it's a culture. It's not the strategy really.

So what we've done is we've instilled in our organization a discipline to continue to -- and that's what made our company successful.

That's why we were able to capture a large portion of the market share even from the beginning stages is that Gildan developed a strategy of being a low-cost manufacturer, passing those cost savings into better quality products, innovation and better pricing.

Our Back to Basics strategy is just taking us back to what is the core competency of the company, and that's what we're continuing to do. So we think that there's still opportunities within our system. You can never stop. I mean you have to challenge yourself.

We're looking at ways to continue to look at reducing costs and increasing capacity and efficiency. So that's part of our DNA. So that, I think, is going to continue to evolve as we go forward. And we're very excited about all this capacity that's coming on, this $500 million, we're big in Central America.

I mean it's all going to -- in our operating plans, we have a deflation. I mean, most people are seeing inflation, but I mean our cost per operating and converting fabrics is coming down as a percentage is not going up. So that's one of the great things about how we leverage our system, and we'll continue to do so as we go forward..

Okay. And I was hoping if you could provide us any perspective that you have on global minimum tax and how we should think about it as it applies to Gildan..

Well, we're tracking what's going on with the global minimum tax to effectively understand how it will evolve as we go forward, I think everybody is looking at it. And I think it's still probably a little bit early, I would say, to really get a good read on it. Obviously, we know what has been agreed and put forward.

And now obviously, it has to go to Congress and have to go through the EU. I think what's really important as we think about our structure, we do have a low effective tax rate, but that's driven by our overall business structure. And it's driven by our vertical integration. It's driven by our setup in Central America. It's driven by a number of factors.

And none of that will change. We're going to drive that whole vertically integrated system very hard as we go forward, it's all about Back to Basics. It's all about our pivot now to our Gildan -- our growth strategy as we go forward.

And as a result of that, that provides the competitive advantage -- the strong competitive advantage we have versus the people that we compete against. So from a tax perspective, we'll see how that unfolds. Again, still early days. I think we are obviously focused on 18% operating margin.

I think ultimately, if our tax rates do increase, we'll probably reassess that. And if you look at the 18% effectively, if our effective tax rate, which is around 5%, went up to 15%, that's a 10% increase. A 10% increase on our 18% operating margin would push us -- push our targets up really to about a 20% operating margin.

And we did 20% out in margin the last quarter. So ultimately, we have to focus on running the business, driving that free cash flow ultimately. But it's not going to change the way we're set up, the way we think, the way we compete, what our DNA is.

And we think that's very strong, and that's going to deliver really strong value for shareholders long term..

Next question comes from the line of Stephen MacLeod from BMO Capital Markets..

Congrats on a great quarter. I just had 2 questions for you. One, I was hoping you could just give a little bit -- give a little bit more color around your yarn supply situation. You mentioned it as a sort of a near-term potential constraint as well as longer term you're managing capacity towards the yarn.

And then secondly, with respect to the inflationary pressures you're seeing and the pricing you've put through, just more near term, I was wondering if you could give a little bit of color around how you see Q4 gross margin evolving and potentially into Q1 as well..

Okay. I'll take the yarn one. So look, I mean, we've made huge improvements. I mean this yarn has been a little bit of an issue and related to -- mainly because of our U.S. labor pool and COVID-related absenteeism and et cetera. So I mean, we've turned a quarter. We've -- it's been something that's been affecting us all year long.

We've -- we started the year, I think, struggling. I would say it's maybe a good word. But now we've -- we're improving every day and not just us. I mean, that's a broader sentiment amongst even the partners that supply us the yarn as well. And we've also increased our sourcing and internal volumes through equipment and other avenues.

So we're basically -- we feel that we're moving forward. And we're actually producing more today than we did in 2019 as we're consuming some of this capacity. Obviously, we're not fully utilized the potential of our $500 million. But over the course of this year, we see a plan to get us there, and that's what we're driving for.

So we feel that we should be in a position to have a significant portion of that $500 million yarn available for us as we move through 2022..

So if you think about gross margin and how that's going to evolve as we go forward. If we look at the third quarter, our gross margin was 31.4%, very, very strong. The one thing I would call out is in that gross margin, that was about 140 basis points of margin that was related to the reversal of a reserve for promotions.

So there was a -- we did get a little bit of uplift in our margin associated from that, which we won't see in the fourth quarter. In the fourth quarter, we will see now headwind from raw materials coming through and inflationary pressures.

We've called that out all year long that we expected that to hit us in the fourth quarter and that will come through. And then that, to a certain extent, will be offset by the price increases that we've talked about in prior questions. So overall, you will see a decline in our gross margin in the fourth quarter.

But I think again, we keep going back to this, the fact that we are running the business to achieve that target operating margin of 18% and I think as we move into the fourth quarter, you won't -- you'll see us be able to deliver on that.

And then as we move into 2022 at a broader level, effectively, we will be managing gross margin, SG&A, everything, the whole focus together with obviously our sales, our capacity-driven growth to hit that target. And that will effectively -- we'll see how it goes quarter-to-quarter as we move into the new year.

But again, we're focused effectively on delivering that number full year. And the fourth quarter, I think, will be a good quarter, down from where we currently are. But I think you'll see, again, numbers pretty well in line with that as we finish up the year and move into 2022..

Your next question comes from the line of Chris Li from Desjardins..

Glenn, to the extent that you can share, can you tell us how much of the common requirement for next year has been locked in prior to the recent surge in cotton prices? I'm just trying to get a sense of when Gildan will start consuming, content has been up above the $1 level..

Chris, we really don't provide that information, but I think that maybe one other way of looking at it is that cotton has been trading quite significantly higher on a year-over-year basis for some time now. So I mean the higher cost of yarn or cotton, let's say, for example, is probably already impacting our cost of goods sold as we go forward.

But I don't really -- wouldn't want to say exactly our position in terms of cotton. But I would just say that the cotton is definitely moving up. We don't know where it's going to land, obviously, because it's still volatile. I mean -- but we have a position that we feel comfortable where we are today. We have good visibility.

We have our pricing strategy, which is in line, and I think is not -- we have lots of room on pricing if we need be. And we're going to deliver 18% operating margin regardless of the price of cotton at this point in time. So we really are pretty comfortable where we are, I think, as we move forward into 2022..

Okay. That's very helpful. And then my other question is, historically, where there would be some margin volatility is when there's a big jump in cotton prices but followed by quite a rapid decline in a short period of time.

Do you see that as a risk to margin? Or do you think that in the current environment, where there's low inventory tight supply and recovering demand that the cotton price were to come down rapidly for whatever reason the type of margin volatility that you had experienced in the past will not materialize as much?.

Yes, right. I mean, look, I mean, the big volatility was in 2011, right, when we went to $2 because cotton and the world ending inventories were 46 million bales, [later 80 million]. So I mean we're not going to -- there's still ample cotton in the world. I mean part of the big spike in cotton is also a function of supply chain disruption.

I mean getting cotton to ports and things like that. So people are panicking and trying to get their cotton. So I don't think that we're going to be in a position where we were in 2011. But I mean, I would say that, look, we're not aggressively raising prices. I mean we've got our price.

I think if you look at what Rhod said, I mean our prices are going to be slightly '19 -- I mean Q3, we're at the same level as '19. Q4 will be slightly higher than '19.

So we're being careful on raising price and using what our strength is, our low-cost manufacturing, our cost initiatives are back to basics to drive volume in this market because we think our competitors are under pressure. I think that their cost structures are broken.

And this is a big advantage for us to take share and ramp up to our $500 million and then follow that up with Bangladesh. So we're not going to go crazy on price. I can tell you we're going to manage that 18% operating margin, and we'll take what price we need.

And I don't think that we'll be in a position to have to worry about the receipt of cotton coming back down to lower levels..

Next question comes from the line of Luke Hannan from Canaccord Genuity..

I just wanted to follow up on the, I guess, the demand part of the equation of what you would have seen in Q3.

Was there any -- on your end, did you notice any, I guess, pull-forward of demand from your distributor customers as a result of these cotton prices going higher? So I guess, a chance for them to be opportunistic and get some lower-cost inventory on their books..

No. Look, I mean, we saw actually destocking in the channel in Q3. I mean, our distributor -- our customers' inventories have actually decreased slightly from Q2 to Q3 because demand is so strong. So this is all being pulled through by end-use demand. The market is very strong.

A lot of this is also a function of what's happening from onshoring, people needing product. I mean the supply chain is basically -- we think our overall market has grown through COVID, obviously, through the onset of online selling, et cetera. So business is actually very strong. In fact, if anything, we left sales on the table..

Okay. And then just as a follow-up to that, Glenn, I know we've talked about in past calls, just the delta, the amount of restocking potential, I guess, there is in the channel relative to 2019.

But is there anything that's come out of your conversations with distributors that would indicate that they're maybe more comfortable with having lower inventory on their books sort of going forward post COVID than they would prior to the onset of the pandemic?.

No. I think that they need more product. I think their efficiencies are, I mean, the lack of product, I think, in the channel. I mean, their inventories are probably half of what they were in '19 today. So just to give you an idea of where they stand. And it's not healthy. We need more inventory in the channel.

That's what we're working to get to increase, obviously, our capacity to ultimately support better inventories in the channel because when they buy a product, if they have to ship to a consumer or one of their end users, one size from the East Coast, one size from the West Coast and you wait to receive all those in your print shop, that's just not good business.

It's not something that they want to do, right? So there has to be an optimal amount of inventory in the channel. It's below optimal levels today. The thing is that business is so strong, that it's going to take some time before that restock eventually happens if it maintains at these types of levels.

And I think that's where -- eventually, it will happen, and they need to have more inventory for sure..

Next question comes from the line of Brian Morrison from TD Securities..

Just want to follow up on that question, Glenn, because your inventory is down 23%.

Maybe just update us on what you see as the replenishment needs in the distributor channel now? And then in terms of the demand environment, when do you think you're going to be in a position to commence replenishment within the channel?.

Well, we don't know that, obviously, because we don't know how strong POS will be as we move forward, right? So I mean it just turned positive. I think there's a lot more -- I think we're leaving orders on the table today. We know it for a fact. I mean there's a lot of business that we had.

And so a lot of the capacity that we're building and increasing as we go forward, I think we'll go right into POS. So the question is that when and at what point in time will we outstrip the demand of the POS basically and how high could the POS go? That's the part that we don't know. But that's a good problem to have. So we'll see what happens.

I mean we're in a relatively good, I think, position today. We'd like to have a little bit more volume as we speak, but it's coming along. And our inventories are in line. I mean, one of our strategies in terms of Back to Basics is obviously continue to manage our working capital and our SKU.

So I don't think that it's our inventories that are too low in aggregate dollars, maybe a little bit low, but nothing significantly. It's just the fact that our capacity needs to be a little bit higher to be able to support the demand in the market today..

Just following up on that.

Where is your current state -- what is the current state of your transfer of assets into your Central American facilities from Mexico?.

It's pretty much complete. I mean we have -- by end of this quarter, beginning of Q1, everything will be installed. We've already started to utilize those assets because we're producing over 2019 levels as we speak today. That will continue to ramp up as we move forward and build on our yarn availability basically, which we have a plan to ramp up.

So I think we're moving forward. We will have more capacity as we move into '22. And our objective would be to try and have as much as that $500 million available for sale in '23..

Okay. And last question, just in the context of supply chain headwinds.

Is vertical integration, has that been a notable benefit in gaining market share? Or is it more still the pricing gap relative to the competition?.

Well, I think that, look, we don't have a significant amount of inflation. So the pricing gap is obviously going to pay big dividends as we move forward. I mean that's a given, right? But look, we're in a position to, I think, continue driving success in our hemisphere, it's paid off.

We've got a very effective supply chain being vertically integrated and managing all aspects of our business. I mean there are very few people in the world to do it, right? So it's proven that when you manage your own supply chain, you can become more effective, you're in control of your destiny.

So we're going to continue to benefit from our vertical integration. And I think that as the world changes, and this is something that's a wake-up call for everybody. I mean people are scrambling for product. They need to understand who the reliable partners are.

I mean I think that we also are going to be in a good position to continue having steady growth with all of our partners as we continue to move forward..

Your next question comes from the line of Jay Sole from UBS..

Glenn, I'm wondering if you can elaborate a little bit on some of the demand sources in the quarter.

Specifically, have you seen some of your orders coming in as a result of those big group events to the extent you kind of know that? I mean you think like the world is completely reopened or are we still kind of in the middle stages of things getting back to normal and all the different sources of where your demand comes from really coming back as they were pre pandemic?.

I think that the market has grown. I mean I said that all along is that pre pandemic, I think we think the market has grown significantly through the -- for people that have brands that are able to sell online.

I mean if you look at our products, I mean, they're like -- they're the canvas for somebody to create a brand, right? I mean, they can buy our shirt put their label in the shirt, put a screen print on the product and create a brand. So a lot of that is, I think, has happened during the pandemic, and there's a lot more brand-driven opportunities.

Online selling has become a big opportunity, I mean, which is relative to the brand as well, but product getting to consumers, which never we're able to before.

And that's a function of having digital printing, which has been a big impact in our industry where before you need to run a screen printing operation where you basically have to set up and make 200 units at a time. With digital printing, you can make onesies and twosies.

So people are going online, you take a picture, you send it to your online provider and 10 days later or not even 10 days later, 3 days later, you get a shirt with your print on it. Near-shoring is becoming a bigger, bigger factor, and that's not just with I think, global brands that we do business with.

But I just think, in general, people are reacting quicker to the market. Retailers are buying T-shirts, they're asking their providers to source those products quicker and more domestic, which is somewhere where -- which is driving our volume. So we just think casualization has been a big factor. Our fleece business is on fire really.

I mean it's up significantly on a year-over-year basis and up significantly over 2019 and continuing to grow. I mean we can't make enough of it. So those are all things that are driving our business. So we think we're relatively in a good position to continue growth.

I mean the only area that we have, which I think is a little bit lagging is our international business, which really hasn't come back in POS, but that's improved over the last year..

[Operator Instructions] Your next question comes from the line of Mark Petrie from CIBC..

I just wanted to follow up on a couple of things you've touched on.

I guess specifically just with regards to working capital, are you comfortable with sort of the levels that you're at today? Or do you think there's opportunity for that to move one way or the other? And then related to that, obviously, the free cash flow generation is extraordinarily strong.

When you think about opportunities to invest in your business, are there additional opportunities for either vertical integration or potentially expanding capacity through acquisition?.

Rhod, do you want to answer that?.

Yes. On the working capital, Mark, look, our working capital, if you look in the quarter, it was around 25%, 26%, right? It's a little low. I mean Back to Basics has been about optimizing our whole setup and through the optimization, we should be able to run with lower working capital.

And we have been able to actually, it's been a big benefit, I would say, from the whole strategy. But we are tight, and we are a little bit low. So if you think about 26%, I would say that we used to talk about running with our working capital in the low 30s, 30% to 35%. And I think probably now we can probably run with around 30%, something like that.

So it's -- effectively, it's a little bit low, a little bit below where we want it to be, but we -- it is a big part of our overall strategy, and we should be able to keep it reasonably low and turn it fast as we go forward..

What was your second part of the question you asked, sorry?.

I was just asking about sort of opportunities to deploy capital aside to returning cash to shareholders, either other opportunities for vertical integration or potentially acquisitions presumably to add capacity, but other possibilities, too..

I think, look, we're always looking for ways to grow our business in terms of capacity. So I think that if there is some type of acquisition for us, probably more -- be more capacity, more textiles or something that's going to drive our top line growth, really.

You know what I mean? So that's probably the type of acquisition that we would look at today. But we have a lot of capacity coming on, too, to be honest with you. I mean, we have a significant amount of capacity today in our Central America textiles and we have Bangladesh 1 coming online, and we have Bangladesh 2. So we're a relatively good spot.

So we'll continue to look at deploying our cash to shareholders, I mean, in the near term, for sure. We have obviously we'll continue to buy back shares and look at returning capital through dividends. I think that's really the -- in the shorter term, that's probably where I think will be -- where we will be in terms of cash flow, return cash..

Next question comes from the line of Jim Duffy from Stifel..

Congratulations on your ESG recognition to start. Can you guys speak to what you're seeing in your global lifestyle brands engagement.

Given your ESG standing in Western Hemisphere manufacturing, I would expect that to be very constructive foundation for discussions, any new business opportunities to point to?.

Well, look, we're -- part of our growth strategy is to continue developing our relationship with these customers. There's definitely, I think, been a big focus on near-shoring and we're in talks with most of our global lifestyle brands to continue to grow their business.

And I think combining that with our ESG strategy, even looking at providing products and other geographical markets, believe it or not, because we're positioning ourselves as a Tier 1 supplier of product.

And ESG for us, we think, is going to be a game-changer as we move into the future, because people are going to need to rely on their supply chain partners, and we believe that we're well positioned to continue capitalizing on our positioning..

Great.

And then Glenn, can I ask a state of distributor inventories relative to POS? And are you seeing any pull-forward of demand from distributors in an attempt to build stock ahead of anticipated price increases?.

No, no. What I said to just a couple of questions ago was that the inventory in the channel really is roughly about half of what it was in '19. I mean, just to put things in perspective. And POS is turning positive relative to '19. So inventories are tight in the channel..

There are no further questions at this time. Ms. Sophie, please continue..

Great. Thank you, Gail. And with that, once again, I would like to thank everyone for their participation today, and we look forward to speaking to you soon. Have a wonderful day to everyone. Thank you..

This concludes today's conference call. Thank you for participating. You may now disconnect..