Gildan Activewear [GIL] Conference call transcript for 2022 q1
2022-05-04 21:08:13
Fiscal: 2022 q1
Operator: Good day and thank you for standing by. Welcome to Q1 2022 Gildan Activewear Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a Q&A session. To ask a question during the session I would now like to hand the conference over to the first speaker today, Ms. Sophie Argiriou, Vice President, Investor Relations. Please go ahead.
Sophie Argiriou: Thank you for Christine standing. Good afternoon, everyone and thank you for joining us. Earlier, we issued our press release announcing our earnings results for the first quarter of 2022. We also issued our earned interim shareholder reports containing management's discussion and analysis and consolidated financial statements. These documents will be filed with the Canadian Securities and Regulatory Authorities and the U.S. Securities Commission and are available on the company's corporate website. I'm joined here today by Glenn Chamandy, our President and Chief Executive Officer and Rod Harries, our Executive Vice President and Chief Financial and Administrative Officer. In a moment, Rod will take you through the results for the quarter and a Q&A session will follow. Before we begin, please take note that certain statements included in this conference call may constitute forward-looking statements. Such forward-looking statements involve unknown and known risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. We refer you to the company's filings with the U.S. Securities and Exchange Commission and the Canadian Securities and Regulatory Authorities. During this call we will also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable IFRS financial measures are provided in today's earnings release and in our MD&A. And with that, I will turn the call over to Rod.
Rhodri Harries: Thank you, Sophie. Good afternoon all and thank you for joining us today. What may begin by saying we're off to a strong start to 2022 as we delivered record net sales up 31% and record adjusted EPS up 58% over last year for the first quarter. Great results as we shift to our Gildan sustainable growth strategy, which is focused on driving growth and margin performance as we invest in and fully leverage our world-class large-scale, vertically integrated manufacturing platform. This platform, together with an efficient product portfolio and go-to-market approach, is providing us with strong capability to service our customers in an environment where many apparel companies are facing supply challenges. Further, because of our industry-leading ability to produce at low cost, we have been in a strong position to be able to price the offset inflationary pressures, and to deliver margin performance. Beyond our strong operating results, we are also pleased about our ability to execute on our capital allocation priorities during the quarter, including re-purchasing 5.1 million shares or 3% of our float, and returning more than 200 million of capital to shareholders while maintaining a strong balance sheet. Turning to the details of our results for the quarter. Total net sales of 775 million, reflecting an increase of a 185 million or 31% over the first quarter last year, largely driven by volume growth and net selling price increases with some favorable impact from product mix. Activewear sales of 667 million were up 38% and hosiery and underwear sales of a 108 million were up 3%. Volume growth in Activewear was driven by strong demand in North America, particularly in the distributor channel, with strong sell-through driven by the continued recovery of large events, travel, and other end-use markets. Volume growth with distributors was also driven by our ability to better service seasonal inventory requirements and to support growth, given our improved production levels this year versus last year. Also contributing to the Activewear sales growth was higher net selling prices, which reflected the impact of base price increases that were implemented starting in the fourth quarter last year, as well as the impact of lower year-over-year promotional discounting. We were also pleased to see that ring-spun and fleece products were key contributors to our strong sales performance in the quarter, driving favorable product mix. Finally, the 3% increase in the hosiery and underwear category was primarily driven by higher selling prices, which drove strong results when compared to industry sales for these categories according to NPD data. So overall, strong top-line delivery for the quarter. Moving onto our strong margin performance, adjusted gross margin of 30.9% was down slightly year-over-year by 20 basis points. You may recall last year we received a one-time cotton subsidy, which benefited gross margins in the quarter by 300 basis point. Excluding this benefit, adjusted gross margin expanded by 280 basis points in the quarter. The improvement was largely due to higher net selling prices and favorable product mix, which more than offset the impact of higher cotton costs and inflation across our manufacturing expenses. Turning to SG&A first quarter of 81 million were up approximately 8 million compared to last year. The year-over-year increase was primarily due to higher volume driven distribution expenses and the impact of inflation on overall costs. SG&A expenses, as a percentage of net sales, improved two percentage points to 10.4% compared to 12.4% last year. As the benefit of volume leverage and our continued focus on cost management more than offset inflationary cost pressures bringing in all together our strong sales and gross margin performance combined with SG&A leverage translated to adjusted operating margin of 20.4% for the quarter, which compared to 18.7% last year, was up 170 basis points, and which led to record adjusted EPS for the quarter of $0.76, 58% above the prior year quarter. Moving on to cash flow and balance sheet items, we consumed $86 million of free cash flow during the first quarter, which included working capital investments to support growth and seasonal requirements, as well as $34 million of capital expenditures related to capacity expansion. As mentioned earlier, from a capital allocation perspective, we were also active on our share repurchase program during the quarter and combined with the share repurchases we have done in April, we have now completed more than 60% of our current NCIB program. Our net debt position at the end of the quarter increased to $829 million and our net debt leverage ratio of one-times was at the low-end of our one to two times target range. On the debt side, I would also highlight that as we focus on ESG as a key pillar of our strategy and reinforcing our commitment towards our ESG targets. During the first quarter, we amended the terms of our existing $1 billion revolving credit facility to incorporate sustainability linked terms. In this regard, we're proud that Gildan is the first Canadian apparel manufacturing company to tie financing costs to the achievement of important ESG targets. Let me now give you a quick update on our Gildan sustainable growth for GHG strategy. As part of our capacity driven growth initiative, we are pleased with the progress we're making on our overall expansion plans in Central America and Bangladesh, which all remain on track. Further, as part of our efforts to strengthen our vertical model we are also making good progress with the integration of Frontier Yarns as we increasingly internalize and optimize production. Finally, on the ESG side, beyond the sustainability and linked loan, which I mentioned, we were also pleased to launch the Gildan respects marketing campaign during the quarter. Now, before concluding with my remarks, let me share some commentary and what we're seeing in the current environment. As I mentioned earlier, throughout the first quarter, we saw strong demand for our Activewear products in North American. More recently, while we have seen some deceleration in POS over the last few weeks, overall demand for Activewear remains healthy. Similarly, we have also started to see some slowing in sell-through for certain Hosiery and underwear category products that could be related to broader economic factors, including the impact of the non-recurrence of stimulus another support payments which consumers received last year. However, although it's difficult to predict how macro concerns will play out. We believe the favorable industry dynamics, which we discussed at our Investor Day, will remain a tailwind to demand. This combined with the continued recovery in areas impacted by the pandemic including tourism, travel, and the progressive come back of large events, together with inventory levels in the distributor channel, which remain below pre-pandemic levels, is expected to provide support for demand going forward. Further on the cost side, our vertically integrated models and the disciplined pricing strategy we have followed so far, puts us in a strong competitive position and provides us with good flexibility to navigate inflationary headwinds and deliver against our profitability goals. Consequently, we are pleased with the start of the year and the progress that can be made in 2022 towards our three-year objectives as we execute on our GHG strategy, driving strong organic growth and margin performance by focusing on capacity expansion, innovation, and ESG to create long-term value for our shareholders. This concludes my formal remarks and with that, I will turn it back over to Sophie.
Sophie Argiriou: Thank you, Rhodri. Before moving to the Q&A session, I ask that you limit the number of questions to two and will circle back for a second round of question if time permits. I'll now turn the call over back to the Operator for the question-and-answer session. Go ahead.
Operator: . Your first question comes from the line of Mark Petrie of CIBC. Your line is open.
Mark Petrie: Good afternoon. With regards to the outlook and the slowdown in POS trends that you were calling out in recent weeks, can you just give us some more color on the products? Where you're observing this and in your discussions with your customers, given their low inventory levels, are these slower POS trends translating to slower order flow or is there some replenishment underway?
Glenn Chamandy: I would say that the POS is somewhat pretty much consistently across the board, there's no one area that's slowed more than another, but let's put it context slow. We still have pretty good -- The beginning of the year, we had pretty good growth. Although it slowed some, it's still very positive for us and we're still pretty optimistic about as we move forward. Like just taper a little bit that comment but partly it's hard for us a little bit understand too, because over the last four or five weeks we've had which huge biking COVID across United States. We've had pretty bad weather. And we think we're still well-positioned as the as things open up in travel and advance continue to evolve as we continue to transition out of the pandemic so we are pretty optimistic, I would say. We were guns blasting record sales have slowed down a bit, but it's still pretty good inventory channels are still low. They've gone up slightly in Q1, but probably in the same level as our sales whereas, whatever growth we had in terms of unit volume sales are somewhat the inventory that increase in the channel. So channels are relatively low, specifically relative to pre -pandemic levels. And we haven't seen any cancellation of orders. I mean, order-flow is strong. We've got a very good order book, and I think we're just poised to continue having a good year. Little cautiously optimistic. And we just -- we don't have a crystal ball, so we're just making sure that we're managing ourselves through the environment, whatever is thrown at us.
Mark Petrie: Yeah. I know that's very helpful context. Definitely I appreciate all of that. And I guess just the second question, just with regards to the continued escalation in cotton prices, I know you are generally leaning towards supporting top-line growth, but can you just talk specifically if there's any change in how you're thinking about pricing or if you've observed any changes in the competitive landscape in the last couple of months?
Glenn Chamandy: Well, obviously, price was part of -- a big part of our sales in Q1. I mean, we've had to take price to offset inflation, but we're pricing off a very low cost of manufacturing and very low pricing, which we've set in the market. So our pricing gap between us and our competition has allowed us to increase prices and maintain the equivalent operating margins I think. So that's the good news. And as we move forward into the future that we have pretty good visibility on our cost structure as we move through this year and as we move into next year, if we need to continue to take more price so we'll look at that point in time. Nobody knows what problem is going to be, but we have good visibility on this year as so far and we'll take price accordingly.
Mark Petrie: I appreciate all the comments. All the best.
Glenn Chamandy: Thank you.
Operator: Your next question comes from the line of, Luke Hannan of Canaccord Genuity. Your line is open.
Luke Hannan: Thanks. Good afternoon. Just following up on that line of questioning on the cost of cotton. Glenn, I think you've mentioned in the past that should the cost of cotton eventually fall back to more normalized levels, that there won't be the same level of price incentives or price decreases, rather, that won't be necessary should happen in the future like it was in the past to be able to spur demand. And I'm just curious to know what exactly underlies year conviction that that's the case this time around.
Glenn Chamandy: Well, because a large part of the price that we have attained in Q1 was just a reversal of promotional discounts that we provide to our customers historically. So what we've done is we did take some price increases in Q4 and a little bit in Q3, I think in certain areas. But the biggest part of the price associated with the price increases in Q1 was the reversal of discounting that we normally have done in the market. So with cotton comes back down, we'll just increase our discounting again, and therefore, we won't have to adjust pricing in the market.
Luke Hannan: Okay. And I wanted to get a better understanding of moving towards the balance sheet. The accounts receivable had jumped up pretty materially quarter-to-quarter, and there has mentioned of there's some impact relating to the timing of the payout for annual rebate programs. I just didn't quite understand that. Want to know what exactly that relates to even a different than what you guys would have experienced in the past?
Rhodri Harries: Yeah. I think that was probably the small Luke's. If you look at the receivables, they were up, but obviously, the sales were up. And if you look at what our gross days outstanding are, they're well in line with where they have been. So I would say we're very comfortable with effectively what's going on with our receivables. And again, mostly what you're seeing is effectively just an increase related to the increased level of sales that we've been seeing.
Luke Hannan: Okay. I appreciate that. Thank you very much.
Glenn Chamandy: Thank you.
Operator: Your next question comes from the line of Stephen MacLeod of BMO Capital Markets. Your line is open.
Stephen Macleod: Thank you. Good evening, guys.
Glenn Chamandy: Hi.
Stephen Macleod: Just wanted to follow up on a couple of things here. When you think about the quarter and notwithstanding some of the some of the relative slowdown that you've seen over the last couple of weeks. Can you talk a little bit about how some of those categories that have -- are continuing to make up ground to pre-pandemic levels, like travel, tourism, corporate, how those end markets fared in the quarter?
Glenn Chamandy: We don't have specific data on any area, I think, in terms of what's growing market, but look, at the overall market, obviously, you can follow what's happening in the recovery of, especially from COVID. I mean, travel is back and tourism is coming back. Events are happening. I mean, I personally believe, over the last month, we saw a little bit of our slowdown was due to the big wave in COVID. But nevertheless, it's hard for us to tell, but I would say that what's driving our business, I think, are -- really is our fashion basics and our fleece sales, which are really the pillar of the growth for the company, and also are benefiting our overall mix of product mix. And that's been pretty much a consistent theme probably for the last 24 months. I mean, we've seen our fleece business continued to grow. It's a growth category. Lifestyle change, I think, which is people are more casually dressing today. So we're pretty bullish on those. Through the acquisition of Frontier, we've been able to obviously increase our capacity in fleece substantially. So that's also been a big positive to us. So we're very optimistic about our positioning in the market, and we'll see where the market goes. We're cautiously optimistic as we go forward.
Stephen Macleod: Okay. That's great. Thank you. And then just secondly, if I look through the outlook section, is it fair to assume that you would still expect at this point in time to generate sales growth in that 7% to 10% range for the Full Year?
Rhodri Harries: Yeah, I think Stephen, if you look at the full year, I mean -- I think as Glenn said, we are cautiously optimistic as far as what we see from a volume perspective. We have seen some slowing down in POS, but I would say again more broadly, we are fairly optimistic. So if you look at the volume that we would expect it would be effectively reflective of that. And then if you look at the price that we would expect for the Full-Year. Last quarter I called out price being mid-to-high single-digit. I think you probably when it's all said and done now as we see how things are playing out and what's going on with promotions. It's at the higher-end, I would say then the lower end. And so the combination of the higher end of the pricing and the volume would give you Full-Year sales. I would say that would be on the higher end of the range. We’ve given. So we're not giving guidance, but I would say that 7% to 10% is a three-year CAGR. And I would say that's why we feel we're off to a good start against that target in 2022.
Stephen Macleod: Okay. That's great. Thank you.
Operator: Your next question comes from the line of Jay Sole of UPS. Your line is open.
Jay Sole: Great. Thank you so much. Maybe you -- can we dive into the gross margin a little bit because almost 31% well above, I think what the consensus had been forecasting, obviously well above where it was in pre-pandemic? Can you just talk about some of the drivers? Was it really all price? Can you tell -- what are some of the efficiencies, maybe from the Back to Basics strategy that has allowed you to have a higher gross margin? If you just maybe give us some breakdown of the pieces that'll be helpful. Thank you.
Glenn Chamandy: Well, thanks, Sir, Jay. So look -- and we called out on the remarks. This is -- if you look at our gross margin we were very pleased with the performance. We were down, but again, that's versus a comp. It was tough because of its cotton subsidy last year. I think if you look at ultimate -- at a base level, our performance is being driven by our manufacturer. Right. If you fundamentally look at the business, it's our vertical integration, it's our scale, it's the way that we are leveraging our platform, is allowing us to be very, very competitive and to really manage, I would say that because of our very low cost base. So that's the starting point, I think for the quarter effectively, we did see price coming through, we did see mix coming through, and of course we did have inflationary costs and we did have higher cotton costs as I called out, but the combination of all of this is driving that strong margin. So as we go through the year, we'll see how that progresses and we will have more inflation coming through, but again, I think would say we're very pleased with the way that we are running the manufacturing, we are ramping up, we're doing the vertical integration of Frontier. And that will allow us to offset the -- some of these inflationary costs and allow us to maintain our low cost position. So it will be some gross margin pressure as we move through the year, you would expect that, but all-in-all we're very pleased. And it all really starts with our manufacturing. That's really that what sets us apart. I would say from our ability to deliver gross margin and ultimately against the operating margin targets.
Jay Sole: Got it. Maybe if I can ask one more. You mentioned your group events are coming back. Maybe just give us a sense of where that business is right now relative to before the pandemic. Are the volumes there back to maybe fully 100% where it was, or maybe it's only 50%? Can you give us a sense of where that rebound in that business stands?
Glenn Chamandy: We'll, look at them. It's hard to totally get a grasp on it today, but you can probably look at travel, and airlines, and data points, but contracts are pretty much in full swing. I think we have a lot of trade shows are happening in -- back Las Vegas is starting to pick up. The big things are. There's a lot of different elements. There's summer camps. There's little league baseball. There's seasonal . There's corporate and promotional, which is probably maybe the only area that we probably would see that could still be a little bit weak pressure on corporations because of higher-cost, let's say, for example, but it's hard to say where all the puts and takes our because we don't have all those data points. But I would say, overall, the market has been very robust. And I think one other, I think key element for us, which is also growing our revenues is don't forget is that people are still looking to onshore their products. I mean, either screen printers, large national accounts, some of our private label customers, brands that we do business with, and some retailers. So I mean, people are looking to buy more product closer to this hemisphere, which is also a big positive for us, which we're seeing lots of opportunity to continue growing sales. So all these things together, look, we feel we're in a very good position. We don't know if the world is going to fall apart, but so far, we've had good run in Q1, and we're little bit more cautious as what we're seeing today. But hopefully, it will continue to have the same type of results as we move through the balance of the year.
Jay Sole: Got it. Okay, thank you so much.
Operator: Your next question comes from the line of Paul Lejuez of Citi. Your line is open.
Brandon Cheatham: Hey, everyone. It's Brandon Cheatham, for Paul. I just want to get a sense of the past you've talked about the restocking opportunity. Was that any part of 1Q restocking? Do you think that you'll be able to catch up on some of that in the second quarter?
Glenn Chamandy: Well, we think that the second quarter is still going to be relatively strong and then we don't anticipate what we said earlier in the year. We didn't anticipate any restocking till 2023 is what we called out, I think in the beginning of the year or so. I think we're still somewhat in that mindset. I think that's probably what we're still feeling. We will see what happens, but there's -- both our inventories are in pretty lean position and I think our customer inventories are also in pretty lean position today, which has guidance.
Brandon Cheatham: Okay. So you wouldn't say you have any spare capacity currently or expect to have excess capacity this year based on from what you're seeing so far?
Glenn Chamandy: No, we're running fall, our sales are pretty robust, 31% increase year-over-year basis. So we're running pretty hard and our inventories are low and our customer inventories are low. So those are two positives. And we're still optimistic about the marketplace, so we'll see those things trends as far as we go forward.
Brandon Cheatham: Okay. And if I could just follow-up on pricing. How much was a -- was that fully flowed through in the first quarter or do you get an incremental benefit in the second quarter as well?
Rhodri Harries: No. If you look at what we've done from our pricing perspective, it did fully flow through in the first quarter. If you look at the way we've been adjusting prices in the back part of last year and the price increases that we took at the beginning of this year, they were reflected in the first quarter. And then we'll see where we go from here, I think what's going to happen is that the comps are going to get tougher obviously as we go into Q2 and Q3, Q4, because we did start to adjust price in the back part of last year. So there you will see it, the uplift from pricing that we saw in the first quarter together with very strong volume, will start to abate, but right now we're going to just watch the environment, see where it is and we'll go from there.
Brandon Cheatham: I'll turn it back. Thank you. Good luck.
Operator: Your next question comes from the line of Brian Morrison of TD Securities. Your line is open.
Brian Morrison: Yes. Thank you. Follow-up questions, please. Rhod, you talked about your gave a little bit of guidance with respect to revenues at the high-end range. I'm wondering if you can just go back and talk about the parameters of your slowing growth comment with perspective sell-through. Q1, Glenn just mentioned you were in the 30% neighborhood. Maybe just some parameters where you were and in recent weeks.
Rhodri Harries: Yeah, and I think if you look at, basically, the first quarter, I called out effectively that the quarter was driven by -- there was a little bit of mix, not a lot. But if you take the mix out, then effectively it was driven, I would call, 50-50 between effectively volume and price. And so if you look from a volume perspective, that means that we were in North America, we were seeing, not particularly in our PrintWear business, we were seeing double-digit type POS. And as you -- as we look at where we are in April, that has moderated back, but it's still healthy. We've effectively moved down to what I would call for the mid-single-digit range, could be pushing up a little bit from that, depends -- As Glenn said, just a little hard to read, right? Because of weather, because of COVID. So it has stepped down, and we'll see where it goes from here. And obviously, that, to a certain extent, will dictate where we go. But I would say it's still at good levels and still at healthy levels.
Brian Morrison: Okay. Thank you for that and then maybe Glenn, you did mention nearshoring. I'd like to follow up on that and if I could. You've had some lockdowns in China recently, which has got to be affecting the supply chain even further. I just wonder if you're seeing the materially increase in demand from national accounts and GLB and whether this is increasingly looking like it will be a permanent benefit to you?
Glenn Chamandy: Well, I think it's going to be a permanent benefit to us, but I think it's not -- this company's plan well in advance, so we have been working together with our customers as a plan to increase their volumes at this hemisphere. So I think that's a general trend that's transpiring and some quicker and for example, the large national accounts like customers, they're looking to buy quicker and this is a bit more responsive, but the larger brands are a little more systematic about how they approach their supply chain as their global -- Frontier brings in China their global manufacturers, but at the end of the day, the onset, this hemisphere will continue to grow and I think we're going to be a big beneficiary of that opportunity.
Brian Morrison: Relative to your current benefit, could you just double over your three-year horizon?
Glenn Chamandy: Well, yeah. I would say that that's realistic. There's a lot of volumes we have.
Brian Morrison: Thank you very much.
Operator: Your next question comes from the line of Jim Duffy of Stifel. Your line is open.
James Duffy : Thank you Good afternoon, guys. Given the -- thanks for taking the question. Does given trends in cotton prices and historical precedent, no doubt tomorrow am going to get calls from clients who argue that strength is impart from distributors pulling forward purchases to build inventories. Further anticipated price increases. How would you guys respond to that? And what if anything, can you do to prevent recurrence of that dynamic in the current environment?
Glenn Chamandy: No. One, you can do channel checks, and obviously, that will confirm that the inventories in the channel are very low. I think that's the first thing. So inventories are in pretty good shape within the overall channel. So there's not an abundance of inventory. That's one thing. Look, at -- we're managing our sales. We're managing the levels of inventory in the channel. What I said earlier was, is that it was up slightly, but it's based on the performance of the business in Q1, and we'll be in a position to continue to service our customers as we go forward. And then that's -- I'm we're going to make sure that we -- I'm not sure the point you're trying to get to, is we're not going to bring overabundance of inventory and channel just because of price of cotton is moved up, and potential prices as we are comfortable with our pricing where it is today. And this could be potentially a 2023
Rhodri Harries: Scenario in terms of further price increases but who knows, MacLeod will be in 2023. So that's, that's a risks and when they don't think anybody's going to 100 take. So today we will. Business is strong. We're managing through our with our customer relations and making sure we're fulfilling as much as we can the requirements to keep our product in Stock were tight on product right now because sales have been very strong and we're going to keep the managed ourselves through as we go forward and our capacity continues to come on mind guys.
James Duffy : Thanks for indulging in that so Glenn with distributer inventories still lean it sounds like you're suggesting Q1 as a normalized baseline. There's not much to work without guidance here should historic little seasonality apply that Activewear business for the balancing the quarters of the year is that sounds like ambitious assumption.
Rhodri Harries: Well, I think you would see sort of normalized seasonality as -- and we talked about, and what things we were doing, obviously I would say I was providing an inventory for the seasonality Jim. So I think it's not -- I wouldn't say it is a normal type of cadence that we see going forward. Again, I would say that if you look at the first quarter, as you think about how that translates in the second quarter, third quarter, fourth quarter. Obviously, we've talked about price and what unfolded there. And we have talked about the -- what we've seen from POS perspective in Glenn's, also highlighted how we are planning to be disciplined. So I think it's -- again, if you thought first quarter was very, very strong and POS was very, very strong. So the demand was there and as we go forward, we would expect to see that moderate as we move into the year, but still, the seasons are the same, right? There's a lots of travel, there's a lots of events, there's a lots going on in the summertime and that will drive demand.
James Duffy : Very good. Thank you, guys. And good luck.
Rhodri Harries: Thank you.
Glenn Chamandy: Thanks you,
Sophie Argiriou: Thank you.
Operator: Your next question comes from the line of Mark Petrie of CIBC. Your line is open.
Mark Petrie: Yes, thanks. I just wanted to come back to the topic of private label. You guys have spoken about this as an opportunity, and certainly the market is moving that way, and has been for a while, both from a consumer and retailer perspective, but I haven't really heard too much with the regards to new wins, be it contract or shelf space. So can you just update on -- update us on that?
Rhodri Harries: Well, look, we don't really going to look into individual specific programs, but I would say, in general, the business is still moving forward. I think that the -- like I said earlier, there's a big opportunity for us is continued growing with our big brands that we do business with. That business is definitely materializing and moving forward. So overall, as we move forward into the future, we've been very tight on capacity right now. So if you look at where we are currently, I mean, our sales, our POS has been so strong for the last two three quarters. We've been focusing our energy and our resources on our core PrintWear business, be further honest with you, because those other pieces of business take a little bit time too leverage and to materialize. I think as we go into future, that's something that it will continue to help us to maintain our growth objectives of the CAGR to 7% to 10%. It's always embedded into of our planning processes as we go through into the three-year period that we'd discussed at our Investor Day.
Mark Petrie: Thanks for that.
Operator: If there are no further questions at this time, please continue.
Sophie Argiriou: Okay. Well, thank you, everyone. Before we leave you all, just a quick reminder that we will be holding our virtual Annual Shareholders Meeting tomorrow morning at 10:00 AM Eastern Time. With that, I would like to thank you again for joining us today and we look forward to speaking to you very soon. Have a good evening.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
