Ladies and gentlemen, thank you for standing by, and welcome to the Quarter 1, 2021 Gildan Activewear Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to Ms. Sophie Arziryu, VP, Investor Relations.
Please go ahead.
Thank you, Rachel. Good afternoon, everyone, and thank you for joining us. Earlier, we Issued a press release announcing our earnings results for the Q1 of 2021. We also issued our interim shareholder report containing management's Discussion and Analysis and Consolidated Financial Statements. These documents will be filed with the Canadian Securities and Regulatory Authorities and the U.
S. Securities Commission and are available on the company's corporate website. I'm joined here today by Glenn Schamendi, 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 Before we begin, please take note that certain statements included in this conference All 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 materially from the future results expressed or implied by such forward looking statements. We refer you to the company's filings The U.
S. Securities and Exchange Commission and Canadian Securities Regulatory Authorities that may affect the company's future results. And with that, I will turn
the call over to Rod. Thank you, Sophie, and good afternoon to all and thank you for joining the call. We hope everyone is staying safe and keeping well. We were pleased with the company's Q1 performance, which reflected a strong start to 2021. Our back to basics strategy is working and is supporting both our sales efforts and our profitability objectives.
Operationally, our strategy is making our business less complex, more cost effective and is helping us drive growth and more efficient use of capital. Further, we are encouraged to see reopens continue and combined with the impact of the U. S. Stimulus and the strong progress of the vaccine rollout in the U. S, We are optimistic that these factors will continue to help economic activity stay on a steady track of recovery.
And finally, Given the company's positioning at the end of the quarter, we were pleased to announce in our press release earlier this afternoon that our Board approved the reinstatement of our Quarterly cash dividend at the same rate where we left off prior to the temporary suspension of the dividend after the Q1 of last year. The Board's decision to reinstate dividend payments reflects increased confidence from the strong performance in the quarter and the recovery so far, together with the outlook for the company's future cash flow generation capabilities and the reduction of our debt leverage ratio, which I'll cover later. Turning to the specifics of the quarter. We delivered net sales of $590,000,000 up 28% compared to the prior year quarter with increases in both our activewear and hosiery and underwear sales categories. When compared to the Q1 of 2019, Overall sales were down approximately 5%.
Activewear sales in the quarter totaled $485,000,000 and were up 30 over last year, driven by strong double digit unit sales volume growth in both our imprintables and retail channels of distribution, Together with strong product mix, which more than offset lower average net selling prices in imprintables. The volume growth in imprintables reflected The combined impact of year over year POS growth and net restocking by distributors, even though inventory levels in the channel remain significantly If we look at Imprintable's POS compared to pre pandemic levels in the Q1 of 2019, It was down an average in the range of 10% to 15%, which was in line with what we saw at the start of the quarter. Moving to the Hosea underwear category, We generated sales of $105,000,000 The 21% increase was driven by the strength of our underwear sales with double digit volume growth over both the Q1 of 2020 2019. Looking at gross margin for the quarter, we delivered strong performance, which in our view underscores the power of our back to basics strategy that is driving and is expected to continue to drive positive results going forward. Our reported gross margin was 32% And adjusted gross margin was 31.1 percent, up 6 50 basis points over last year.
Our gross margin performance in the quarter was enhanced By an $18,000,000 one time payment we received in April from the USDA, even without this 300 basis point benefit, Gross margin was still strong at 28.1%, up 3 50 basis points over last year. This one time USDA benefit was received under the Pandemic Assistance for Cotton Users or PACU program And represents essentially COVID related government support provided to domestic users of U. S. Cotton. Excluding the PACU benefit, The year over year increase in gross margin was mainly due to the non recurrence of COVID related charges incurred in the Q1 of 2020, Lower raw material costs, favorable product mix and the positive impact of our back to basics strategy, partly offset by lower average net selling prices.
With respect to SG and A, we kept our expenses for the quarter essentially flat compared to last year, Despite generating higher sales, SG and A expenses were approximately $73,000,000 or 12.4 percent of sales, compared to approximately $74,000,000 or 16.1 percent of sales for the same quarter last year. The year over year reduction reflected cost savings stemming from our back to basics initiatives, offset by higher variable compensation expense. Adding this all up, we generated operating income of $114,000,000 compared to an operating loss of $92,000,000 in the Q1 of 2020, which if you recall included a goodwill impairment charge of $94,000,000 Adjusted operating income for the quarter was $110,000,000 Significantly above the $20,000,000 we generated last year. The increase was driven by higher sales and adjusted gross margin and the impact of the non recurrence of the $21,000,000 trade accounts receivable impairment charge recorded in the Q1 of last year. Consequently, we reported net earnings close to $99,000,000 or $0.50 per diluted share and adjusted net earnings of 95,000,000 or $0.48 per share.
Excluding the $0.09 PACU benefit, adjusted EPS for the quarter was $0.39 Up significantly from adjusted EPS of $0.06 in the Q1 last year and $0.16 in the Q1 of 2019. So overall, a very strong performance in the Q1, setting us on a good path for the year. From a cash flow perspective, we generated free cash flow of $38,000,000 in the quarter compared to last year when we consumed $235,000,000 of free cash flow. The increase reflected higher operating earnings, lower working capital impacts and lower CapEx. Free cash flow in the quarter also included a net Cash impact of $30,000,000 from insurance proceeds related to the hurricane damages we sustained in November of last year, which is a timing impact related to the replacement of equipment.
The decrease in working capital was largely due to a lower inventory build in the quarter, which was driven in part by benefits of our back to basics strategy, including our SKU rationalization and distribution initiatives, which are allowing us to manage our inventories more efficiently. At the same time, while our manufacturing ramp up following the disruption caused by the hurricanes late last year has gone well, we're continuing to ramp back our capacity And stronger than anticipated sales in the Q1 resulted in a lower than planned increase in inventory levels in the quarter. Consequently, we ended the quarter with inventories $736,000,000 slightly up from $728,000,000 at the end of 2020 and down 38% compared to approximately $1,200,000,000 a year ago. Given our free cash flow, we reduced our net debt position during the quarter to 542,000,000 down from $577,000,000 at the end of 2020. Our available liquidity at quarter end remained at $1,600,000,000 Which was where we left off at the end of the year.
Our external debt leverage ratio decreased to 2.1 times adjusted EBITDA, down from 3.5 times at the end of 2020. However, for debt covenant purposes, after reflecting adjustments, which The impact of the Q2 of 2020, the company's net debt leverage ratio fell to 1.1 times. I'd like to highlight that as of April 5, we are no longer required to comply with the restrictions and provisions established in June of last year And we amended our loan agreements to obtain temporary COVID related covenant relief. Further, on April 20, We repaid the $400,000,000 2 year term loan, which was due in 2022, which we secured last year as a precautionary COVID measure. Finally, as highlighted previously, given the strength of our recovery thus far, we are very pleased to announce this quarter that we are reinstating our dividend at its Regarding other return of capital considerations, we expect that our Board will assess the potential reinstatement of our share repurchase program When we gain further visibility on the COVID recovery outlook and when the company's debt leverage ratio falls well within this historical target range.
This sums up the key highlights of our results for the Q1. And before we open it up for questions, Let me just touch upon the sell through trends that we are seeing currently. As we move from the Q1 into the 2nd quarter, Overall, Imprintables POS is tracking slightly better than during the Q1, down approximately 10% compared to pre pandemic 2019 levels. In retail channels, our sales in all product categories are tracking above prior year levels. Although we're encouraged by these trends, We are monitoring other broader market dynamics that could affect the pace of the overall recovery.
Events driven by large gatherings that Historically been a key driver of our imprintables business have not yet restarted. And although re openings continue And the pace of vaccinations in the U. S. Has accelerated nicely, we cannot predict with accuracy when large gatherings will fully come back. Further, as I'm sure many of you are hearing, supply chains are being impacted by labor shortages in the U.
S. Affecting certain industries, including yarn spinners. Tightness in raw material supply is also developing and the impact of port backlogs And transportation related issues are factors that we are monitoring. Consequently, we remain conscious in the near term, Particularly with respect to these global factors. However, as it relates to areas we have executed on and continue to drive, including our back to basics strategy, We are extremely pleased with progress and are confident that the steps taken to accelerate our strategy last year and the benefits that we are seeing thus far Are positioning us well to take advantage of market share opportunities, deliver on our profitability targets and create shareholder value over the long term.
And with that, I'll turn it back to Sophie.
Thank you, Rod. That concludes our formal remarks. I will now turn the call over back to the operator for the question and answer session. Rachel?
Thank you, Sophie. Our first question comes from the line of Paul Lejuez from Citi. Sir, your line is open.
Hey, everyone. This is Brandon Cheatham on for Paul. Thanks for taking our question. I was just wondering, how do you feel about your inventory position Now, I think last time we spoke, manufacturing was outpacing POS. So I'm just kind of curious about the dynamic there.
Did Sales come back stronger than expected? Or were there some impacts from some of the things you mentioned on the supply chain side that constricted things there?
This is Glenn. Well, our inventory position is it's right size. It's lower than we originally anticipated, obviously, mainly because sales were stronger than we anticipated in Q1. However, we're still running at a good run rate relative to 2019 levels. Our current run rate is around 90% of what We ran at 19 levels and we're going to continue to ramp up.
It's not it's been challenging, I mean to say the least because of So, Bob mentioned this commentary, but we're well positioned. And as we continue to execute on our back to basics strategy, What we're focusing on is obviously less product, less SKUs, less complexity. So it gives us a very good opportunity to serve in on what we need. We should be able to operate at inventories that were lower than historical levels and yet still improve our service as we go forward. So We're not back up to full capacity yet and that will happen as we move through the end of the year.
But I think we're going to go through Q2 around 90% of $19
Got it. And then on the labor shortages, ultimately, do you think it's Higher wages drive people back or people just not there? And what's your outlook on that abating?
Well, our outlook is you got to spend the money from the stimulus package really, to be honest with you, Julien. That's the answer, right? So That's we paid down wages on our facilities, but I think that's sorry, what?
Yes, it's Ed. I think if you look at it's really it's the wages that's effectively the stimulus, the $300 a week, right, that we're seeing out there. There's also COVID as well. It's also I think I mean there's a number of factors. People coming back into the workforce Are being impacted with a number of pressures, a number of stresses.
And so I think ultimately The stimulus, we'll work our way through that and we'll work our way through COVID. And so ultimately that will abate, but it will take a bit of time. And we do see these pressures over the next number of months.
And this is mainly in our U. S. Operations. In terms of our Honduras operations, they're running well. We have Apple people other than supplies and other things that could Effectiveness is not a people issue in Central America.
Got it. Thanks a lot. Good luck. Thank
you. Our next question comes from the line of Sabahat Khan from RBC Capital. Sir, your line is open.
Okay. Thanks and good afternoon. In your release, you noted some distributor Can you maybe give us some context on where in the restocking cycle you're at? Is it broad based? Is it just people kind of Testing a lot of just some context on where we are in the cycle?
Well, typically the inventories that our distributors Harry, our go forward inventory, so normally they would increase their inventories As they go into season, but to put things in context, our inventories are above 40% below Levels in 2019 even though we had some restocking, so they were very low at the end of Q4 and they're still significantly below where we were 2019 levels and I feel they're lower than I would say The normal really normal low with it, that they should be at this time of the year. So the stocking that we did have, I think, would be relatively It's not overstocking, it's talking as required to support the seasonality of the business in Q2.
And then just a quick follow-up on that. I guess, what are distributors, I guess, kind of waiting on this to improve visibility? Or is it Maybe they'll just do a bit more just in time going forward. Demand obviously looks like it's picking up. I'm just trying to understand if it will be more of a gradual rebuild this time versus some of those large Restocking quarters we've historically seen?
Well, I mean, look, partly sales are strong. POS is starting to improve. I mean, one thing we're starting to see is we're starting See, basics products come back and our sales have been driven really by fashion, t shirts and fleece which are actually positive in POS and where we really see the drag so far on our minus 15% and now minus 10% is more on the basic side and we're starting to see some Those are larger orders typically that we see floating around. We're starting to see some of that come back. So we think as we go through this market And so, we continue to improve.
We're tight on capacity, so as we're going to stay tight until we exit Q2 and move into Q3 and Q4.
Great. Thanks very much.
Thank you. Our next question comes from the line of Vishal Shreedhar from National Bank. Sir, your line is open.
Hi, thanks for taking my question. I guess you've already hinted at it in your remarks, but broad based inflation It seems to be topical. Wondering how much latitude Gildan thinks it has to increase price if need be? And Did Gildan take any pricing or promo action in the quarter?
Well, we're still taking our price leadership position in the market. So we Pricing as we've been pricing for the last 3, 4 quarters. And yes, I mean, look, we think that our industry is I'm capable of taking price increases, but one of the things that's also occurring as we leverage our back to basics strategy is that we're lowering our cost structure. Our manufacturing costs, believe or not, despite inflation are coming down. And as we streamline our operations, our SG and A It's coming down as a percentage of sales.
So overall, what we're targeting is to drive ourselves to what we think is the 18% operating margins. And we'll do have a combination of we'll see how we get there. But if we have room, we think to continue to price aggressive and Offset some of the inflationary costs with our manufacturing cost savings and our estimated leverage to still achieve our goals as we move But we also have the opportunity to raise prices. We think it's required, but we have a lot of flexibility as we move So, the bounce half of this year into next year.
Okay. And given that there's a lot of room for Also to restock and given that Q2 POS is tracking down about 10%, Is the subtext there that Gildan's trend should exceed POS in the interim as these wholesalers Restock, given optimism about large gatherings coming back, call it, in a few months?
Well, I don't think that We're going to have an opportunity to restock inventory in the channel. I mean, we think that our own inventory levels It will be pretty similar to end of this quarter as they are in the beginning of the quarter. And like I said before, we're running at a rate of about 90% 2019 levels, so we need to work it that way. And so we're tight on capacity as we move Q2. If you look at where we are now in April plus the supply time it takes to produce goods, I mean the quarter is Going pretty quick, right.
So we have pretty good visibility to where we are and we're going to continue to ramp up as we move I think that's the more important thing is that we're very comfortable with the
way we see
the market evolving. We're pretty much tracking in line With the market in terms of where our capacity currently is and where the market POS is, so that's a good thing. And as we move into Q3, we should be able to continue to take opportunity as the market recovers and our capacity continues to increase. So that's where we're going to look at as we
Thank you.
Thank you. Our next question comes from the line of Chris Lee from Desjardins Securities. Sir, your line is open.
Good afternoon. Just maybe first question on the gross margin. Obviously, very strong in the quarter. Can you maybe talk about your gross margin outlook for the remainder of the year? Do you expect to build on that margin improvement from Q1?
So look, our gross margin was very strong. If you look at the 31.1%, if you exclude the PACU 28.1%, I would say we're very pleased with the margin. I think as we go forward through the year, there'll be some puts and takes, right. So Effectively, we'd probably see a little bit stronger mix coming through as we continue to push forward with the overall recovery. But at the same time, as we noted, right, it is an environment where there are some inflationary pressures.
As we get to the back end of the year, we'll have to see what we do with raw material costs. And so there are a little some things that will drive margin up. There's some things that we have to work with as well. So I think overall, I think what we'd like to do probably is try to hold at levels which are close to where we are in Q1 As we move through the year, we'll see.
Okay. That's very helpful, Rod. And another question, I know this is Very tough one to answer because nothing has been decided yet, but the concept of the global minimum tax is very topical these days. If it does get implemented, it could potentially cause tax rates to rise across the board. I guess my question is, what are your thoughts on this and What levers does Gildan have to mitigate the impact if it does get implemented?
Well, I would say, Chris, I think it's very early in the overall Discussion of the if you look at a minimum tax from a global perspective, I mean, we're like everybody else. We're just monitoring what's going on. We'll see how that unfolds. Right now, we don't see any significant impact based on what we're aware of. But let's monitor the situation as we go forward.
Great. Thanks for the answers and best of luck.
Thank you. Our Next question comes from the line of Mark Petrie from CIBC. Sir, your line is open.
Hi, good afternoon. Thanks. Sorry, Glenn, could you just clarify your comment with regards to distributor levels? It wasn't clear to me what you were referring to, but something was About 40% below levels seen previously. Could you just clarify?
Yes. So the inventories in the channel are roughly 40% So below 2019 levels and pretty much same below 20 levels too because it really moved between 2019 2020.
Okay. Thanks. And I guess just broadly, you're not seeing large scale events Resume at least just quite yet, but can you just sort of walk us through what you're seeing or hearing with regard to other end markets, Including some of the pockets of demand or markets that accelerated or developed through the pandemic?
Well, I think that those markets developed during the pandemic, the online, the casual at home, All those things have driven share, I think, during the pandemic are continuing to drive share. I think as we see Pickup right now from Q1 into Q2, I think it's a little bit more of the recovery of gatherings. I mean, look at the Kentucky Derby, It wasn't 130,000 people, we had 50,000 people. We're seeing some baseball games with a large crowd. So definitely, things are Starting to open up and I think that will only continue to improve as we move through the balance of the year.
I don't see the other part of that business going away. I think that's the net net what we discussed last quarter is that I think that the overall market It's going to expand our universe, it's going to expand as we really have a full recovery because We've created new opportunities and new channels of sales through all those online selling. So Hopefully that that's the recovery comes and then we'll see a bigger market and more opportunity.
Okay. And then just a follow-up, I think it was Chris' question with regards to the gross margin. Rod, thanks for the comments, for the expectations For the balance of 2021, I'm just thinking back to sort of your 30% gross margin target. And I know that you're sort of Pivoting to focus people more on the 18% operating margin target. But nonetheless, should Team type level or what is the lever to see further upside from gross margin today?
I think you said it's actually Mark and we're really focused on that 18%, right? So I think That's what we're really driving to deliver with the back to basic strategy. And I think if we get back to 2019 sales levels, We like our chances to be able to deliver the 18%. So I think as we go forward, we will see it Come from gross margin, we'll also see it come from SG and A, but that's what we're really working effectively to deliver. And then also it's also combined together with Growth in the volume, it's all placed together.
So I think look, I think we're happy with the progress that we're making with our overall strategy. I mean, if you look at what back to basics Delivering force both in gross margin and SG and A. I mean, we really are seeing very strong benefit And we'll see it, I think, in both areas as we go forward and that will flow through to operating margins. And again, we get back to 2019 levels. I think we feel very good about hitting that 18%.
And plus we're going to leverage that for top line growth as well, because I think that's the point here is that We're focused more on all of those factors, but as well as make sure that we have top line growth. So we can leverage our low cost manufacturing, these cost savings, still achieve Operating margins are just annual sales. That's really what the back to basics is all about.
Yes, understood. Appreciate all the comments and wish you all the best.
Thank you.
Thank you. Our next question comes from the line of Jay Sole from UBS.
Great. Thank you so much. Just want to follow-up on some of the margin questions talking about SG and A. The SG and A dollars were down pretty significantly versus not just 1Q of 2020, but also 1Q of 2019. As we get into the Q2, obviously, there's the comparisons get a little bit different because the SG and A was down so much last year.
But how should we think about the SG and A dollars in Q2 versus Q2 of 2019, I mean, can we really see them down as much as they were in terms of just total dollars versus 2Q 2019? Or is there going to be more of like A bounce back, so the dollars will be a lot closer to 2019 level? Thank you.
Look, I mean, if you look at 2019, we haven't really seen the benefit Back to basics really flowing through in the SG and A side. So if you do look at where we're running in the Q1, I think as we go into Q2, we'll see a little bit of some increase with respect to distribution costs. Look, we have the SG and A well under control as we work towards that 12% target. So the delta which you've seen between 2019 and where we currently are in the Q1, I mean, That's all back to basics. It's all come out of the system.
I think we've done a great job on the SG and A side to reduce it. And so we I mean, again, We feel very good about our ability to deliver on our target this year.
Got it. Okay. Thank you so much.
Thank you. Our next question comes from the line of Luke Hannan from Canaccord. Sir, your line is open.
Yes, good afternoon. Just first one for me is on the competitive environment. Glenn, I know you touched on it earlier, You're still, sort of the price leader in the printables channel. But I'm curious to see, are you seeing anything from your customers in terms of how they Are they choosing to compete on price as well or what are you seeing there?
Well, look, we're continuing to take the price leadership So we are the, I think, the low price in the market. But at the same time, look at it, we There's also other suppliers and competitors that don't have availability of product. And I think that in general, the inventory in the marketplace is relatively tight Amongst all users, all suppliers, so people are skeptical to lower prices with their title inventory. We're taking a strategy at everyday low price. We're going to continue to do it.
We're seeing market share growth. Even though We're down to 10 to 15, we're down 10 now. We know from statistics within the market that we're actually gaining share. So I think that's sort of our strategy. We're going to be consistent in our approach and focus on top line growth Private market share.
Okay. And one more for me. Just you've all seen the headlines on how COVID is playing out overseas. So I'm curious to know on the build out of Bangladesh, is there do you see any risk on maybe There being a labor shortage for continuing to build out that facility? Or do you see any risk maybe on the time line for that being pushed out when that might be
Well, right now, we're still on time with Bangladesh to support 2023. We started construction of the project, was moving along. Bangladesh does not have the same Type of COVID environment that India does, I mean, it was, but there is they have much greater percentage of vaccines in Bangladesh and they've had India like, I think, about 8% of the population has been vaccinated already. So it's a little bit different environment. Things were getting a little bit worse last month, but during Ramadan, they have to shut down right now And things are improving.
So we're the environment there is stable and improving, I would say, As we see it today, obviously, there's no crystal ball. This is a pandemic. So So far, things are good and we're on track to support 2023. We're also in the process of We are configuring our Mexican capacity It's Central America, which we dismantled at the end of last year. So we're still on track to put incremental capacity in Central America as well.
So we feel that we're in a good shape to support future sales as we go forward.
Okay. Thank you very much.
Thank you. Our next question comes from the line of Stephen MacLeod from BMO Capital Markets. Sir, your line is open.
Okay. Thank you. Good morning. Good afternoon, guys. Just a couple of questions.
You've covered a lot of ground here, but a few things that I wanted to dig in on. You mentioned that in previous quarters, you talked about sort of your underwear market share gains. And I'm just curious if you think that based on how the underlying market performed, Will you continue to gain share in Q2 on the underwear side at retail?
Well, we definitely gained share in retail. We're up 20 plus percent in underwear, I think. So it's going very good. I mean, I think that the underwear is On track and ahead of expectations. Okay, that's great.
Thank you.
And then just I just wanted
to clarify some commentary on the gross margin. You're clearly well on the way to exceed your 12% SG and A target, you talked a little bit about the 18% operating margin target. But with gross margin expected to continue to trend Sort of in line with the adjusted Q1 through the balance of this year. Do you think it's achievable to meet your 30% target in 2022?
Again, Stephen, I mean, what I would say is we get back to the 2019 sales levels, I think we feel very good about that 18 So I think as we said earlier, right, working both the gross margin and the SG and A Effectively, we feel very good about it. So I think we have again, and because back to basics is driving both sides of the equation, Bottom line, we do feel good about gross margin and SG and A and as Glenn said earlier, about our ability to drive volume. That's key. With the back to basics, we can we get the cost reduction, we keep the prices down, we get the volume, we get the operating leverage, We get better gross margin. We get better SG and A.
Everything works. So we're very pleased with the whole strategy. Right.
Okay, great. Thank you.
Thank you. Our next question comes from the line of Brian Morrison from TD Securities. Sir, your line is open.
Hi, good evening. Thank you.
A couple of follow-up questions. Glenn or Rod, are you able to quantify, you said the channel is 40% below 2019, 2020 levels. Are you able to quantify that amount?
So it's just over 100,000,000
Okay. And then in terms of the underwear commentary, and specifically private label, I think last time you had mentioned that opportunities were somewhat on hold during the pandemic. I'm wondering as the social Restrictions start to ease or the pandemic gets a little less in the U. S, in particular, if you're seeing any progress with respect to opportunities in
Vertical. Well, yes, I mean, look, we're working with all our partners for future opportunities. There's probably not to say anything concrete, but we're definitely looking at working on Future growth opportunities to align ourselves to as we move forward into 2022. And we're very comfortable that all of the 4 pillars of our growth, both creating growing in our North American printwear, our international Sales as well as both our product label and our own brands and retail, we think that all of these areas are going to see significant growth as we move Into 2022, we're poised in all areas. Okay.
And then last question, and it's high level, Glenn. Just Your POS is tracking down 10%, yet the imprintable drivers, you look at tourism or sporting events, they're still very limited.
So I
just want to understand like what is filling this void? Is it I understand some of it's got to be online and some of it's got to be national accounts, But what's filling that void? And then in terms of national accounts, are you seeing more movement towards onshore? And is this something that could be permanent market share gains?
Look, the retail in general, retailers are selling more T shirts probably than they sold pre pandemic Because people aren't going to the fairs, so some of that is maybe double dipping a little bit, I would say, because people are only going to buy so many shirts a year, right. So And we have to buy them because they're staying home and there's more leisure etcetera. So they're looking for places to go get them. They're buying them online or buying them at At retail outlets, so that's what's happening. So but net net, I would say that the overall market has grown because of the onset of all the online, the failed loyalty, People to buy screenprints and T shirts, digital printing has given them opportunity for people to buy onesies and twosies that they can never get before.
So the market has grown. And as I said earlier is that when it recovers, We just don't know how much will come back and how much it will recover, but it's definitely going to be very Opportunistic for us, I think, as we move in. And as far as the supply chain, I guess, more Domestic supply, I think that's also going to be a key factor. Look, a lot of the products that we sell are at once, they're in our warehouses. We carry the inventory.
So taking the risk to go buy from Asia, you de risk this whole thing. And all of our shirts, regardless of what You're buying them. Basically, we have products for every outlet. We have fashion shirts, basic shirts, so And they all have tearaway labels. So it's very easy for any fashion brand to basically take one of our products, tear the label out, put their brand in And resell it to consumer.
So we're well positioned. I think even from the supply chain to continue growing both from A way to put printwear perspective and as well as to support Global Lifestyle and our regional partners.
Thanks very much.
Thank you.
Thank you. And our next question comes from the line of Jim Duffy from Stifel. Sir, your line is open.
Thank you. Good afternoon. Couple of questions from me. Rod, to start, revenues in the Q1 relative to the Q1 of 2019, Activewear down 2%, Hose rate underwear down high teens. Do you expect that rate of change relative to 2019 will continue to improve or Was there some benefit for restocking that may have made that artificially high in the Q1?
We did talk a little bit about the restock in the Q1, right? So from a distributor perspective, we saw about $50,000,000 Restock impact in the quarter effectively, if we look at Q2, I'm not so sure that we're going to see that given the way things are Holding. So I think that's one benefit I would call or one difference I would call out, Jim.
Okay. And then a question on the Channel partner inventories, you guys have spoken about the printwear market 40% below 2019. Can you comment on where it stands with retail channel partners? Are retail channel partners yet restocked to be up with demand or are there more quarters you think of supply chasing demand in the retail channel For the hosiery and underwear business.
I would say they're in balance relative to the size of the business gap because obviously our underwear business is much larger Today than it was in 'nineteen, so just a little bit more inventory to support those larger sales budgets and balance.
Okay. Thank you.
Thank you. There are no further I will now turn the call over back to Sophie. Please go ahead.
Thanks, Rachel. Before we leave you all, just A quick reminder that we will be holding our virtual annual shareholders meeting tomorrow at 10 a. M. Eastern Time, sorry. So with that, I'd like to thank you again for joining us today, and we look forward to speaking to you very soon.
Have a good evening.