Gildan Activewear NYSE: GIL reported record first-quarter results from continuing operations as the company worked through the first full fiscal reporting period to include the recently acquired HanesBrands business. Management said the quarter reflected “disciplined execution,” ongoing integration progress, and proactive steps to accelerate synergy capture, while maintaining full-year 2026 guidance and three-year objectives for 2026-2028.
Record Q1 sales; EPS pressured by integration and acquisition accounting
President and CEO Glenn Chamandy said Gildan delivered “record Q1 sales from continuing operations of nearly $1.2 billion,” up 64% year-over-year, “primarily due to the HanesBrands acquisition.” Adjusted diluted earnings per share from continuing operations were $0.43 versus $0.59 a year earlier, which Chamandy attributed to the “short-term impact of integration initiatives that we have put in place to accelerate synergies captured.”
Chief Financial Officer Luca Barile reported net sales from continuing operations of $1.17 billion, up 63.8% year-over-year and in line with guidance of roughly $1.15 billion. However, compared with pro forma net sales from continuing operations of $1.29 billion, Barile said sales were lower due largely to reduced volumes tied to “our proactive inventory reduction across customer channels, which temporarily reduced sell-in.”
Gross profit was $278 million, or 23.9% of sales, versus $222 million, or 31.2%, a year earlier. On an adjusted basis, excluding a $106 million inventory fair value step-up charge recorded as part of the acquisition, adjusted gross profit was $385 million, or 33% of sales, compared to 31.2% in the prior-year quarter. Barile said the 180-basis-point improvement reflected pricing initiatives intended to “partially offset the impact of tariffs,” the favorable contribution from HanesBrands, and “to a lesser extent, lower raw material and manufacturing costs.”
SG&A expenses increased to $219 million from $87 million. Adjusted SG&A was $218 million, or 18.7% of sales, versus $86 million, or 12.1%, with Barile citing the acquisition of HanesBrands partially offset by realized synergies. Adjusted operating income was $167 million, up $31 million year-over-year, and adjusted operating margin was 14.3%. Barile said margin was below last year but ahead of the company’s guidance of about 12.9%, and the decline primarily reflected Hanes’ historically higher SG&A burden relative to Gildan.
Net financial expenses rose to $67 million, up $37 million year-over-year, due to higher borrowing levels tied to the acquisition. Gildan reported a GAAP diluted loss per share from continuing operations of $0.30 compared to GAAP diluted EPS of $0.56 a year earlier.
Channel trends: share gains despite softer markets
Gildan introduced disaggregated net sales reporting by wholesale and retail beginning in the quarter. Wholesale net sales were $552 million versus $626 million a year earlier, driven primarily by inventory reduction actions and the “nonrecurrence of some preemptive buying ahead of tariffs” in the prior-year period, according to Barile. Retail net sales were $614 million versus $85 million, primarily reflecting the HanesBrands contribution and higher net selling prices.
Chief Commercial Officer Chuck Ward said both the wholesale and retail markets were “a little bit softer than we expected,” including weather-related impacts in the U.S. during the quarter, but he added that Gildan “outperformed both markets” and “continue[d] to gain share in both markets.” Ward characterized the wholesale market as down low single digits while Gildan performed up low single digits, citing strength in premium products including Comfort Colors as well as newer brands such as Champion (under a licensing agreement) and AllPro. In retail, Ward said the market was “flattish,” while Gildan was up low single digits, with underwear performing “exceptionally well” across men’s, women’s, and kids’ categories.
Internationally, Ward said performance was “slightly below the plan” due to uncertain macro conditions and rising energy costs, with strength in continental Europe but “continued pressure in the U.K. and some pressure in Latin America.” Entering the second quarter, Ward said the company was “seeing some improvements in both markets overall.”
Integration progress and synergies remain central
Management emphasized progress integrating HanesBrands and relocating production into Gildan’s manufacturing network. Chamandy said the company is “relocating textile production volumes from the Hanes to the Gildan facilities, leveraging our low-cost manufacturing and supply chain structure,” while standardizing IT systems and key processes. He said Gildan remains confident in achieving approximately $250 million in run-rate cost synergies over three years, including about $100 million in 2026, and continues to pursue additional synergies beyond the stated target.
Asked about timing and areas of synergy realization, Chamandy said the integration is advancing across “yarn” and supply chain processes, and that “the bulk of Hanes’ volume is being produced in Gildan’s world today.” He linked the proactive inventory actions to accelerating the transition into Gildan’s footprint, with the goal of capturing synergies and building an innovation platform to drive revenue growth in 2027.
Barile did not quantify Q1 synergies against the 2026 target, but said the company is “well on our way” and reiterated confidence in delivering the year’s synergy objective.
Guidance maintained; Q2 outlook reflects inventory actions and shipment timing
Chamandy said the company is maintaining its 2026 guidance, citing competitive positioning, scale, and innovation pipeline. Barile reiterated full-year guidance for continuing operations:
- Revenue of $6.0 billion to $6.2 billion
- Adjusted operating margin of approximately 20%
- Capital expenditures of approximately 3% of net sales
- Adjusted diluted EPS of $4.20 to $4.40
- Free cash flow above $850 million
For the second quarter, Gildan expects net sales from continuing operations of approximately $1.6 billion. Barile said the outlook continues to reflect the temporary inventory reduction reducing sell-in as the company consolidates manufacturing to accelerate synergies, as well as a shipment timing shift into the second half due to the nonrecurrence of pre-buying ahead of pricing actions in the prior-year quarter. Adjusted operating margin is expected to be around 19.7%, reflecting higher SG&A levels, including higher amortization and depreciation linked to acquisition accounting, and a timing difference between integration costs and the benefits that follow in later quarters.
Barile also said adjusted gross margin and adjusted SG&A are expected to “sequentially improve” each quarter, starting from Q1’s adjusted gross margin of 33% and adjusted SG&A of 18.7%, to arrive at the full-year operating margin target.
Supply chain and macro risks: Bangladesh operations “running normally”
Chamandy addressed the Middle East conflict and broader uncertainty, saying the company has “good visibility for 2026” on key input costs such as cotton, polyester, and energy. He also said the company’s Bangladesh operations had been running normally and that Gildan has built contingency plans if conditions deteriorate. In the Q&A, he reiterated that operations in Bangladesh were running normally and said the company has redundancy in energy sources, including solar and on-site LNG capabilities.
Chamandy also said Gildan hedges energy exposure and expects pricing to remain stable in 2026 given visibility on key inputs, while noting the company’s history of offsetting inflationary pressures with price actions as a “price leader.”
On Bangladesh capacity expansion, Chamandy said the initiative was progressing at the same pace as previously discussed and that the company was “full steam ahead,” adding commentary on Bangladesh’s longer-term energy infrastructure improvements.
On leverage and capital allocation, Barile said net debt ended the quarter at $4.868 billion, with a leverage ratio of 3.3x net debt to trailing 12-month pro forma adjusted EBITDA. He reiterated that proceeds from a potential divestment of the HanesBrands Australian business (classified as held for sale and reported as discontinued operations) would be used to pay down debt, with the goal of returning to a leverage framework of 1.5x to 2.5x. Barile said the company has not changed its position that buybacks under its NCIB would resume once leverage returns close to the midpoint, around 2x.
About Gildan Activewear NYSE: GIL
Gildan Activewear Inc NYSE: GIL is a vertically integrated manufacturer and wholesaler of branded basic apparel, including activewear, socks, hosiery and underwear. Headquartered in Montreal, Quebec, the company produces a wide range of products such as T-shirts, fleece garments, sport shirts, performance wear, and shapewear under its Gildan, Anvil, Comfort Colors, Gold Toe, Peds and Silks brands. Leveraging its in-house knitting, dyeing, cut-and-sew and finishing operations, Gildan supplies blank apparel to screen printers, promotional product distributors and major retailers around the world.
Since its founding in 1984 by Glenn J.
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