Gildan Activewear Inc. has entered into an agreement to purchase 100% of the equity of Kentucky Derby Hosiery Co., Inc., based in Hopkinsville, Kentucky. The total purchase price, including the assumption of all of Kentucky Derby’s debt, is approximately U.S. $45 million. Consideration for the equity component of the purchase price will be paid in cash on closing, with the exception of approximately $500,000 which will be satisfied by Gildan shares, subject to regulatory approval.

The acquisition is expected to close on or around July 3, 2006, the beginning of the fourth quarter of Gildan’s fiscal year.

Kentucky Derby has annual sales in excess of U.S. $130 million, primarily consisting of private label programs for U.S. mass-market retailers. Based on Kentucky Derby’s current level of profitability, the acquisition will initially be neither accretive nor dilutive to Gildan’s earnings. However, once the integration of Kentucky Derby is complete, Gildan currently expects the acquisition to enhance annual E.P.S. by approximately U.S. $0.30. Gildan plans to undertake the integration process during fiscal 2007 and 2008.

Gildan intends to utilize Kentucky Derby’s experience and distribution with mass-market retailers to enhance its platform to build the Gildan brand in hosiery, underwear and activewear, while continuing to provide quality products to support and develop Kentucky Derby’s private label programs and brand licences. In conjunction with the continuation of its growth strategy, Gildan is currently constructing two new state-of-the-art facilities at its Rio Nance manufacturing complex in Honduras, including a facility for the large-scale production of athletic socks, as well as completing the ramp-up of its new Dominican Republic textile facility.

The current majority owner and Chief Executive Officer of Kentucky Derby, William H. (“Bill”) Nichol, Jr., will continue to lead the business subsequent to its acquisition by Gildan. Bill is fully committed to work in partnership with Gildan’s sales and marketing team to combine the strengths of the two companies in order to further enhance Kentucky Derby’s existing business, drive the development of the Gildan retail brand for basic family apparel products, and position Gildan as a leader in the U.S. hosiery market.

The Company also announced that its results to-date for its third fiscal quarter have been more favourable than anticipated in the guidance which it had provided on May 4, 2006, primarily due to more favourable product-mix. Consequently, the Company is now comfortable that it will achieve or exceed the consensus of analyst diluted E.P.S. estimates for the third quarter, which is U.S. $0.67 per share, compared to Gildan’s prior E.P.S. guidance of approximately U.S. $0.63 per share. As a result of this upward revision, the Company now expects to achieve or exceed diluted E.P.S. of U.S. $2.00 for the full 2006 fiscal year, compared to its prior E.P.S. guidance of approximately U.S. $1.96 per share.