Gildan Activewear’s first-quarter sales surged 63.8 percent due to last December’s acquisition of HanesBrands, but were down 9.3 percent on a pro-forma basis due to planned lower sell-ins to reduce inventories to better align manufacturing capacity.  Adjusted operating margins topped guidance. The company maintained its full-year 2026 guidance.

“We are pleased with our first quarter performance, reflecting disciplined execution across the organization and continued progress against our strategic priorities,” said Glenn J. Chamandy, Gildan’s president and CEO. “We advanced our integration initiatives as planned, with early actions reinforcing our operating model and strengthening our ability to drive efficiency and synergy capture. While the external environment remains uncertain, we are focused on what we can control — driving operational excellence, advancing our integration of HanesBrands, maintaining cost discipline and consistent execution — all supported by our low-cost vertically integrated platform and strong balance sheet, which position us well to deliver on our strategic and financial objectives,”

Q1 2026 Operating Results
The HanesBrands Australian Business has been classified as held for sale and reported as discontinued operations since the fourth quarter of 2025. As such, the operating results discussed herein are on the basis of continuing operations. Furthermore, consistent with the announcement made during its last quarterly results, Gildan said it is now transitioning to disaggregating its net sales into Wholesale and Retail. “Wholesale” comprises sales to distributors, screenprinters, embellishers and global lifestyle brand (GLB) customers. “Retail” comprises sales to mass merchants, department stores, national chains, specialty retailers, online retailers and directly to consumers.

Net sales from continuing operations were $1.17 billion, up 63.8 percent over the prior year, in line with guidance of approximately $1.15 billion. The year over year increase reflects the HanesBrands acquisition partially offset by integration initiatives (detailed thereafter) undertaken to optimize its  manufacturing footprint and accelerate synergy capture. Compared with proforma net sales from continuing operations of $1.29 billion, the year over year decline was primarily driven by lower volumes stemming from its proactive inventory reduction across customer channels, which temporarily reduced sell-in, as previously communicated. Wholesale sales were $552 million compared to $626 million, down 11.9 percent versus the prior year due to the aforementioned proactive inventory reduction across its combined customer channels as well as the non-recurrence of preemptive buying ahead of tariffs in the comparable period last year. This was partially offset by pricing initiatives implemented to offset a portion of the impact from tariffs, the contribution of HanesBrands and favorable mix. Gildan said it continued to see robust demand for Comfort Colors and its new brands, such as Champion (under a licensing agreement) and ALLPRO, continue to gather momentum with its  customers. Retail sales were $614 million, compared to $85 million in the prior year, primarily reflecting the acquisition of HanesBrands and higher selling prices. Albeit to a lower extent, Retail sales were also affected by the lower sell-in previously detailed and the non-recurrence of preemptive buying ahead of tariffs. Notwithstanding, its key underwear brands captured additional market share in the quarter.

The company generated gross profit of $278 million, or 23.9 percent of net sales, versus $222 million, or 31.2 percent of net sales, in the same period last year. Adjusting for an inventory fair value step-up charge of $106 million recorded as part of the HanesBrands acquisition, adjusted gross profit was $385 million, or 33.0 percent of net sales compared to 31.2 percent in the prior year. The 180-basis point improvement mainly reflects favorable pricing initiatives implemented to partially offset the impact from tariffs, the favorable contribution from HanesBrands and to a lesser extent lower raw material and manufacturing costs.

SG&A expenses were $219 million compared to $87 million in the prior year. Adjusting for charges related to the proxy contest and leadership changes and related matters, adjusted SG&A expenses were $218 million, or 18.7 percent of net sales, compared to $86 million or 12.1 percent of net sales for the same period last year. The increase in adjusted SG&A in the quarter reflects the acquisition of HanesBrands, partially offset by synergies realized as part of the HanesBrands integration process.

The company generated an operating loss of $1 million this quarter, compared to income of $130 million in the prior year. Adjusting for restructuring and acquisition-related costs and the inventory fair value step-up charge as part of the HanesBrands acquisition, as well as the costs relating to proxy contest and leadership changes and related matters, adjusted operating income was $167 million up $31 million year over year. Adjusted operating margin was 14.3 percent of net sales, down 470 basis points versus last year and ahead of guidance of approximately 12.9 percent. The year over year decrease in adjusted operating margin is mainly a reflection of the HanesBrands acquisition and HanesBrands’ lower operating margins due to historically higher levels of SG&A relative to Gildan.

Net financial expenses of $67 million were up $37 million over the prior year, due primarily to higher borrowing levels related to the HanesBrands acquisition. Taking into account the aforementioned factors, and a higher outstanding share base as a result of the acquisition, GAAP diluted loss per share from continuing operations was 30 cents, compared to GAAP diluted earnings per share of 56 cents in the prior year. Adjusting for restructuring and acquisition-related costs, the inventory fair value step-up charge and an income tax recovery of $33 million related to restructuring charges and other adjustments, adjusted diluted EPS from continuing operations were 43 cents, down 27.1 percent from 59 cents in the prior year.

Cash flows used in operating activities totaled $279 million for the three months ended March 29, 2026, compared to $142 million in the prior year, primarily reflecting lower net earnings from continuing operations. After accounting for capital expenditures totaling $30 million, the company consumed approximately $310 million of free cash flow. Gildan ended the quarter with net debt of $4,868 million and a leverage ratio of 3.3 times net debt to trailing twelve months proforma adjusted EBITDA.

HanesBrands Integration Progress Update
Gildan said, “The integration of HanesBrands continues to progress as planned. The company is well on pace to generate approximately $100 million in targeted synergies for 2026 and continues to expect to realize approximately $250 million of annual run-rate cost synergies over the next three years. With regards to previously communicated integration initiatives to accelerate footprint optimization, we are in the process of reallocating production volumes across our consolidated network leveraging Gildan’s low-cost vertically integrated manufacturing operations to support synergy capture. The company will continue to optimize and increase capacity through 2026 to support growth into 2027. Furthermore, distribution capacity is being optimized and planning efforts remain on track to standardize IT systems across facilities and key supply chain and manufacturing processes, further driving efficiencies.”

2026 Outlook
Gildan said, “Our expanded scale combined with our continued focus on strengthening our competitive position and driving profitable growth supports our confidence in our ability to execute against our objectives. While the broader operating environment remains uncertain, we believe our low-cost vertically integrated business model and the agility it provides, together with strong industry positioning provide a solid foundation to navigate evolving external conditions and support continued financial performance. Based on these factors and subject to prevailing macroeconomic conditions, we believe we are well positioned to progress toward the three‑year objectives for the 2026–2028 period as outlined in our Q4 earnings release issued on February 26, 2026. As for 2026, and with respect of our continuing operations, our guidance for the full year is maintained as follows:

  • Revenue of $6.0 billion to $6.2 billion;
  • Full year adjusted operating margin of approximately 20 percent;
  • Capex to come in at approximately 3 percent of net sales;
  • Adjusted diluted EPS
  • in the range of $4.20 to $4.40, an increase of approximately 20 percent to 25 percent year over year;
  • Free cash flow to be above $850 million.”

The assumptions underpinning its 2026 guidance are as follows:

  • Its full year guidance reflects continuing operations and as such excludes the contribution from the HanesBrands Australian operations which are reported as discontinued operations.
  • Its outlook reflects the expiry of a transition service agreement at HanesBrands related to its divestiture of Champion, representing slightly over $100 million in net sales in 2025.
  • Growth in key product categories driven by recently introduced innovation, the favorable impact from new program launches and market share gains, and the various incentives from jurisdictions where Gildan operates.
  • A proactive, temporary reduction of inventory across its combined customer channels, resulting in reduced sell-in as Gildan optimizes its manufacturing footprint as part of the HanesBrands integration.
  • Continued disciplined adjustments to its operating footprint and commercial mix, with a focus on margin accretive growth.
  • Its outlook reflects its currently expected impact of tariffs, including the expected positive impact of the February 20, 2026 U.S. Supreme Court decision invalidating certain tariffs and of subsequent related announcements by the U.S. Administration, together with mitigation initiatives including pricing actions and its ability to leverage its flexible business model as a low-cost, vertically integrated manufacturer. Higher tariff costs incurred prior to these developments remain embedded in its inventory costs. Given the dynamic and rapidly evolving tariff environment, the level and structure of tariffs, and their effects, remain uncertain and difficult to predict. In addition, its outlook does not reflect potential rights, if any, to refunds which remain uncertain and potentially subject to further legal proceedings as well as, among other, applicable procedural requirements and further guidance from U.S. Customs and Border Protection.
  • No share repurchases until its net debt leverage ratio1 approximates the midpoint of its target leverage framework of 1.5-2.5x net debt to trailing twelve months proforma adjusted EBITDA
  • The adjusted effective income tax rate for 2026 is expected to be around 19 percent.
  • Its outlook assumes continued successful execution on the HanesBrands integration plan, including the realization of the anticipated benefits from actions already undertaken as well as future integration actions.
  • Gildan assumes no meaningful deterioration from current market conditions including the pricing and inflationary environment, and the absence of a significant shift in labor conditions or the competitive environment.

For the second quarter of 2026, net sales from continuing operations are expected to be approximately $1.6 billion. This continues to reflect the proactive temporary reduction of inventory levels across customer channels which is reducing sell-in, as we complete the consolidation of manufacturing facilities to accelerate synergy capture. Furthermore, a timing shift in shipments from the second quarter into the second half of the year is also reflected and is due to the non-recurrence of some pre-buying in the second quarter of 2025 ahead of pricing actions. Adjusted operating margin is expected to be around 19.7 percent, reflecting higher SG&A levels which will be impacted by higher amortization of intangible assets and depreciation of property, plant and equipment resulting from the fair value purchase accounting impacts of the HanesBrands acquisition, in addition to a timing differential between some integration-related costs incurred and the flow-through of their benefit in subsequent quarters. The company’s adjusted effective income tax rate in the second quarter of 2026 is expected to be slightly lower than the expected full-year 2026 adjusted effective income tax rate.

Image courtesy Gildan Activewear