Gildan Activewear, Inc. reported that adjusted earnings grew 17 percent in the second quarter ended June 29. Margins improved due to lower raw material and manufacturing costs, as well as favorable pricing. Sales rose 6.5 percent, as a 12 percent gain in Activewear offset declines in hosiery and underwear.

Gildan reaffirmed its full-year 2025 guidance, including the impact of tariffs, while narrowing its adjusted diluted EPS 2025 guidance range.

“The Gildan Sustainable Growth (GSG) strategy continues to drive solid financial performance, as evidenced by our record second quarter results, driven by strong net sales growth of 12 percent in Activewear. As we navigate through the current fluid operating environment, we are focusing on what we can control, which is allowing us to continue to strengthen our competitive position and drive profitable top-line growth. Moreover, our performance reflects the agility and resilience of our low-cost vertically integrated business model, which remains the cornerstone of our ability to deliver long-term value for our stakeholders,” said Glenn J. Chamandy, Gildan’s president and CEO

Q2 2025 Operating Results
Net sales were a record $919 million, up 6.5 percent over the prior year, in line with previously provided guidance of mid-single digit growth. Activewear sales of $822 million were up 12 percent driven by higher sales volumes and, to a lesser extent, favorable product mix and higher net prices. Gildan said it continued to see market share gains in key growth categories and a positive market response to its recently introduced new products which feature key innovations, including its new Soft Cotton Technology. Furthermore, complementing solid sales to North American distributors, Gildan observed continued momentum with national account customers, driven by its strong overall competitive positioning and as Gildan said it continued to benefit from recent changes in the industry landscape. International sales decreased by 14.1 percent year over year, primarily due to demand softness in certain markets. Separately, Hosiery and underwear sales were $96 million, down 23.3 percent versus the prior year, mainly owing to lower sales volumes and unfavorable mix, as the category experienced continued broader market weakness during the quarter.

The company generated gross profit of $289 million, or 31.5 percent of net sales, versus $262 million, or 30.4 percent of net sales, in the same period last year representing a 110-basis point improvement, which was primarily driven by lower raw materials and manufacturing costs as well as favorable pricing.

SG&A expenses were $82 million compared to $124 million in the prior year. Adjusting for charges related to the proxy contest and leadership changes and related matters, which were primarily incurred in the prior year, adjusted SG&A expenses were up 21 percent to $81 million, or 8.8 percent of net sales, compared to 7.7 percent of net sales for the same period last year. The increase in adjusted SG&A in the quarter reflects higher general and administrative expenses and variable compensation. Furthermore, the benefit from the Barbados jobs credit was $12 million this quarter, down from $17 million in the prior year when this credit was introduced retroactively to January 1, 2024.

The company generated operating income of $199 million, or 21.7 percent of net sales, comparing favorably to $141 million, or 16.4 percent of net sales last year. Adjusting for restructuring and acquisition-related costs in both years and the aforementioned costs relating to proxy contest and leadership changes which were primarily incurred in the prior year, adjusted operating income was $209 million up $13 million, or 22.7 percent of net sales, flat versus last year and in line with guidance provided.

Net financial expenses of $32 million were up $8 million over the prior year due primarily to higher borrowing levels. The company’s income tax expense for the quarter was $30 million versus $59 million last year. The decrease is mainly due to the enactment of Global Minimum Tax (GMT) in the second quarter of 2024 with retroactive effect to January 1, 2024 and a one-time charge related to the revaluation of deferred tax assets and liabilities due to an increase in the corporate tax rate in Barbados. The company’s adjusted effective income tax rate for the quarter was 17.4 percent versus 27.2 percent last year.

Taking into account the benefit from a lower outstanding share base, GAAP earnings totaled $137.9 million, or 91 cents a share, up from $58.4 million, or 91 cents a share, against $58.4 million, or 35 cents, a year ago. Adjusted earnings were a record $145.9 million, or 97 cents, up from $124.7 million, or 74 cents, a year ago.

Year-to-Date Operating Results
Net sales for the first six months of the year ended June 29, 2025, were $1,630 million, up 4.6 percent versus the same period last year. In Activewear, Gildan generated sales of $1,470 million, up $141 million or 10.6 percent, driven primarily by higher volumes and a favorable product mix, reflecting positive sales momentum at U.S. Distributors and National accounts, partly offset by softness in International markets. International sales of $112 million were down 9.2 percent versus the same period last year, reflecting continued demand softness across geographies. In the Hosiery and underwear category, sales were down 30 percent versus the prior year reflecting less favorable volume and mix, broader market weakness as well as the phase out of the Under Armour business in the first quarter of 2025.

The company generated gross profit of $511 million, up $38 million versus the prior year, driven by the increase in sales and gross margin. Gross margin of 31.4 percent was up by 100 basis points year over year mainly driven by lower raw material costs and to a lesser extent favorable pricing.
  
SG&A expenses were $169 million, $60 million below prior year levels. Excluding costs related to the proxy contest, leadership changes and related matters which were primarily incurred in the prior year, adjusted SG&A expenses were $167 million, or 10.3 percent of net sales, compared to $152 million or 9.8 percent of net sales, reflecting mainly higher variable compensation and distribution costs and the benefit from the Barbados jobs credit of $20 million this year compared to $17 million for the same period last year.

The company generated operating income of $329 million, or 20.2 percent of net sales, reflecting higher net sales and improved gross margins, compared to operating income of $246 million or 15.8 percent of net sales last year. Excluding restructuring and acquisition related costs and the aforementioned costs relating to proxy contest and leadership changes, adjusted operating income was $344 million or 21.1 percent of net sales, up $23 million or 50 basis points compared to the prior year.

Net financial expenses of $62 million were up $15 million over the prior year period due to higher borrowing levels. Income tax expenses were significantly lower than the prior year, due to the non-recurrence of a revaluation of deferred asset and tax liabilities following the enactment of the Barbados tax reform. On an adjusted basis, income taxes were down slightly year over year. Reflecting the improved financial performance and the benefit from a lower outstanding share base, GAAP diluted EPS and adjusted diluted EPS were $1.47 and $1.56 respectively, compared to GAAP diluted EPS and adjusted diluted EPS of $0.81 and $1.33 respectively, in the prior year.

Cash flows from operating activities totaled $46 million for the six months ended June 29, 2025, compared to $113 million in the prior year, primarily reflecting higher working capital investments. After accounting for capital expenditures totaling $58 million, the company consumed approximately $12 million of free cash flow. During the first half of 2025, the company continued to execute on its capital allocation priorities returning $206 million to shareholders, including dividends and by repurchasing about 2.9 million shares under its normal course issuer bid (NCIB) program. Gildan ended the first half of 2025 with net debt of $1,849 million and a leverage ratio of 2.2 times net debt to trailing twelve months adjusted EBITDA, within its current targeted debt range of 1.5x to 2.5x net debt to adjusted EBITDA.

2025 Outlook

Gildan said, “The sustained execution of Gildan Sustainable Growth (GSG) strategy positions us well for the remainder of 2025. As such, against the current fluid macroeconomic backdrop, we remain focused on operational agility and continue to believe that our vertically integrated business model, paired with our strong industry positioning enable us to operate in dynamic environments and drive strong financial performance.”

Consequently, for 2025, Gildan reaffirmed its full year guidance while narrowing the range for adjusted diluted EPS, as follows:

  • Revenue growth for the full year to be up mid-single-digits;
  • Full year adjusted operating margin to be up approximately 50 basis points;
  • Capex to come in at approximately 5 percent of sales;
  • Adjusted diluted EPS in the range of $3.40 to $3.56, up between 13 percent and 19 percent year-over-year, compared to previous guidance of $3.38 to $3.58; and
  • Free cash flow to be above $450 million.

The assumptions underpinning 2025 guidance are as follows:

  • Gildan has considered the impact of tariffs currently in place in conjunction with mitigation initiatives available, including pricing and the firm’s ability to leverage its flexible business model as a low-cost vertically integrated manufacturer.
  • The outlook continues to reflect growth in key product categories driven by recently introduced innovation, the favorable impact from new program launches and market share gains, the expected ongoing benefits from the jobs credit program that took effect in Barbados in 2024 and continued share repurchases under the NCIB program, while remaining within its leverage framework target.
  • Gildan also expects its adjusted effective income tax rate for 2025 to remain at a similar level to 2024.

For the third quarter of 2025, net sales are expected to be up low single digits year over year, reflecting a timing shift of orders from the third quarter into the second quarter, and partly into the fourth quarter. Adjusted operating margin is expected to be maintained at a similar level to the second quarter of 2025. The company’s adjusted effective income tax rate in the third quarter of 2025 is expected to be at a similar level to the full year 2024 adjusted effective income tax rate.

Image courtesy Gildan