On Thursday, Gildan Activewear (NYSE:GIL) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Gildan Activewear reported record Q1 sales from continuing operations of nearly $1.2 billion, a 64% increase year-over-year, primarily due to the Hanes brand acquisition.
Adjusted diluted earnings per share from continuing operations were $0.43, down from $0.59 in Q1 2025, influenced by short-term integration initiatives.
The company is progressing with the integration of Hanes, relocating production to leverage Gildan’s cost structure, and aims for $250 million in run-rate cost synergies over three years.
Despite uncertainties in the Middle East, the company maintains its 2026 guidance and three-year objectives, citing strong competitive positioning and a robust innovation pipeline.
Management expressed confidence in achieving financial targets, with a focus on operational excellence, cost discipline, and synergy realization.
Full Transcript
OPERATOR
Ladies and Gentlemen, thank you for standing by and welcome to Gildan Activewear’s 2026 Q1 earnings conference call. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to J.C. Hayem, Senior Vice President, Head of Investor Relations and Global Communications. Please go ahead.
J.C. Hayem (Senior Vice President, Head of Investor Relations and Global Communications)
Thank you, Angela. Good morning, everyone and thank you for joining us this morning. Earlier today we issued a press release announcing our results for the first quarter while maintaining our guidance for 2026 as well as our three year objectives for the 202628 period. The company’s management discussion and analysis and consolidated financial statements are expected to be filed with the Canadian securities and regulatory authorities and the U.S. securities and Exchange Commission today and will also be available on our corporate website. As a reminder, please note that we’ll be holding our annual general meeting today at 2pm Eastern time with more information available on the events page of our corporate website now. Joining me on the call today are Glenn Shemandy, President and CEO of Gildan Activewear, Luca Barilli, Executive Vice President, Chief Financial Officer and Chuck Ward, Executive Vice President, Chief Commercial Officer. This morning we’ll take you through the results for the quarter and then a question and answer session will follow. Before we begin, please take note that certain statements included in this conference call may constitute forward looking statements which involve unknown and known risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward looking statements. We refer you to the Company’s filings with the U.S. securities and Exchange Commission and Canadian securities regulatory authorities, including in the case of our fiscal 2026 outlook and our three year objectives for the 2026-28 period, as well as certain risks and assumptions related thereto and our earnings press release dated April 30, 2026. During this call we’ll also discuss certain non GAAP financial measures. Reconciliations to the most directly comparable IFRS measures are provided in today’s earnings release as well as our mdna. Before I turn it over to Glenn, a few items to note Remember that the first quarter represents the first full fiscal reporting period during which the results of Hanes Brands are fully consolidated into the company’s financial statements. Please note that we may refer to Hanes Brands as Hanes throughout this call. Then, as previously announced, the Hanes Brands Australian business, which we refer to as haa, has been classified as held for sale and reported as discontinued Operations as of December 1, 2025, the date of closing of the Hanes brand acquisition. So unless otherwise indicated, the figures we’ll be discussing today are from continuing operations and therefore exclude the results of the HAA business. With this in mind, we are only in position to confirm that the sale process is progressing as expected and will not provide any further updates at the moment. Also, as we announced last quarter, we have transitioned to reporting disaggregated net sales by wholesale and retail as of the first quarter. You will find in our press release supplementary pro forma net sales from continuing operations disaggregated by channel and geographic area on a quarterly and full year basis for 2025. In addition, you’ll also find supplementary pro forma net sales from continuing operations for the same periods showing Gildan Activewear on the stand alone basis and adjusted for Hanes brand sales. For reference, wholesale comprises sales to distributors, screen printers, embellishers and global lifestyle brand customers which we refer to as glb, whereas retail comprises sales to mass merchants, department stores, national chains, specialty and online retailers and directly to consumers. And now I’ll turn it over to Glenn.
Glenn Shemandy (President and CEO)
Thank you Jesse and good morning everyone and thank you for joining us on this call. As we highlighted in this morning’s press release, we are pleased with our first quarter performance reflecting disciplined execution and continued progress against our strategic priorities. We delivered record Q1 sales from continuing operations of nearly 1.2 billion which were up 64% versus last year primarily due to the Hanes brand acquisition. We also reported adjusted diluted earnings per share from continuing operations of $0.43 compared to $0.59 in the first quarter of 2025, reflecting the short term impact of integration initiatives that we have put in place to accelerate synergies captured. We remain very excited about the Hanes acquisition and the opportunities we see. We are progressing well with our integration initiatives and relocating textile production volumes from the Haines to the Gildan facilities, leveraging our low cost manufacturing and supply chain structure. We are working fast but with a well thought approach to be able to unlock the benefits of operating as one integrated company and we continue to optimize and expand our capacity in 2026 to support growth in 2027. We are also enhancing our distribution network. Our plans to standardize IT systems, key supply chain and manufacturing processes, all remain on track. Given the progress so far, we remain confident in attaining our objective of approximately 250 million in run rate cost synergies over the next three years, including approximately 100 million in 2026 and we continue to pursue additional synergies beyond the three year target. Now with the situation in the Middle east, the external environment around us becomes increasingly uncertain. But Gildan has navigated through uncertain situations in the past with agility and discipline. That said, I’d like to address two key elements related to this situation. First, despite inflationary environment, we have good visibility for 2026 when it comes to our input costs including cotton, polyester as well as energy. Second, our Bangladesh operations have been running normally until now and we have built in temporary contingency plans should the situation deteriorate. This is what our agility and our vertical integration enables us to do. So we have a clear line in sight into our plans for the rest of the year and we are focused on what we can control, driving operational excellence, advancing on our integration of Hanes, maintaining our cost discipline and consistent execution. With that in mind, considering the strength of our competitive positioning across our product lines, channels and geographies driven by our scale and our strong pipeline of innovation, we are maintaining our guidance for 2026 and remain confident in our ability to achieve our three year objectives for 20262028 period. I look forward to answering your questions after our formal remarks. And now I’ll turn it over to LUCA for a financial review.
Luca Barilli (Executive Vice President, Chief Financial Officer)
Thank you Glenn and good morning everyone. Thank you for joining us today to discuss our first quarter results. Let me start with the specifics of the quarter, then turn to our 2026 outlook and guidance. First, the quarterly results. We reported record first quarter sales from continuing operations of 1.17 billion, up 63.8% year over year in line with guidance of approximately 1.15 billion. The increase reflects the Hanes Brands acquisition, partially offset by our integration initiatives undertaken to optimize the company’s manufacturing footprint and accelerate synergy capture. Now, compared with pro forma net sales from continuing operations of 1.29 billion, the year over year decline was primarily driven by lower volumes stemming from our proactive inventory reduction across customer channels which temporarily reduced sell in as we previously communicated. Now looking at Wholesale net sales were 552 million compared to 626 million in the prior year due primarily to the impact of the voluntary inventory reduction across customer channels as well as the non recurrence of some preemptive buying ahead of tariffs in the comparable period last year. This was partially offset by pricing initiatives which were implemented to partially offset a portion of the impact from tariffs. The contribution of Hanes brand’s unfavorable mix. We continue to see robust demand for comfort colors in our new brands such as Champion, which is under a licensing agreement and Alpro. Now turning to retail, net sales were 614 million compared to 85 million in the prior year, primarily reflecting the contribution from the Hanes brand’s acquisition and higher net selling prices. 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. As previously mentioned, our key underwear brands captured additional market share in the quarter and new programs launched in mid-2025 are performing well. Shifting to margins, we generated gross profit of $278 million or 23.9% of net sales versus $222 million or 31.2% 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 Hanes Brands acquisition, adjusted gross profit was 385 million or 33% of net sales compared to 31.2% in the prior year. The 180 basis point improvement mainly reflects favorable pricing initiatives implemented to partially offset the impact of tariffs, the favorable contribution from Hanes brands and to a lesser extent lower raw material and manufacturing costs. SGA 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 SGA expenses were 218 million or 18.7% of net sales compared to 86 million or 12.1% of net sales for the same period last year. The increase in adjusted SGA in the quarter reflects the acquisition of Hanes brands partially offset by synergies realized as part of the Hanes Brands integration process. As we bring all these elements together and adjusting for the restructuring and acquisition related costs and the inventory fair value step up charge as part of the acquisition as well as the costs relating to proxy contests and leadership changes and related matters, adjusted operating income was 167 million, up 31 million year over year. Adjusted operating margin was 14.3% of net sales was down 470 basis points versus last year and ahead of guidance provided of approximately 12.9% the year over year. Decrease in adjusted operating margin is mainly a reflection of the Hanes brand’s acquisition and Hanes lower operating margins due to historically higher levels of SGA relative to Gildan. Net financial expenses were $67 million, up $37 million year over year primarily due to higher borrowing levels related to the Hanes Brands acquisition. Now taking into account all of these factors and a higher outstanding share base as a result of the acquisition, Generally Accepted Accounting Principles (GAAP) diluted loss per share from continuing operations was $0.30 compared to Generally Accepted Accounting Principles (GAAP) diluted earnings per share of $0.56 in the prior year in adjusting for restructuring and acquisition related costs, inventory fair value, step up charge and an income tax recovery of 33 million related to restructuring charges and other adjustments. Adjusted diluted earnings per share from continuing operations were $0.43 down 27.1% from $0.59 in the prior year. Now turning to cash flow and balance sheet items. Cash flows used in operating activities, which includes discontinued operations, totaled 279 million for the first quarter 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. We ended the quarter with net debt of $4.868 billion and a leverage ratio of 3.3 times net debt to trailing twelve months pro forma adjusted EBITDA as previously announced, we are pursuing a sale of HAA and the net proceeds from the potential divestment will be used to pay down a portion of the company’s outstanding debt and further accelerate our objective to return to a leverage framework of 1.5 to 2.5 times net debt to pro forma adjusted EBITDA. Turning to the outlook for 2026 with respect to our continuing operations, we are maintaining our guidance as revenue of 6 billion to 6.2 billion full year adjusted operating margin of approximately 20%, CAPEX to come in at approximately 3% of net sales, adjusted diluted Earnings Per Share (EPS) in the range of $4.2 to $4.4, an increase of 20 to 25% year over year and free cash flow to be above 850 million. Furthermore, the assumptions underpinning our outlook are essentially the same as we previously communicated and are detailed in our press release issued earlier today. Finally, we have also provided guidance for our second quarter, we expect net sales from continuing operations to be approximately 1.6 billion. This continues to reflect 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 2026 is also reflected and is due to the non recurrence of some pre buying in the second quarter of 2025 ahead of pricing actions. Our adjusted operating margin is expected to be around 19.7% reflecting the higher SGA levels which includes higher amortization of intangible assets and depreciation of property, plant and equipment resulting from the fair value purchase accounting impacts of the Hanes Brands acquisition in addition to a timing differential between some integration related costs incurred and the flow through of their benefit in subsequent quarters. Finally, the company’s adjusted effective income tax rate in the second quarter is expected to be slightly lower than the expected full year 2026 adjusted effective income tax rate. In summary, we are pleased with the quarter and our integration progress. The broader operating environment remains uncertain and we feel cautiously optimistic about the remainder of 2026 while being mindful of the Middle east conflict and the heightened concerns on the end consumer. Nonetheless, we are focused on what we can control. We believe that our low cost, vertically integrated business model and the agility it provides, together with strong industry positioning provide a solid foundation for us to navigate evolving external conditions and support continued financial performance. Thank you. And now I’ll turn it over to Jesse.
Jesse Haim (Moderator)
Thank you Luca. This concludes our prepared remarks and now we’ll begin taking your questions. Before moving to the Q and A session, I’d like to remind you to limit your questions to two and we’ll circle back for a second round if time permits. Angela, please begin the Q and A session.
Angela
Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star one again. Thank you. Your first question comes from the line of JSOL with ubs. Your line is now open.
Jay
Great. Thank you so much. Two questions for me, Glenn. I’d love if you could give us a little review of the point of sale both for the Guild and Printwear business, but also for the Hanes business that you saw in the quarter that you’re kind of seeing second quarter to date. And then also maybe if you can take A step back and tell us how the strategy that you’re developing for the Hanes business is evolving, how you’re thinking about investing in marketing, investing in product. If you can give us an update on that, that would be terrific as well. Thank you.
Chuck Ward (Executive Vice President, Chief Commercial Officer)
Okay, well, let Chuck go with the. Discuss the market conditions and I’ll answer the other side. Okay, thank you. Good morning, Jay. As we look at net sales for the quarter, as Lucas said, we were in line with guidance. Both markets were a little bit softer than we expected with some impacts in the US obviously with some tough weather during Q1 that everybody experienced. But overall, as Glenn mentioned, we performed well and we outperformed both markets. We continue to gain share in both markets. And as he mentioned in his comments, we typically perform well in challenging markets. But if I break it down, we really. Jay, look at it wholesale retail, as Jessie mentioned in her opening remarks. So I’ll really address it from a wholesale retail perspective. As we look at the wholesale market, the market was down low single digits while we performed up low single digits. So again, continuing to take share in the market. If you really dive into that market, Jay, it’s continuing strong performance with our premium products. Luca mentioned comfort colors, for example, and the strength that we’re seeing continue in that brand, our growth in …
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