GIL — Gildan Activewear Inc.

Summary of Gildan Activewear Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Net Sales: $911 million, up 2.2% year-over-year, with Activewear sales increasing by 5.4%.
• Adjusted Operating Margin: 23.2%, representing an 80 basis point improvement year-over-year.
• Adjusted Diluted EPS: $1.00, a 17.6% increase compared to $0.85 in the same quarter last year.
• Gross Margin: 33.7%, a 250 basis point improvement attributed to lower manufacturing costs and favorable pricing.
• Operating Cash Flow: $270 million for the first nine months, with free cash flow of approximately $189 million.
• Net Debt: Approximately $1.7 billion, with a leverage ratio of 2x net debt to trailing 12 months adjusted EBITDA.

2. Strategic Updates and Business Highlights

• Gildan continues to execute its sustainable growth strategy, focusing on innovation and expanding its product offerings, including new brands like ALLPRO and Champion.
• The Comfort Colors brand is performing well, celebrating its 50th anniversary, and is set to expand into new categories such as hats and bags.
• The company is planning the integration of the proposed acquisition of HanesBrands, aiming for synergies of at least $200 million by leveraging its manufacturing capabilities.
• An integration team has been established to prepare for the acquisition, expected to close late 2025 or early 2026.

3. Forward Guidance and Outlook

• Adjusted Diluted EPS Guidance: Narrowed to a range of $3.45 to $3.51 for the full year, reflecting a year-over-year increase of approximately 15% to 17%.
• Revenue Growth: Expected to be up mid-single digits for the full year, consistent with previous guidance.
• Adjusted Operating Margin: Anticipated to increase by approximately 70 basis points compared to previous guidance of 50 basis points.
• CapEx Guidance: Revised to approximately 4% of sales from 5%, with a focus on maintaining asset maintenance and strategic investments.

4. Bad News, Challenges, or Points of Concern

• Hosiery and Underwear Sales: Down 22% year-over-year, attributed to a timing shift of shipments and broader market weakness.
• International Sales: Decreased by 6.1% year-over-year due to ongoing demand softness.
• Market Conditions: The overall market remains under pressure, with Gildan experiencing low single-digit declines in the imprintables market.
• Inventory Levels: Slightly higher than expected due to tariff costs, although management is comfortable with inventory positioning.
• Competitive Landscape: While Gildan is performing well, there are concerns about the overall health of competitors and the uncertainty surrounding tariffs affecting supply chains.

5. Notable Q&A Insights

• Management acknowledged delays in floor sets by large retailers affecting the innerwear category but noted that fleece programs are performing well.
• The company is seeing stable market conditions, with performance in key categories like Comfort Colors and fleece remaining strong despite overall market weakness.
• There is cautious optimism regarding the potential for growth in the innerwear category in Q4, with expectations for a return to growth.
• Discussions around tariffs indicate a reorientation of supply chains, but there is uncertainty in the market that may hinder immediate shifts.
• Gildan's pricing strategy has been to align with tariff impacts, maintaining competitive pricing without widening the gap against competitors.

Overall, Gildan Activewear's Q3 2025 results reflect solid financial performance and strategic execution, though challenges in certain product categories and market conditions present ongoing concerns. The upcoming acquisition of HanesBrands is positioned as a significant growth opportunity for the company.