GIL — Gildan Activewear Inc.

Gildan Activewear Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Sales: Record Q1 sales from continuing operations reached $1.17 billion, up 63.8% year-over-year, primarily due to the acquisition of Hanes Brands.
• Earnings: Adjusted diluted EPS from continuing operations was $0.43, down 27.1% from $0.59 in Q1 2025. GAAP diluted loss per share was $0.30.
• Gross Profit: Reported gross profit was $278 million (23.9% of net sales), with adjusted gross profit at $385 million (33% of net sales), reflecting a 180 basis points improvement year-over-year.
• SG&A Expenses: Increased to $219 million (18.7% of net sales), compared to $87 million (12.1% of net sales) in the prior year.
• Cash Flow: Cash flows used in operating activities totaled $279 million, with free cash flow consumption of approximately $310 million after capital expenditures.
• Debt: Ended the quarter with net debt of $4.868 billion and a leverage ratio of 3.3x net debt to trailing 12 months pro forma adjusted EBITDA.

2. Strategic Updates and Business Highlights

• The integration of Hanes Brands is progressing well, with plans to achieve approximately $250 million in run-rate cost synergies over the next three years, including $100 million in 2026.
• Gildan is optimizing its manufacturing footprint and enhancing its distribution network.
• The company is focused on innovation and product development, particularly in the underwear and activewear segments, leveraging the strengths of both Gildan and Hanes brands.
• The company reported strong demand for premium products like Comfort Colors and Champion.

3. Forward Guidance and Outlook

• Maintaining full-year revenue guidance of $6 billion to $6.2 billion and an adjusted operating margin of approximately 20%.
• Expected adjusted diluted EPS for the year is in the range of $4.20 to $4.40, representing a 20% to 25% increase year-over-year.
• For Q2 2026, projected net sales from continuing operations are approximately $1.6 billion, with an adjusted operating margin of around 19.7%.

4. Bad News, Challenges, or Points of Concern

• The company is navigating an uncertain external environment, particularly due to geopolitical tensions in the Middle East and inflationary pressures affecting input costs.
• There was a proactive inventory reduction across customer channels, which temporarily reduced sell-in and impacted sales volumes.
• The integration of Hanes Brands has led to higher SG&A expenses, which may pressure margins in the short term.
• The overall market conditions remain challenging, with some softness observed in retail and wholesale channels.

5. Notable Q&A Insights

• Management expressed cautious optimism regarding the demand environment, noting improvements in Q2 but acknowledging the potential impact of macroeconomic factors on consumer confidence.
• The company is focused on capturing market share in underwear and activewear, with plans for product innovation and marketing investments.
• There are contingency plans in place for operations in Bangladesh amid geopolitical risks, and management confirmed that operations are currently running normally.
• Questions regarding the timing and magnitude of synergies from the Hanes integration were addressed, with management confident in achieving the $100 million target for 2026.
• The company is actively pursuing the sale of its Australian business, which will help reduce debt and improve leverage ratios.

Overall, Gildan Activewear reported strong sales growth driven by the Hanes acquisition while facing challenges related to integration costs and market uncertainties. The company remains optimistic about future growth and synergy realization.