Gildan lowers annual guidance amid demand slowdown

Canadian basic apparel manufacturer Gildan Activewear reported a 61.1 percent increase in third-quarter net sales from continuing operations to 1.47 billion dollars. The growth was driven by the integration of its acquisition of HanesBrands, though results fell short of management projections due to softening consumer demand across both wholesale and retail channels.

Given the pressure on consumer discretionary spending and customer inventory replenishment, the Montreal-based apparel group lowered its full-year 2026 outlook and withdrew its three-year targets for 2026 to 2028. Gildan now expects full-year revenue of between 5.4 billion dollars and 5.5 billion dollars, down from previous guidance of 6 billion dollars to 6.2 billion dollars, adjusted operating margin of approximately 20 percent, compared to previous guidance of approximately 21.8 percent and adjusted diluted EPS in the range of 3.70 dollars to 3.80 dollars, compared to previous guidance of 4.65 dollars to 4.75 dollars.

Macroeconomic pressure impacts wholesale and retail volumes

Wholesale revenue fell 6.8 percent YoY to 735 million dollars, representing a 10.8 percent drop when measured against proforma wholesale sales of 823 million dollars in the comparative period. Gildan attributed the shortfall to broader market weakness, less favourable fleece shipments, and lower replenishment orders from distributors managing working capital. Brands including Comfort Colors, American Apparel, and Champion maintained stable customer demand.

Retail sales reached 732 million dollars, up from 122 million dollars in the third quarter of 2025, reflecting the contribution of HanesBrands. On a proforma basis, retail sales contracted 7 percent against 787 million dollars in the prior year period, hampered by subdued customer footfall, cautious inventory commitments from key retail partners, and temporary product availability constraints.

“Our results this quarter did not meet our expectations, reflecting a more subdued demand environment and near-term challenges in parts of our business across both Wholesale and Retail,” said Gildan president and chief executive officer Glenn Chamandy. “The demand recovery we had anticipated has not materialized as expected, but our confidence in the underlying strength of the business and the long-term growth opportunity has not changed.”

Diluted earnings per share (EPS) on a GAAP basis stood at 1.37 dollars, while adjusted diluted EPS rose 54 percent year-over-year (YoY) to 1.54 dollars. Operating income reached 354 million dollars, with adjusted operating margin climbing 380 basis points YoY to 27 percent, supported by 177 million dollars in International Emergency Economic Powers Act (IEEPA) tariff refunds and initial cost synergies.

Strategic divestment and updated outlook

Gildan completed the sale of HanesBrands Australia to BBFIT Investments on October 26, 2026, for an enterprise value of approximately 700 million Australian dollars, equivalent to approximately 490 million dollars. The company used the net cash proceeds to repay long-term debt, lowering its net debt to 4.14 billion dollars and ending the quarter with a net leverage ratio of 2.7 times proforma adjusted EBITDA.

The board approved a normal course issuer bid (NCIB) to repurchase up to 5 percent of issued and outstanding common shares, representing 9,260,156 shares, starting on November 9, 2026. The company also approved a quarterly cash dividend of 0.249 dollars per share, payable on December 21, 2026.

Management confirmed that its cost-synergy capture target of approximately 100 million dollars for 2026 remains on track, with an objective to achieve 250 million dollars in run-rate synergies by the end of 2028. Construction of its second production plant in Bangladesh remains on schedule to begin manufacturing in 2028, while a revised long-term strategy will be presented to investors in spring 2027.