Gildan Activewear Inc.

Reported Q2 2026 net sales from continuing operations were $1.58 billion, up 72.3% year over year, in line with guidance of about $1.6 billion. Adjusted diluted EPS from continuing operations was $1.28, up 32% from $0.97 last year; GAAP diluted EPS from continuing operations was $0.49 versus $0.91. Gross profit was $460 million, or 29.1% of net sales, versus $289 million, or 31.5% a year ago; excluding the $86 million inventory fair value step-up cost, adjusted gross profit was $545 million, or 34.5%, versus 31.5% last year. Adjusted operating income was $352 million, with adjusted operating margin of 22.3%, down 40 bps year over year but 260 bps above guidance. For the first half, operating cash flow was $68 million, capital expenditures were $51 million, and free cash flow was about $17 million. Net debt ended the first half at about $4.69 billion, with leverage of 3.2x net debt to trailing 12-month pro forma adjusted EBITDA. Full-year 2026 guidance was raised to revenue at the low end of $6.0 billion-$6.2 billion, adjusted operating margin of about 21.8% (from about 20%), adjusted EPS of $4.65-$4.75 (from $4.20-$4.40), CapEx of about 3% of net sales, and free cash flow of about $1 billion (from above $850 million). Q3 2026 revenue is expected to be about $1.65 billion, adjusted operating margin about 26%, and adjusted effective tax rate about 18.5%. Management said the guidance includes about $220 million of IEEPA tariff refunds, with most of the refunds expected in Q3, and that roughly half of the refund amount will be reinvested in 2026 while the structural tariff benefit supports the full-year base.

Glenn Chamandy framed the quarter as strong execution after the HanesBrands acquisition, emphasizing that the company is only eight months into a transformational integration and already on track for about $100 million of synergies in 2026. He said the remaining integration work, supply chain optimization, and IT/process standardization should make benefits more visible exiting 2026 and set up another $100 million of targeted synergies in 2027. His tone was confident and forward-looking, with repeated emphasis on a stronger base for 2027, profitable growth, and returning capital after leverage improves.

Luca Barile walked through the quarter’s mechanics in detail: higher sales, a 34.5% adjusted gross margin after the HanesBrands step-up cost, 22.3% adjusted operating margin, and $1.28 adjusted EPS. He highlighted net financial expense of $69 million versus $32 million last year due to higher borrowings, first-half free cash flow of $17 million, and net debt of about $4.69 billion at 3.2x leverage. On guidance, he pointed to $220 million of expected IEEPA tariff refunds, about half being reinvested into the business, the rest supporting a structurally higher 21.8% operating margin base; he also reiterated that free cash flow should reach about $1 billion and that working capital should end below 30% of sales.

Analysts focused heavily on whether the 2026 earnings raise is simply pulling forward earnings from later years, and management said the answer is no because the updated guidance reflects both a nonrecurring refund being reinvested and a structural tariff benefit that becomes the new base for 2027. They also pressed on days sales outstanding and receivables quality; Luca said AR/DSO trends reflect growth, new brand launches, and channel transition rather than deterioration, and that gross and net DSOs should keep improving as working capital falls below 30% of sales. Other questions centered on SG&A, the Barbados subsidy, the 53rd week, pricing, and the path to buybacks; management said the Barbados subsidy was already in the original guide, pricing is not expected to move structurally, and share repurchases should resume once leverage approaches the midpoint of the 1.5x-2.5x target range after the HAA sale closes.