Gildan Activewear (NYSE:GIL) reported second-quarter results that reflected the impact of its HanesBrands acquisition, raised its 2026 earnings outlook and said it expects to receive approximately $220 million in IEEPA tariff refunds this year.
For the quarter ended June 28, net sales from continuing operations rose 72.3% year over year to $1.58 billion, largely driven by the HanesBrands acquisition. Adjusted diluted earnings per share from continuing operations increased 32% to $1.28, compared with $0.97 in the prior-year period.
Sales trends and commercial performance
Gildan said wholesale fundamentals remained healthy, although the broader wholesale market was down low single digits during the second quarter. Chamandy said Gildan outperformed the market, posting growth at the upper end of low single digits and continuing to gain share.
Wholesale net sales totaled $769 million, down 1.5% from the prior year and down 5.8% from pro forma continuing-operations sales. Chief Financial Officer Luca Barile attributed the decline primarily to the company’s previously announced proactive inventory reduction across customer channels, partly offset by pricing initiatives.
Chief Commercial Officer Chuck Ward said demand trends improved sequentially through the quarter, with further strengthening in June. He said Comfort Colors, American Apparel and Champion each recorded double-digit sales growth during the quarter, while the company also gained share in ring-spun and fleece categories. The ALLPRO brand continued to gain traction, and Gildan launched a Hanes Scrubs line.
Retail net sales were $813 million, compared with $137 million in the prior-year quarter, reflecting the acquisition of HanesBrands. On a pro forma basis, retail sales declined from $901 million, as cautious retailer inventory management, lower seasonal inventory builds at certain large customers and softer broader consumer demand weighed on sales.
Barile said retail softness was broad-based and became more pronounced in June. Gildan lowered its market assumption for the year to a range of flat to low-single-digit growth, from its prior assumption of flat to low-single-digit growth, which had included an expectation of potential growth at the higher end of that range.
Margins, tariff refunds and reinvestment
Gross profit was $460 million, or 29.1% of sales, compared with $289 million, or 31.5% of sales, a year earlier. Excluding an $86 million inventory fair-value step-up cost associated with the HanesBrands acquisition, adjusted gross profit was $545 million, or 34.5% of sales.
Adjusted operating income rose $144 million year over year to $352 million. Adjusted operating margin was 22.3%, down 40 basis points from the prior-year period but ahead of the company’s guidance of about 19.7%.
Barile said the margin performance reflected the HanesBrands contribution, lower raw-material costs and pricing initiatives, partly offset by tariffs. The company recorded an approximately $25 million benefit during the quarter from a first phase of IEEPA tariff refunds.
Gildan expects roughly $220 million of IEEPA tariff refunds in 2026, including the amount recorded during the second quarter, with most remaining refunds anticipated in the third quarter. About half of the refunds represent a nonrecurring benefit tied to tariffs paid in fiscal 2025 and products manufactured in the company’s Asian hub, according to Barile.
The company plans to reinvest the nonrecurring portion into retail marketing and advertising, promotional and demand-generation programs, and faster product innovation and packaging enhancements. Ward said a refreshed Hanes brand platform is now in market, and the broader campaign is expected to deliver about 1 billion impressions and reach approximately 120 million consumers.
Gildan said the remaining tariff-refund benefit is structural because apparel qualifying as originating under CAFTA-DR is no longer subject to tariffs. Barile said products from Bangladesh remain subject to a 10% Section 301 tariff, while products from Vietnam are subject to a 12.5% Section 301 tariff.
Updated outlook and cash flow
For 2026, Gildan expects revenue at the low end of its previous $6 billion to $6.2 billion range. The company raised its adjusted operating-margin outlook to approximately 21.8% from about 20% and raised adjusted diluted EPS guidance to $4.65 to $4.75, from $4.20 to $4.40 previously.
Gildan also increased its free-cash-flow expectation to approximately $1 billion, from prior guidance of more than $850 million. Capital expenditures are expected to total about 3% of net sales.
For the third quarter, the company expects continuing-operations sales of approximately $1.65 billion, with both wholesale and retail returning to growth compared with pro forma prior-year sales. Adjusted operating margin is expected to be about 26%, aided by anticipated tariff refunds, realized synergies and a Barbados subsidy.
For the first half, cash flow from operating activities, including discontinued operations, was $68 million. After $51 million in capital expenditures, free cash flow was approximately $17 million for the six-month period, including $326 million generated in the second quarter. Gildan ended the first half with net debt of about $4.69 billion and a leverage ratio of 3.2 times net debt to trailing-12-month pro forma adjusted EBITDA.
Australian business sale and capital allocation
Gildan also announced a definitive agreement to divest the HanesBrands Australian Business, or HAA, to BBFIT Investments at an enterprise valuation of approximately AUD700 million, or about $490 million at current exchange rates. The HAA business has been reported as discontinued operations since the fourth quarter of 2025.
The transaction is expected to close in the second half of 2026, subject to regulatory approvals and customary closing conditions. Gildan plans to use proceeds to repay debt and accelerate its return toward the midpoint of its target leverage range of 1.5 to 2.5 times net debt to trailing-12-month pro forma adjusted EBITDA.
Barile said the company expects to renew its normal-course issuer bid, or share-repurchase program, when leverage approaches the midpoint of that range.
About Gildan Activewear (NYSE:GIL)
Gildan Activewear Inc (NYSE:GIL) is a vertically integrated manufacturer and wholesaler of branded basic apparel, including activewear, socks, hosiery and underwear. Headquartered in Montreal, Quebec, the company produces a wide range of products such as T-shirts, fleece garments, sport shirts, performance wear, and shapewear under its Gildan, Anvil, Comfort Colors, Gold Toe, Peds and Silks brands. Leveraging its in-house knitting, dyeing, cut-and-sew and finishing operations, Gildan supplies blank apparel to screen printers, promotional product distributors and major retailers around the world.
Since its founding in 1984 by Glenn J.
