Q2 FY2026
Filed Jul 30, 2026Gildan Reports Strong Second Quarter Results, Updates its Full Year 2026 Guidance and Announces the Sale of HanesBrands Australia
Q2 net sales from continuing operations rose 72.3%, adjusted operating income rose 68.8%, adjusted diluted EPS rose 32.0%, and adjusted operating margin exceeded guidance. Full-year adjusted operating margin, adjusted diluted EPS, and free cash flow guidance were raised, although Wholesale sales declined and GAAP earnings were affected by acquisition, restructuring, purchase-accounting, and discontinued-operation items.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net sales from continuing operationsother | $1,582.5 million | – | 72.3% |
| Gross profitother | $459.8 million | – | 58.9% |
| Gross marginother | 29.1% | – | (2.4) pp |
| Adjusted gross profitnon-GAAP | $545.4 million | – | 88.5% |
| Adjusted gross marginnon-GAAP | 34.5% | – | 3.0 pp |
| SG&A expensesother | $193.8 million | – | n.m. |
| Adjusted SG&A expensesnon-GAAP | $193.0 million | – | n.m. |
| Adjusted SG&A expenses as a percentage of net salesnon-GAAP | 12.2% | – | 3.4 pp |
| Restructuring and acquisition-related costsother | $90.0 million | – | n.m. |
| Operating incomeother | $175.9 million | – | (11.8)% |
| Operating marginother | 11.1% | – | (10.6) pp |
| Adjusted operating incomenon-GAAP | $352.3 million | – | 68.8% |
| Adjusted operating marginnon-GAAP | 22.3% | – | (0.4) pp |
| Adjusted EBITDAnon-GAAP | $420.6 million | – | 70.8% |
| Financial expensesother | $69.3 million | – | n.m. |
| Income tax expenseother | $16.2 million | – | (45.3)% |
| Adjusted effective income tax ratenon-GAAP | 15.9% | – | – |
| Net earnings from continuing operationsother | $90.4 million | – | (34.4)% |
| Total net earnings (loss)other | $(50.0) million | – | n.m. |
| Adjusted net earnings from continuing operationsnon-GAAP | $237.9 million | – | 63.1% |
| GAAP diluted EPS from continuing operationsother | $0.49 | – | (46.2)% |
| Adjusted diluted EPS from continuing operationsnon-GAAP | $1.28 | – | 32.0% |
| Cash flows from operating activitiesother | $347.4 million | – | 84.6% |
| Capital expendituresother | $(21.2) million | – | (38.4)% |
| Free cash flownon-GAAP | $326.4 million | – | n.m. |
| Year-to-date net sales from continuing operationsother | $2,748.4 million | – | 68.6% |
| Year-to-date adjusted operating incomenon-GAAP | $519.1 million | – | 50.8% |
| Year-to-date adjusted diluted EPS from continuing operationsnon-GAAP | $1.72 | – | 10.3% |
| Year-to-date cash flows from operating activitiesother | $68.0 million | – | 47.8% |
| Year-to-date free cash flownon-GAAP | $16.6 million | – | n.m. |
| Inventoriesother | $2,168.3 million | – | – |
| Trade accounts receivableother | $1,076.4 million | – | – |
| Long-term debt (including current portion)other | $4,531.1 million | – | – |
| Cash and cash equivalentsother | $268.3 million | – | – |
| Total debtnon-GAAP | $4,967.2 million | – | – |
| Net debtnon-GAAP | $4,688.9 million | – | – |
| Net debt leverage rationon-GAAP | 3.2 | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| WholesaleThe decline was mainly due to proactive inventory reduction across combined customer channels, partially offset by pricing initiatives. The Company cited market share gains in ringspun and fleece and double-digit sales growth for Comfort Colors®, American Apparel® and Champion®. | $769.4 million | – | (1.5)% |
| RetailSales primarily reflected the HanesBrands acquisition. Relative to Retail proforma net sales from continuing operations of $901 million, volumes were affected by broader market softness, lower seasonal inventory builds at certain large retail customers, non-recurrence of pre-buying in Q2 2025, and lower sell-in from inventory reduction, partly offset by pricing actions. | $813.1 million | – | n.m. |
| United StatesGeographic disaggregation of net sales from continuing operations. | $1,438.6 million | – | 74.3% |
| CanadaGeographic disaggregation of net sales from continuing operations. | $42.9 million | – | 33.8% |
| InternationalGeographic disaggregation of net sales from continuing operations. | $101.0 million | – | 65.8% |
Full year 2026 and Q3 2026 outlook
- RevenueFull year 2026: at the low end of the previously communicated range of $6.0 billion to $6.2 billion. Q3 2026 net sales from continuing operations: approximately $1.65 billion.
- Tax rateFull year 2026 adjusted effective income tax rate: approximately 18%. Q3 2026 adjusted effective income tax rate: approximately 18.5%.
- NoteFull year 2026 adjusted operating margin: approximately 21.8%.
- NoteFull year 2026 adjusted diluted EPS: $4.65 to $4.75, an increase of approximately 32.5% to 35% year over year.
- NoteFull year 2026 capex: approximately 3% of net sales.
- NoteFull year 2026 free cash flow: approximately $1.0 billion.
- NoteQ3 2026 adjusted operating margin: approximately 26%, compared to 23.2% the prior year.
- NoteApproximately $220 million in expected IEEPA tariff refunds in 2026, inclusive of approximately $25 million recorded in the second quarter, with most anticipated to be recorded during the third quarter.
- NoteApproximately $100 million in targeted synergies for 2026 and approximately $250 million of annual run-rate cost synergies over the next three years.
Capital returns
- The Board declared a cash dividend of $0.249 per share, payable on September 14, 2026, to shareholders of record on August 20, 2026.
- During the first half of 2026, the Company returned $92 million to shareholders through dividends.
- The Company expects no share repurchases until its net debt leverage ratio approximates the midpoint of its target leverage framework of 1.5-2.5x net debt to trailing twelve months proforma adjusted EBITDA.
What drove it
- The HanesBrands acquisition was the primary driver of the 72.3% increase in Q2 net sales from continuing operations.
- Adjusted gross margin improved 3.0 pp, reflecting the favorable contribution from HanesBrands, lower raw material costs, pricing initiatives, and an approximate $25 million Phase I IEEPA tariff refund benefit.
- Adjusted operating income included synergies from HanesBrands integration and an EDGF subsidy retroactive to 2025.
- The Company stated that the vast majority of 2026 synergy-capture initiatives have already been implemented.
- The Q2 IEEPA tariff refunds contributed $0.11 per share to adjusted diluted EPS from continuing operations.
- The Company completed its initial supply-chain footprint rationalization and is reallocating production volumes across its consolidated network.
Concerns
- Wholesale sales declined 1.5%, and the Company attributed the decline principally to proactive inventory reduction across customer channels.
- Compared with Q2 2025 proforma net sales from continuing operations of $1.72 billion, Q2 2026 sales declined due to lower volumes, proactive inventory reduction, and non-recurrence of pre-buying ahead of pricing actions.
- Retail volumes were affected by broader market softness, lower seasonal inventory builds at certain large retail customers, non-recurrence of pre-buying, and lower sell-in.
- GAAP operating income declined 11.8%, GAAP diluted EPS from continuing operations declined 46.2%, and total net loss was $(50.0) million, reflecting restructuring and acquisition-related costs, the inventory fair value step-up, higher financial expenses, and discontinued operations.
- Adjusted operating margin declined 0.4 pp as HanesBrands had lower operating margins due to historically higher SG&A relative to Gildan and the Company faced a net IEEPA tariff headwind inclusive of tariff refunds.
- Financial expenses increased to $69.3 million from $32.0 million, primarily due to higher borrowing levels related to the HanesBrands acquisition.
- A significant portion of expected tariff refunds is non-recurring and is expected to be reinvested in strategic growth initiatives in 2026.
- The net debt leverage ratio of 3.2 remained above the stated target range of 1.5 to 2.5 times proforma adjusted EBITDA.
What to watch
- Receipt and Q3 recognition of most of the approximately $220 million expected IEEPA tariff refunds.
- Whether Wholesale and Retail return to growth relative to proforma net sales from continuing operations, as guided for Q3 2026.
- Delivery of approximately $100 million in targeted synergies for 2026 and progress toward approximately $250 million of annual run-rate cost synergies over the next three years.
- The planned reinvestment of non-recurring tariff refunds into brand building, retail marketing, product innovation, and packaging enhancements.
- Closing of the HanesBrands Australia sale in the second half of 2026 and debt repayment from the proceeds.
- Progress toward the midpoint of the 1.5x to 2.5x net debt leverage target, which would permit renewal of the NCIB program.
Balance sheet and cash flow
- Cash flows from operating activities were $347.4 million in Q2 2026 and $68.0 million for the six months ended June 28, 2026. Cash flows include continuing and discontinued operations because discontinued-operation cash flows have not been segregated.
- Free cash flow was $326.4 million in Q2 2026 and $16.6 million for the six months ended June 28, 2026.
- At June 28, 2026, inventories were $2,168.3 million, trade accounts receivable were $1,076.4 million, total debt was $4,967.2 million, cash and cash equivalents were $268.3 million, and net debt was $4,688.9 million.
- Net debt leverage ratio was 3.2 at June 28, 2026, versus 3.0 at December 28, 2025.
- The Company agreed to divest HanesBrands Australia for an enterprise valuation of approximately $700 million Australian dollars (or approximately $490 million). Proceeds will be used to pay down a portion of outstanding debt. The transaction is expected to close in the second half of 2026.
Analysis
Gildan reported Q2 2026 net sales from continuing operations of $1,582.5 million, up 72.3% from $918.5 million, principally reflecting the HanesBrands acquisition. The reported total was in line with guidance of approximately $1.6 billion. Wholesale revenue declined 1.5% to $769.4 million as the Company reduced inventory across combined customer channels, while Retail revenue rose to $813.1 million from $137.1 million, primarily reflecting HanesBrands. Management also identified broader market softness, lower seasonal inventory builds at certain large retailers, and the non-recurrence of prior-year pre-buying as volume pressures.
Underlying gross profitability strengthened despite purchase-accounting effects. Gross margin was 29.1%, down from 31.5%, while adjusted gross margin was 34.5%, up 3.0 pp. The reconciliation removed $85.6 million of inventory fair value step-up cost tied to the Hanes acquisition. Favorable HanesBrands mix, lower raw-material costs, pricing, and approximately $25 million of Phase I tariff refunds supported adjusted gross margin, while tariffs continued to weigh on gross margins. Adjusted operating income increased 68.8% to $352.3 million and adjusted operating margin was 22.3%, 260 basis points above guidance of around 19.7%, although 40 basis points below the prior year.
GAAP results remained affected by integration and acquisition accounting. Operating income declined 11.8% to $175.9 million, net earnings from continuing operations declined 34.4% to $90.4 million, and GAAP diluted EPS from continuing operations was $0.49 versus $0.91. Restructuring and acquisition-related costs were $90.0 million and the inventory fair value step-up cost was $85.6 million. Higher borrowing tied to the acquisition raised financial expenses to $69.3 million. Adjusted diluted EPS from continuing operations rose 32.0% to $1.28, including a $0.11 per-share benefit from IEEPA tariff refunds.
Cash generation was strong in the quarter, with cash flows from operating activities of $347.4 million and free cash flow of $326.4 million. First-half free cash flow was $16.6 million, with first-half operating cash flow of $68.0 million. Net debt was $4,688.9 million and the net debt leverage ratio was 3.2. The planned sale of HanesBrands Australia for an enterprise valuation of approximately $700 million Australian dollars, or approximately $490 million, is expected to provide proceeds for debt repayment and accelerate the return toward the Company’s leverage framework. Dividends returned $92 million to shareholders in the first half, while share repurchases remain paused pending leverage reduction.
The updated outlook raises the profitability and cash-flow framework while placing revenue at the low end of the $6.0 billion to $6.2 billion range. Gildan now expects approximately 21.8% adjusted operating margin, adjusted diluted EPS of $4.65 to $4.75, and approximately $1.0 billion of free cash flow. The outlook includes approximately $220 million of expected IEEPA tariff refunds, most anticipated in Q3, and assumes significant non-recurring refunds will be reinvested in growth initiatives. Q3 net sales from continuing operations are expected to be approximately $1.65 billion and adjusted operating margin approximately 26%, supported by anticipated tariff refunds, synergies, and the EDGF Barbados subsidy.
Management, verbatim
We delivered strong results this quarter as our teams continued to execute with discipline against our strategic priorities. We continue to make excellent progress integrating HanesBrands and capturing synergies, while leveraging the combined strength of our brands, manufacturing network, and commercial capabilities, and investing strategically in innovation. While we remain mindful of the external environment and given the strength of our business fundamentals and the momentum we are building, our focus could not be clearer: control what we can control, execute our strategy, capture the significant opportunities ahead and drive profitable growth and long-term shareholder value.
Glenn J. Chamandy, President and CEO
Not in the filing
stated, not guessed- A prior-release outlook section was not provided, so no comparison of reported results with prior guidance is included.
- Q2 2026 share repurchase amount was not reported.
- Q2 2026 debt repayment amount was not reported.
- Q2 2026 dividend cash payment amount was not reported.
- Cash and cash equivalents prior-year balance was not reported.
- Gross-margin guidance was not reported.
- Operating-expense guidance was not reported.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.