Gildan sales jump 72% on HanesBrands, sells Australia unit and lifts margin outlook

Gildan's Q2: Sales Up 72.3%, Australia Business Sold

Gildan Activewear has reported a sharply stronger second quarter, with sales from continuing operations rising 72.3% year on year to $1.58 billion, a jump the company attributes largely to its acquisition of HanesBrands. Adjusted operating margin came in at 22.3%, comfortably ahead of the company's previous guidance, while adjusted diluted earnings per share reached $1.28. The quarter also produced operating cash flow of $347 million and free cash flow of $326 million.

Chief executive Glenn Chamandy said integration of HanesBrands is progressing on schedule, with most of the planned synergy initiatives for 2026 already implemented. The company expects around $100 million in integration synergies this year and continues to target roughly $250 million in annual run-rate cost savings over the next three years. Manufacturing footprint rationalisation is largely complete, with production shifting into Gildan's vertically integrated, low-cost network, while work continues on distribution systems and IT platforms.

Gildan also flagged a major earnings boost from changes to US tariff policy. Following recent revisions to the treatment of apparel imported under the CAFTA-DR trade agreement, the company expects around $220 million in tariff refunds during 2026, most of them in the third quarter. About half relate to products manufactured in the CAFTA-DR region and represent a continuing structural benefit, since qualifying apparel is no longer subject to the tariffs; the rest are largely one-off recoveries that will be reinvested in brand development, retail marketing, product innovation and packaging.

Reflecting these developments, Gildan raised its full-year outlook, guiding adjusted operating margin to about 21.8% versus roughly 20% previously, while keeping revenue at the lower end of its $6.0–6.2 billion range. Alongside the results, the company agreed to sell HanesBrands Australia to BBFIT Investments for an enterprise value of around A$700 million (approximately US$490 million), with proceeds earmarked primarily for debt reduction. Gildan acknowledged that the retail environment remains cautious, with some retailers limiting inventory levels, but pointed to product innovation, market share gains and its manufacturing network as foundations for further earnings growth into 2027. It also highlighted continued sustainability progress, including maintaining 100% sustainably sourced cotton and reducing water intensity for a second consecutive year.

Why the HanesBrands Integration Is Delivering More Than Revenue

Integration Is Delivering Earlier Than Guidance Assumed

The second-quarter adjusted operating margin of 22.3% is the clearest evidence yet that the HanesBrands deal is performing ahead of management's own modelling — the full-year margin guidance has now been raised by nearly two percentage points to about 21.8%. That suggests the cost savings and manufacturing rationalisation tied to the ~$250 million three-year synergy target are coming through faster than originally planned. The margin figures are company-reported facts; the conclusion that integration is running ahead of schedule is an interpretation supported by the guidance raise and by management's statement that most 2026 synergy initiatives are already implemented.

The $220 Million Tariff Refund Is a Two-Part Story

The CAFTA-DR revisions matter differently for the income statement than for future years. Roughly half of the ~$220 million in expected 2026 refunds is structural: apparel made in the CAFTA-DR region is no longer subject to tariffs, so that benefit should persist into 2027 and beyond. The other half is largely one-off recovery of tariffs already paid, and management has said it will recycle those funds into brands, marketing, innovation and packaging. The split is management's own description, but the implication is clear for anyone modelling 2027 earnings: only the structural portion should be carried forward, and the cash should be expected to land mostly in the third quarter.

Why HanesBrands Australia Is Being Sold

The disposal to BBFIT Investments was signalled from the outset — the business was classified as held for sale immediately after the HanesBrands acquisition — so this is the planned endgame of the deal rather than a reaction to trading conditions. At an enterprise value of about A$700 million (US$490 million), the sale is principally a balance-sheet tool: proceeds will primarily reduce debt, and Gildan has explicitly linked any future share repurchases to first reaching its target leverage ratio. That reading is an interpretation, but it is grounded in management's own statement on how the proceeds will be used. The deal also sharpens Gildan's focus on its core North American basics business.

The Asymmetry in the Full-Year Guidance

Gildan kept revenue at the lower end of its $6.0–6.2 billion range while raising margin guidance — a split that tells you where the earnings growth is coming from. The cost and tariff tailwinds are doing the heavy lifting; end-market demand remains muted, with the company itself flagging that some retailers are limiting inventory amid economic uncertainty. Gildan claims market share gains in key apparel categories; if accurate, that means the enlarged, lower-cost company is applying real pressure on competitors in basic apparel even in a soft retail environment.

What Investors Should Watch as Gildan Banks $220M in Tariff Refunds

For investors and industry watchers, the key swings in this update are the tariff refund timing, the Australia sale and the split between structural and one-off margin benefits.

• Separate the ~$220 million tariff refund into its two halves: roughly half is a structural margin benefit that should carry into 2027, while the rest is one-off and earmarked for reinvestment — model only the structural portion as recurring.
• Expect most of the ~$220 million in refund cash flow to arrive in Q3 2026, when Gildan has said the bulk of it will be received.
• Track the closing of the HanesBrands Australia sale to BBFIT Investments at ~A$700 million (~US$490 million); proceeds are earmarked primarily for debt reduction, and the stated precondition for share repurchases is reaching Gildan's target leverage ratio.
• Reconcile the guidance split: full-year adjusted operating margin is now guided to ~21.8%, up from ~20%, while revenue stays at the lower end of the $6.0–6.2 billion range — implying earnings growth is driven by costs and tariffs rather than volume.
• Retail buyers and competitors should weigh Gildan's claim of market share gains in key apparel categories against its own caution that some retailers are limiting inventory amid economic uncertainty.