Gildan Activewear (GIL) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Gildan reported record revenues from continuing operations of approximately $3.6 billion for 2025, with adjusted operating margins of 21.5% and adjusted diluted EPS growth of 17%, reaching $3.51 [7][21] - For Q4 2025, sales from continuing operations were $1.078 billion, a 31.3% increase year-over-year, with organic growth of 4.9% excluding Hanes' contribution [15][16] - Adjusted diluted EPS for Q4 was $0.96, up 16% from $0.83 in the prior year, while GAAP diluted EPS from continuing operations was $0.32 compared to $0.86 the previous year [21] Business Line Data and Key Metrics Changes - Activewear sales grew 10.3% to $788 million, driven by the Hanes acquisition and favorable pricing [16] - Innerwear sales, which now include hosiery, underwear, and intimates, surged approximately 171% year-over-year, primarily due to HanesBrands' contribution [16] - International market sales reached $68 million, up 5.1% year-over-year, reflecting the acquisition's impact despite demand softness in certain regions [17] Market Data and Key Metrics Changes - The company anticipates approximately $250 million in run-rate cost synergies over the next three years, an increase from the original target of $200 million [10] - The integration of HanesBrands is progressing ahead of plan, with manufacturing footprint optimization already underway [8][10] - Gildan expects revenue for 2026 to be between $6 billion and $6.2 billion, with adjusted diluted EPS projected in the range of $4.20 to $4.40 [25][29] Company Strategy and Development Direction - The acquisition of HanesBrands is seen as a pivotal moment, doubling Gildan's scale and enhancing its competitive position across product lines and geographies [8][12] - The company is focusing on capturing synergies and optimizing its operational footprint, with a clear emphasis on margin-accretive growth [43] - Gildan plans to expand its Bangladesh facility to reinforce its cost leadership and support long-term demand [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving targeted synergies and maintaining a strong competitive position despite a dynamic macroeconomic environment [12][28] - The company is optimistic about growth in key product categories, driven by innovation and market share gains [25][29] - Management highlighted the importance of investing in product innovation to enhance the quality of offerings and drive sales growth [56][62] Other Important Information - The HanesBrands Australian business has been classified as held for sale and reported as discontinued operations [5] - Gildan's net debt at the end of 2025 was $4.417 billion, with a leverage ratio of 3 times net debt to trailing 12 months pro forma adjusted EBITDA [23] - The company plans to use proceeds from the potential divestment of the HanesBrands Australia business to reduce outstanding debt [24] Q&A Session Summary Question: Can you elaborate on the destocking plans for the year? - Management indicated that the destocking is driven by capacity changes due to the closure of two Hanes facilities, and they are working closely with customers to manage inventory levels [36][38] Question: What sales capacity can be achieved after closing the Hanes facilities? - Management confirmed that current manufacturing capacity is sufficient to support the projected sales growth, with additional capacity expected from the second phase of the Bangladesh facility [45][46] Question: How will the integration of HanesBrands be managed? - Management stated that all integration will be internalized within Gildan's facilities, leveraging existing capacity and optimizing operations [80]