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 a year-over-year adjusted diluted EPS growth of 17%, reaching $3.51 [7][21] - For Q4 2025, sales from continuing operations were $1.078 billion, up 31.3% year-over-year, with organic growth of 4.9% when excluding Hanes' contribution [15][16] - Adjusted diluted EPS for Q4 was $0.96, a 16% increase 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] - The company is also expanding its Bangladesh operations with a second large-scale textile facility expected to come online in late 2027 [11] Company Strategy and Development Direction - Gildan's strategy focuses on leveraging the Hanes acquisition to double its scale and enhance innovation and growth potential [8] - The company aims for compounded annual sales growth of 3%-5% from pro forma net sales of $6.089 billion for the combined businesses over the next three years [12][29] - A new organizational structure has been implemented to support combined operations, with a focus on commercial strategy for retail and wholesale channels [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to unlock targeted synergies and achieve growth objectives despite a dynamic macroeconomic environment [12][28] - The outlook for 2026 includes expected revenues of $6 billion to $6.2 billion, with adjusted diluted EPS projected between $4.20 and $4.40 [25][28] - Management highlighted the importance of innovation and investment in product offerings to drive future growth, particularly in the Hanes brand [56][62] Other Important Information - The HanesBrands Australian business has been classified as held for sale and reported as discontinued operations [5] - The company plans to use proceeds from the potential divestment of the Australian business to reduce outstanding debt and return to a leverage framework of 1.5x-2.5x net debt to pro forma adjusted EBITDA [24] Q&A Session Summary Question: Can you elaborate on the destocking plans for the year? - Management indicated that the destocking is primarily 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 expanding operations in Bangladesh and Central America [80]