Gildan Activewear Inc. Q4 FY2025 earnings call

• Thanked employees, customers, and shareholders. - 2025 had record revenues from continuing operations of about $3.6 billion, strong adjusted operating margins of 21.5%, and adjusted diluted EPS growth of 17%. - Hanes acquisition doubles scale, combines iconic brands with Gildan's platform. Integration is underway, including manufacturing footprint optimization, closing two Haines textile factories, optimizing distribution capacity, standardizing IT platforms, and harmonizing processes. - Raised synergy expectations to approximately $250 million in run rate cost synergies over three years. - Moving forward with phase two of Bangladesh complex, construction to begin in 18 months with initial production in late 2027. - Initiated formal process for sale of Haynes Brands Australia business. - Confident in unlocking synergies and achieving growth objectives for 2026 - 2028, including compounded annual sales growth of 3% to 5% and adjusted diluted EPS growth in the low 20% range.

For the fourth quarter, sales from continuing operations were $1.078 billion, up 31.3% year over year. Excluding Haynes' contribution, organic growth was 4.9%. Activewear sales grew 10.3% to $788 million. Innerwear sales (including hosiery, underwear, and intimates) were up about 171% versus last year, primarily reflecting Haynes Brands' contribution in December but offset by slightly lower volumes. International markets sales were $68 million, up 5.1% year over year. Full year 2025 net sales excluding Haynes' contribution were up 4% year over year. Gross profit for the quarter was $312 million or 28.9% of net sales. Adjusted gross profit was $347 million, or 32.2% of net sales. SG&A expenses were $125 million. Adjusted operating income was $223 million. Full year adjusted operating margin was 21.5%.

• 2026 continuing operations revenue expected $6 to $6.2 billion. - Full year adjusted operating margin approximately 20%. - CapEx approximately 3% of net sales. - Adjusted diluted EPS in range of $4.20 to $4.40. - Free cash flow above $850 million. - Q1 2026 net sales from continuing operations expected approximately $1.15 billion. - Adjusted operating margin expected approximately 12.9%. - Reorganized internal sales teams to align with go-to-market strategy, transitioning from disclosing activewear and innerwear sales to retail and wholesale basis.

Q: Talk about destocking cadence and if driven by capacity changes.

A: Proactively reducing inventory due to disconnect between ultimate capacity and current run rate, with capacity in place to support guide, and inventory reduction impacting Q1 sales.

Q: After closing Haines facilities, sales capacity and Bangladesh phase two.

A: Current capacity supports guide, Bangladesh phase two will add incremental capacity.

Q: Follow up on synergy guidance increase.

A: Ongoing opportunity to increase synergies, with clear line of sight on $250 million over three years.

Q: Australian process status.

A: Process underway, only proceeding if terms are attractive.

Q: Innerwear segment performance.

A: Organically flat in Q4 but improved from Q3, continuing to gain share.

Q: Sales growth drivers outside inventory reduction.

A: Growth in key categories, national account growth, new programs, market share gains.

Q: Integration of closing Haines facilities.

A: Capacity in place, internalizing volumes, managing inventories.

Q: Leverage and EPS CAGR.

A: Leverage at three times, EPS CAGR in low 20% range.

Q: Q1 inventory reduction and sell-through.

A: Comfortable with inventory management, no negative impact on POS.

Q: Hanes Australia EBITDA in Q4.

A: Sales contributed around $70 million, earnings contribution 4 cents to discontinued operations.

Q: Industry demand and outlook.

A: Market was okay in Q4, continuing to grow through higher value products and new programs.

Q: Intimate business divestment.

A: Not planning divestment currently, aiming to stabilize and improve margins.

Q: Operating margin guidance.

A: Adjusted operating margin around 20% driven by Gildan's base profile, Haynes profile, and synergies.

Q: Comfort Colors expansion.

A: Expanding into new categories, with contribution in forecast.