Gildan Cuts 2026 Outlook and Withdraws 2026-2028 Targets After Q3 Miss

Gildan Activewear (NYSE:GIL) reported third-quarter net sales from continuing operations of $1.47 billion, up 61.1% year over year on the HanesBrands acquisition — but roughly $180 million below its own guidance of about $1.65 billion. The shortfall forced the company to cut its full-year forecast and withdraw its 2026-2028 objectives. On a prior-year pro forma basis, sales actually declined, from $1.61 billion.

"The demand recovery we had anticipated did not materialize as expected," President and CEO Glenn Chamandy said. He noted that margins and cash flow held up, supported in part by tariff refunds. That support, however, is temporary money — refunds arrive once, while the demand weakness shows every sign of persisting.

What did Gildan cut?

The revised outlook removes meaningful value from prior expectations:

• Revenue: $5.4 billion to $5.5 billion, down from the low end of a $6 billion to $6.2 billion range.
• Adjusted diluted EPS: $3.70 to $3.80, cut from $4.65 to $4.75.
• Adjusted operating margin: approximately 20%, versus roughly 21.8% previously.
• Free cash flow: $700 million to $750 million, against a prior expectation of about $1 billion.

CFO Luca Barile said the revision reflects the third-quarter shortfall and softer demand persisting into the fourth quarter. Approximately $300 million of the revenue reduction stems from weaker consumer demand and unfavorable mix, particularly lower fleece shipments. Another $145 million reflects lower-than-anticipated customer replenishment, $75 million relates to product availability and service constraints, and $30 million to lower net selling prices. The arithmetic is disclosed; the comfort is not.

Gildan withdrew its 2026-2028 objectives entirely and will present an updated long-term outlook at an investor day in spring 2027. Barile framed the withdrawal as a reset of the revenue base after weaker performance. The company offered no 2027 guidance on the call.

Why did demand fall short?

Chief Commercial Officer Chuck Ward pointed to higher interest rates and persistent inflation in household essentials, which have made lower- and middle-income consumers more selective about apparel. Retailers have responded by pushing lower-priced products and smaller pack sizes.

Of the quarter's miss versus guidance, roughly $100 million reflected weaker demand and unfavorable mix, mainly in wholesale, while about $60 million reflected availability and service constraints, primarily in retail. Unusually warm weather in the U.S. and Europe compounded the problem: fleece point-of-sale declined by a mid- to high-teens percentage in September, and fleece carries a higher average selling price than basic T-shirts, so the mix deteriorated twice over.

Wholesale sales fell 10.8% to $735 million from a pro forma $823 million. Retail sales declined 7% to $732 million from $787 million. Ward attributed availability constraints to changing order patterns, production tightness during facility integration, and longer lead and transit times for certain Asia-sourced products; Gildan is raising inventory targets for longer-lead-time items and says the constraints are largely behind it. Promises of resolution deserve scrutiny until the fourth quarter confirms them.

Where did the margin strength come from?

Adjusted diluted EPS from continuing operations rose 54% to $1.54, and adjusted operating margin reached 27%, above guidance of about 26%. Barile credited, in part, planned reinvestment of tariff refunds shifting from the third quarter into the fourth — a timing benefit, not operational strength. Greater SG&A deleverage on lower sales partly offset it.

Adjusted gross margin rose to 43.3% from 33.7%, helped by approximately $177 million in IEEPA tariff refunds and lower manufacturing and raw material costs. The full-year outlook includes about $220 million in expected tariff refunds, with a significant portion assumed to be reinvested in growth initiatives.

What happens with Hanes and capital returns?

Chamandy said the Hanes integration remains on track for approximately $100 million in targeted synergies in 2026 and an annual run rate of about $250 million by the end of 2028. New and enhanced products will roll out progressively through 2027, beginning with men's underwear and socks.

Gildan completed the sale of the HanesBrands Australia business on Oct. 26 for approximately $490 million in cash and used the net proceeds to repay debt. The board approved a new normal course issuer bid to repurchase up to 5% of outstanding common shares. Barile said the company expects to return to target leverage of 1.5 to 2.5 times net debt to trailing 12-month pro forma adjusted EBITDA by the end of 2027, while maintaining an investment-grade credit rating.

A company cutting guidance by nearly a billion dollars in revenue while buybacks and synergy targets stay intact is asking investors to trust the plan over the print.