Gildan Activewear, Inc.

We'll be right back. But it's hard to unlock the door when you're making out.

You know what I'm saying?

You be saying that we got to quit doing this. So why are you leaning in for one more kiss? And pretty soon you're sliding off. What you got on is slipping into my T-shirt. Right there, your hair messed up like a guns and rolls. It's video, oh, oh, so hot. We'll be right back. See you next time. your hair messed up like a guns and roses video oh so high still got it up in my head you were moving around in the tv lane i ain't ever seen anything like your dress my floor the way you wore my my t-shirt look at my t-shirt baby We'll be right back. We'll be right back. Get off of work and we meet down at our spot. We had a patio with a view of a parking lot. It was two for one and four for two. Had Christmas lights in the middle of June. All hung up like I was on you. I'd say, hey, hey, baby, do you want to come over? You say, no way, then you're moving closer. you were in my t-shirt right there your hair messed up like a guns and roses video oh oh so high still got it up in my head you were moving around in the td line i ain't ever seen anything like your dress my floor the way you wore my my t-shirt yeah you look good in my t-shirt girl oh yeah We'll be walking up the stairs with the neighbors saying keep it down. But it's hard to unlock the door when you're making out.

You know what I'm saying?

You'll be saying that we got to quit doing this. So why are you leaning in for one more kiss? And pretty soon you're sliding off. What you got on is slipping into my T-shirt. Right there, your hair messed up like a guns and roses. Video, oh, oh, so high. Still got it up in my head. You're moving. I ain't ever seen anything like your dress, my floor, the way you wore my T-shirt. My T-shirt. Oh, no, baby, no, I can't lie. Show them in my T-shirt. Oh, no, baby, no, I can't lie. We'll be right back.

Ladies and gentlemen, thank you for standing by and welcome to Gildan ActiveWare's 2025 Q4 earnings conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jesse Haim, Senior Vice President, Head of Investor Relations and Global Communications. Please go ahead.

Thank you, Sarah. Good morning, everyone, and thank you for joining us. Earlier today, we issued a press release announcing our results for the fourth quarter and full year 2025 and initiated guidance for 2026. The company's management discussion and analysis and consolidated financial statements are expected to be filed with the Canadian Securities and Regulatory Authorities and the U.S. Securities Commission today and will also be available on our corporate website. Now joining me on the call today are Glenn Chimandi, President and CEO of Gildan, Luca Barile, Executive Vice President, Chief Financial Officer, and Chuck Ward, Executive Vice President, Chief Commercial Officer. This morning, we'll take you through the results for the quarter and additional updates, and then a question and answer session will follow. Before we begin, please take note that certain statements included in this conference call may constitute forward-looking statements which involve unknown and known risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. We refer you to the company's filings with the U.S. Securities and Exchange Commission and Canadian Securities Regulatory Authorities. During this call, we will also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable IFRS measures are provided in today's earnings release, as well as our MD&A. Before I turn it over to Glenn, as you know, on December 1, 2025, the company completed the acquisition of Haynes Brands. As such, the fourth quarter and full year 2025 results include Haynes Brand's contribution from December 1st, 2025 to December 28th, 2025. Moreover, as announced this morning, the Haynes Brand's Australian business, which we refer to as HAA, has been classified as held for sale and reported as discontinued operations as of December 1st, 2025, the date of closing of the Haynes Brand's acquisition. Unless otherwise indicated, The figures we will be discussing today are from continuing operations and therefore exclude the results of the HAA business. And now I'll turn it over to Glenn.

Thank you, Jessie, and good morning, everybody, and thanks for joining us today. I'd like to start the call by taking a moment and thanking our employees, both Gildan and Haynes, for their dedication and commitment and outstanding execution through the year. I'd also like to acknowledge the loyalty of our customers, and the ongoing support of our shareholders. As we highlighted in this morning's press release, 2025 was another important year for Gildan. And when we concluded on a high note, with record revenues from continuing operations of about $3.6 billion, strong adjusted operating margins of 21.5%, and a year-over-year adjusted diluted EPS growth of 17%, or adjusted diluted EPS from continuing operations of $3.51, which includes the contribution of Hanes since December 1st, the date of the closing of the acquisition. As we look ahead to 2026, we are very excited about the Hanes acquisition, which doubles our scale combines iconic brands with our world-class, low-cost, vertically integrated platform, and unlocks a powerful engine for innovation and growth. Our global team's focus is now fully capturing the value of our expanded platform. In fact, the integration is well underway and progressing ahead of plan. Let me give you a few highlights about the progress we have made so far. Since the transaction closed, our teams have moved quickly and decisively, with a strong focus on unlocking the significant value that we targeted, leveraging the scale and capabilities of the combined organizations. We've already begun our manufacturing footprint optimization, we made the decision to close the two Haines textile factories in early 2026. Production volumes from these facilities will be relocated across our consolidated network in early 2026, leveraging Gildan's low-cost structure and further accelerating our synergies. As a result, our capacity is tight in the short term. We are therefore proactively undertaking a temporary reduction of inventory levels across customer channels. We will continue to optimize and increase our production levels through 2026 to support the growth going forward into 2027. Furthermore, we are optimizing our distribution capacity and work is underway to standardize IT platforms and harmonize key manufacturing supply chain processes to drive further efficiencies and unlock the full benefits of operating as one integrated business. We have put in place a new organizational structure to support the combined operations with leadership presence in Winston-Salem, North Carolina. Chuck Ward has been appointed to a newly created role of EVP, the Chief Commercial Officer. In this role, he will lead the company's commercial strategy for retail and wholesale channels. Given the pace and the quality of the progress so far, we are raising our synergy expectations. We now anticipate approximately $250 million in run rate cost synergies over the next three years, an increase from the original $200 million target. We now expect approximately $100 million per year in 2026 and 2027, and at least $50 million in 2028. And we will continue to pursue additional synergies beyond our revised three-year synergies target. Furthermore, the associated one-time restructuring costs are expected to stay within a one-to-one ratio to the costs of synergies generated. Now, just touching on Bangladesh, today we are pleased to announce that we are moving forward with phase two of our Bangladesh complex. Over the next 18 months, We will begin construction of our second large-scale textile facility, with initial production expected to come online in the later part of 2027, supporting growth plans for 2028. As previously communicated, the supporting infrastructure is already in place, and the required investment remains within our CAPEX guidance. of Bangladesh Bookprints is central to reinforcing our cost leadership in Ringspan and in Inuar. And the addition of a second facility strengthens our ability to support key sales drivers, enhances our flexibility, and position us well for the long-term demand. Today, we are also announcing that following a comprehensive evaluation and strategic alternatives, We have determined that pursuing a sale of the Haynes Brands Australia business, or HAA, is in the best interest of Gildan stakeholders. As a result, Gildan has initiated a formal process for HAA. Finally, with a strong foundation and a further strength in competitive position across product lines, channels, and geographies, we remain confident in our ability to unlock targeted run-rate synergies and achieve these synergies objectives for the 2026 to 2028 period outlined in our August 2025, including compounded annual sales growth of 3% to 5% versus pro forma net sales from continuing operations of $6.089 billion for the Gildan and Haynes combined businesses for fiscal 2025 and adjusted diluted EPS growth in the low 20% range compared to the fiscal 2025 adjusted diluted EPS from continuing operations. In conclusion, we believe this is an exciting and pivoted moment for Gildan. And we're enthusiastic about the next phase of our growth journey. We have a solid foundation that allows us to execute from a position of strength, with scale both in wholesale and retail, and setting us distinctly apart and underpinning our strong competitive positioning, and putting us in a greater position to continue driving sustainable growth and long-term shareholder value. I look forward to answering your questions after our formal remarks, and now I will turn it over for Luca for a financial review.

Thank you, Glenn. Good morning, everyone, and thank you for joining us today to discuss our fourth quarter and full year results. Let me start with the specifics of the quarter, then turn to our 2026 outlook and guidance. First, the quarterly results. As a reminder, HAA operations have been classified as held for sale and are therefore reported as discontinued operations as of the fourth quarter of 2025. We reported fourth quarter sales from continuing operations of $1.078 billion, up 31.3% year over year. Excluding Haynes' contribution of $217 million for the period from December 1st to December 28th, 2025, organic growth was up 4.9%. Activewear sales grew 10.3% to $788 million, once again reflecting the Hanes acquisition and complemented by favorable mix and higher net selling prices. We saw solid sales to North American distributors and continued growth with national account customers, driven by our strong overall competitive positioning, new programs contribution, and market share gains in key growth categories. We continue to see robust demand for Comfort Colors and our innovative pipeline continues to drive excitement with our new soft cotton technology and new brands such as Champion and Allpro. For the innerwear category, which now includes hosiery, underwear, and intimates, sales were up about 171% versus last year, primarily reflecting Haynes Brands' contribution in December, offset by slightly lower volumes owing to continued broader market weakness. Turning to international markets, sales were 68 million, up 5.1% year over year, primarily reflecting the acquisition, which was partially offset by demand softness across markets, and more specifically in the UK. On a full year 2025 basis, excluding Haynes Brands' contribution of $217 million for the period from December 1st to December 28th, 2025, net sales were up 4% year over year and in line with guidance. Furthermore, excluding the impact of the exit of the Under Armour business in 2024, net sales would have been up approximately 4.7% year over year. Shifting to margins for the quarter, we generated gross profit of $312 million or 28.9% of net sales versus $253 million, or 30.8% of net sales in the prior year. Adjusting for an inventory fair value step-up charge of $35.4 million recorded as part of the Hanes Brands acquisition, adjusted gross profit was $347 million, or 32.2% of net sales compared to 30.8% in the prior year. The 140 basis point increase was primarily driven by favorable pricing implemented to offset the impact from tariffs, lower manufacturing and raw material costs, and, to a lesser extent, the favorable Hanes Brands contribution. SG&A expenses were $125 million compared to $78 million in the prior year, primarily reflecting the combination with Hanes Brands. Adjusting for charges related to the proxy contest and leadership changes and related matters, adjusted SG&A expenses were $124 million, or 11.5% of net sales, compared to $78 million, or 9.5% of net sales, for the same period last year. The increase in adjusted SG&A in the quarter reflects primarily the combination with Hanesbrand, as well as purchase accounting impacts. including amortization of intangible assets recorded in connection with the acquisition. As we bring all these elements together and adjusting for restructuring and acquisition-related costs, as well as the inventory fair value step-up charge recorded as part of the acquisition and costs related to the proxy contest, leadership changes, and related matters, adjusted operating income was $223 million, up 48 million or 20.7% of net sales compared to 21.3% in the prior year, mainly a reflection of Hanes Brands' lower adjusted operating margin. A brief comment on the full year adjusted operating margin. It reached 21.5% of net sales, up 20 basis points compared to the prior year. Excluding Hanes Brands, Adjusted operating margin was roughly in line with the guidance provided, which called for an increase of approximately 70 basis points year-over-year. Net financial expenses for the quarter were $43 million, up $16 million year-over-year, primarily due to higher borrowing levels related to the Haynes Brands acquisition. Taking into account all these factors, and a higher outstanding share base as a result of the acquisition in the fourth quarter, We generated GAAP diluted EPS from continuing operations of 32 cents versus 86 cents the prior year, while adjusted diluted EPS were 96 cents, up 16% from 83 cents in the prior year. For the full fiscal year 2025, GAAP diluted EPS from continuing operations were $2.57 compared to $2.46 in the prior year. while adjusted diluted EPS increased by 17% to $3.51 from $3 in the prior year. Excluding Haynes Brands' contribution, adjusted diluted EPS came in toward the low end of the guidance range provided. Now turning to cash flow and balance sheet items for the year. Operating cash flow, which includes discontinued operations, totaled $606 million, compared to $501 million in the prior year, primarily reflecting lower working capital investment. After accounting for capital expenditures totaling $114 million, the company generated approximately $493 million of free cash flow, which includes discontinued operations. During 2025, we returned $319 million to shareholders, including dividends paid, and by repurchasing about 3.8 million shares under our NCIB program. We ended the year with net debt of $4.417 billion and a leverage ratio of three times net debt to trailing 12 months pro forma adjusted EBITDA. As Glenn detailed, Gildan has determined that pursuing a sale of HAA is in the best interest of Gildan and its stakeholders. We will only proceed with a potential transaction if value and terms are attractive and determined to be in the best interest of the company. And the proceeds from the potential divestment will be used to pay down a portion of the company's outstanding debt and further accelerate Gildan's objective to return to a leverage framework of 1.5 to 2.5 times net debt to pro forma adjusted EBITDA ratio, while largely offsetting the expected earnings dilution from the HAA sale. Now, turning to the outlook. Looking ahead to 2026, we expect to build on the progress made across our key strategic initiatives under our Guilden Sustainable Growth Strategy, driving continued market share gains in key product categories in a dynamic macroeconomic environment. We have a strong foundation, and now, with the Hanes acquisition, an even further strengthened competitive position across product lines, channels, and geographies. As such, For 2026, with respect to our continuing operations, meaning excluding HAA, we expect the following. Revenue of $6 to $6.2 billion. Full year adjusted operating margin to be approximately 20%. CapEx to come in at approximately 3% of net sales. Adjusted diluted EPS in the range of $4.20 to $4.40. free cash flow to be above $850 million. There are various assumptions underpinning this outlook. They are, firstly, our full-year guidance reflects continuing operations and excludes the contribution from HAA operations, which are reported as discontinued operations. Net sales and diluted earnings per share for HAA for 2026 are expected to be approximately 675 million and 21 cents respectively. Also, our outlook takes into account the expiry of a transition service agreement at Haines Brands related to its divestiture of Champion, representing slightly over 100 million in sales in 2025. Our outlook continues to reflect growth in key product categories driven by recently introduced innovation, the favorable impact from new program launches and market share gains, and the various incentives from jurisdictions where we operate. Furthermore, and as previously detailed, our outlook reflects the temporary reduction of inventory across our combined customer channels, which we are proactively undertaking. Our outlook reflects continued disciplined adjustments to our operating footprint and commercial mix, with a focus on margin accretive growth. our outlook reflects our currently expected impact of tariffs, including the expected positive impact of the February 20, 2026 U.S. Supreme Court decision invalidating certain tariffs and of subsequent related announcements by the U.S. administration, together with mitigation initiatives, including pricing actions and our ability to leverage our flexible business model as a low-cost, vertically integrated manufacturer. Higher tariff costs incurred prior to these developments remain embedded in our inventory costs. Given the dynamic and rapidly evolving tariff environment, the level and structure of tariffs and their effects remain uncertain and difficult to predict. In addition, our outlook does not reflect potential rights, if any, to refunds which remain subject to, among other, applicable procedural requirements and further guidance from U.S. Customs and Border Protection. As previously communicated, there will be no share repurchases until our net debt leverage ratio approximates the midpoint of our target leverage framework of 1.5 to 2.5 times net debt to trailing 12 months pro forma adjusted EBITDA. The adjusted effective income tax rate for 2026 is expected to be around 19%. Our outlook assumes continued successful execution of the Haynes Brands integration plan including the realization of the anticipated benefits from actions already undertaken, as well as future integration actions. And finally, we have assumed no meaningful deterioration from current market conditions, including the pricing and inflationary environment, and the absence of a significant shift in labor conditions or the competitive environment. As Glenn laid out earlier, we are reiterating our three-year objectives for 2026 to 2028 period, including Compound annual net sales growth of 3% to 5% versus pro forma net sales from continuing operations of $6.089 billion for the Gildan and Haynes brands combined businesses for fiscal 2025. And adjusted diluted EPS growth in the low 20% range compared to our fiscal 2025 adjusted diluted EPS from continuing operations. And turning to the guidance for our first quarter of 2026, we expect net sales from continuing operations to be approximately $1.15 billion. As detailed earlier, given our ongoing consolidation of manufacturing facilities, and in order to accelerate and increase synergy capture and support our new operating model, we are proactively undertaking a temporary reduction of inventory levels across customer channels, which will have an impact on the net sales in the quarter. Our adjusted operating margin is expected to be approximately 12.9%, reflecting the higher SG&A levels, which will be impacted by higher amortization of intangible assets and depreciation of property, plant, and equipment, resulting from the fair value purchase accounting impacts of the Hanes Brands acquisition, in addition to a timing differential between some integration-related costs incurred and the flow-through of their benefit in subsequent quarters. Finally, the company's adjusted effective income tax rate in Q1 is expected to be slightly higher than the expected full-year 2026 adjusted effective income tax rate. Lastly, the company has implemented a reorganization of its internal sales teams to more closely align with its go-to-market strategy. This organizational realignment is intended to enhance strategic focus and operational execution by reflecting the distinct customer engagement models and growth drivers of each channel. As a result, effective the first quarter of 2026, we will transition from disclosing net sales for activewear and innerwear, which was previously hosiery and underwear, to providing the same information on a retail and wholesale basis. We believe these changes will improve transparency and better align the company's reporting with its go-to-market structure. We expect to provide supplemental 2025 pro forma disaggregation of revenue disclosure when we report our first quarter results for 2026. In summary, we are pleased with the quarter and we're excited to continue to provide you with the updates on our integration progress and our major 2026 initiatives in the spring when we release our first quarter results. Thank you. And now I'll turn it over to Jessie.

Thank you, Luca. This concludes our prepared remarks, and now we'll be taking your questions. As usual, before moving to the Q&A session, I'd like to remind you to limit your questions to two, and then we'll circle back for a second round if time permits. Sarah, you may begin the Q&A session, please.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, simply press star 1 again. Please ensure your phone is not on mute when called upon. Thank you. Your first question comes from Paul with Citigroup. Your line is open.

Hey, everyone. This is Brandon for Paul. I was hoping you could talk a little bit more about the destocking that you're planning for the year. You know, what is the cadence of that? Is it primarily hit, you know, one queue or, and should we see that kind of rebound as the year progresses? And I just want to confirm, it sounds like this is driven by your capacity changes by shutting down those two facilities. It's not something that you're seeing in customer orders. So are some orders just going unfulfilled or are you kind of working hand in hand with your, your, customers on that.

I'll start with the first part of the question. So what we're doing is look at, we communicated last year that we are increasing our internal capacity in Bangladesh and in Central America, obviously in anticipation to support the AIDS integration. So there's a disconnect between what our ultimate capacity is and what our run rate is. So currently, We have all the capacity in place to support the closure of the two Haines facilities. And these are, they only had two facilities, so it's basically closing both of their textile facilities. And what we're currently doing is we're bringing that product into our Gildan network, and obviously we're ramping the volumes up to support the capacity that's in place. So the disconnect for us right now is that we're short on available inventory. We have a little bit available, we have tightness of inventory as we move into 2026 that needs to be managed. So we're proactively producing inventory in the Trimels to reflect that, which would ultimately should allow us to bring that inventory back up as we move into the later part of this year, into 2027. I'll maybe let Luca talk about the timing.

Yeah, thanks for your question. So I think, you know, in order to articulate the timing and really understand how this is impacting our guide, it's really important to understand the composition of the top line. Let me start by saying that as we understand the top line, the starting point is really our pro forma results for 2025. In other words, the pro forma results simulate as if the Hanes acquisition would have occurred the first day of 2025. So our pro forma net sales are $6.089 billion. That excludes both the sales contribution of Hanes Australia, which is now classified as an asset held for sale and as a discontinued operation, and the expiry of the transition service agreement at Hanes, which related to its defestiture of Champion, which was slightly over $100 million. So that's the starting point. From that point, effectively, both wholesale and retail are fundamentally growing. And they're growing off of that pro forma base in line with the expectations of our growth over the next three years of 3% to 5%. The wholesale growth vectors, they include growth in key categories. Fleece, ring spun, comfort colors, brands like Champion, All Pro. The continuation of strong growth from national accounts, which includes some of our private label programs in fleece and tea. And items that contributed to our 75% of our organic growth in 25, that continues as we move into 26. continue to take share despite a fluid macroeconomic environment from our product innovation, and some positive mix is also contributing to that accretion. On the retail side, growth is expected across all categories. It's primarily supported by share gains and expansion across key retail customers and channels, and it's complemented by the impact of some price that we took to work through the impact of tariff costs and inventory. That underlying growth I just described is offset really by two factors. The first is our proactive decision to temporarily reduce inventories across the customer channels, as Glenn was alluding to. That inventory reduction driven by the accelerated integration of production volumes from the closure of the two Haines facilities into our network, that's a trade-off of short-term capacity tightness for accelerated synergy capture. So as a reminder, we're expected to yield run rate synergies now of 250 million over the next three years versus the 200 million that was previously communicated. And that cadence is now realized with 100 million in 2026, 100 million in 2027, and 50 million in 2028. And the second factor is remember that we're continuing to optimize our operating footprint and commercial mix with a clear focus on margin accretive growth. So effectively, the $6 billion to $6.2 billion top line guide from continuing operations. It excludes $675 million of expected contribution from HAA. It's rooted in the foundational growth, and it's offset by the actions that we are taking for the long term. So in terms of the cadence, when you take a look at our Q1 net sales guidance, it's approximately $1.15 billion. So again, to appreciate what's happening in Q1, we needed the understanding of the full year, and our Q1 guidance reflects our proactive decision temporarily reduce the inventories across channels. And Q1 also has, in terms of the addition to that, where we're comping higher sales in the first quarter of 2025 related to customers across channels where there was some pre-buying in anticipation of potential tariffs coming through. So it's impacting our Q1 guidance, and some of that may trickle into the beginning of the second quarter.

Yeah, that's very helpful. And then just to follow up, after you close those two pains facilities, what sales can you achieve with your current manufacturing capacity? And then when Bangladesh phase two comes online, should we think about that as an incremental 500 million in sales capacity or has anything changed there? Thank you.

So we have enough sales capacity today to support the guide of the 3% to 5% over the three-year period. And once we bring Bangladesh 2 online, obviously we'll be able to support 28% and 29% at least with the level of capacity. It's a little bit different mix associated because depending on what product and what mix goes into that textile facility, But I would say that, you know, we definitely have visibility on enough capacity to support 28 and 29 with the development of the second phase of Bangladesh. And we can support 26 and 27 going into 28 with what we have available to us right now. And that's the part that's important to understand is that we did already put it in our bed into our guidance of CapEx guidance in 2025. You know, we did a expansion throughout our network. We're expanding again in DR in 26, which is embedded into our 3% CapEx number that we outline, as well as the development of our Bangladeshi facility. That's all embedded in our 3% to 4% CapEx number. But the important thing to understand is that everything is in place. It's now the disconnect. We couldn't start ramping up production in 2025 in anticipation for the Hanes closure. We had to wait for the closure to happen. Otherwise, we would have been consuming more working capital, et cetera, et cetera. So the way you have to look at it is that all this capacity is in place. We're running at a certain run rate today. We're closing the two Hanes facilities. That product amongst our product has to be sort of manufactured. And there's a disconnect between the time it takes us to sort of develop and grow the volumes within the capacity that's already there. And that's sort of why we're, you know, managing these inventories in the channel in the short term. But that's really a short-term situation, and it will work itself through as we move through this year. And the other important point is that, you know, when we looked at synergies, you know, obviously the synergy from Haynes' cost structure to the Gildan cost structure, you know, that's a synergy which is quantifiable. But scale is also a huge synergy for us right now. And as we continue to optimize and grow the Gildan footprint, we're continuing to lower our cost structure and be better positioned, I think, as we continue to go forward. And we're very excited about where we are.

Your next question comes from Jay Sol with UBS. Your line is open.

Great. Thank you so much. Maybe, Glenn, I want to just follow up on that. I think you mentioned the prepared remarks that you see 100 million in synergies this year, 100 million next year, and at least 50 million in 2028. Can you just talk about what you're seeing that allowed you to raise the guidance and sort of, you know, do you see opportunities even beyond in 2028 versus, you know, kind of what was stated in the press release today? Thank you.

Yeah, well, look, I mean, there's definitely an ongoing, you know, opportunity for us to continue, you know, reducing and increasing the synergy levels. I mean, you know, as we, you know, go into this, obviously, you know, we called out in the beginning, we said it was 200, potentially up to 300. you know, what we do is we just want to make sure that we articulate what we really have clear line of sight of. And right now we have clear line of sight of, you know, the 200. And, you know, we're continuing to move forward and see if we can bring that 200, you know, up. Now, as far as the, you know, the opportunity above and beyond the three-year period, you know, there's things like, you know, Bangladesh, for example. There's still a lot of, of fabric that is being sourced outside and that will be internalized as we go forward and bring on Bangladesh. We know that Bangladesh will bring us additional savings and synergies as we move past the three-year period. So we're really comfortable on the 250 and potentially taking that up from there as we move forward. And we'll communicate that as we move along. And every quarter we'll give you an update. But we're effectively looking to get all these synergies. And this is not really a back-to-basics story. This is basically just us hunting and tackling and going through things. I mean, you know, there was a lot of complexity in the business and we're streamlining and, you know, that's part of, you know, what we've taken into consideration even a little bit this year as we look at it. You know, there's some businesses and segments that they shouldn't really be in and these are all areas that we're looking to, you know, streamline and reduce SG&A complexity. So, Overall, we're very excited. And one thing I'd like to really point out about the synergies, it's not just about the synergies. Look, we have line of sight on synergies, but I also like to maybe just add, I think the most important point about the whole thing is that we're also investing. And we're investing in the innovation of the product. So just the fact that we're actually looking at the synergies, but we are not just reducing the cost structure of the businesses. but we're investing in the future. One of the things that we're doing right now is we're also reinvigorating the product offerings of the Hanes in all segments and enhancing what we think is the go-to-market strategy of the quality of these products by leveraging our vertically integrated low-cost manufacturing, the innovation that we've been able to develop. That in a way is a dis-synergy because we're putting more value in the garments that they're going to be going to market with. We're in a very good position right now. This is one of the reasons why we're moving quickly because we want to not just capture the synergies, but we believe that the quicker that we can innovate and elevate the Hanes product category and their lines and offer better quality products to the consumer, the faster we're going to go on a trajectory of sales growth with this brand because we think the brand has a lot of legs and we're very excited about our position so far.

Yeah, and maybe, Glen, I'd just like to add, I think, you know, Jay, from an earnings profile, right, in terms of our guidance, that we're really encouraged, right, with the 420 to 440 of adjusted EPS, which includes 100 million synergies for 2026. So, you know, the actions we're taking, accelerating and increasing our synergies, to 250 million with 120, 26, 127 and 50 in 2028. Uh, we're very encouraged by that.

Well, you know, if I can just follow up on that, because, you know, there's a lot of important points there and going the investment in the product. I think I'm glad you brought that up. I think there's a thought out there, you know, Haynes brands hadn't had a lot of sales growth, uh, you know, looking backwards over the last few years, their history. I mean, do you see it, the, the Haynes, the portfolio brands that you're acquiring, uh, you know, with Hanes Brands, do you see that as a portfolio that you can grow over time? And, you know, because not everybody has that, you know, is aware of that.

Right, exactly. So, you know, one of the things I think is important is that, first of all, we're going to hold an investor conference sometime in the fall. Jesse and Luke and myself are going to, you know, nail down that date because, you know, when we can't explain to investors, shareholders, really our strategy is, the opportunity at hand, I mean, the opportunity is, you know, we think is quite large. You know, Hanes has had declines, but their declines have been in certain categories. I mean, the Intimates has not performed, but that's a category which is, you know, sort of a decline because of the consumer. It's department store driven. Department stores have obviously declined over the years. It's also a consumer that's basically changing their purchase habits from going to structured to unstructured product offerings. So there's different elements of why and where the sales have dissipated. But the anywhere business is still taking share. I mean, Haynes Brand as a company is gaining market share. They gained market share in 2025. So far this year, at the beginning of the year, they're continuing to gain share. And they're doing that, I think, without really the type of investment that was required for the long term. I mean, that was sort of, I would say, the challenges that the company did have. They weren't able to invest the capital in innovation that Gildan or manufacturing capacity. So when you take an iconic brand like Hanes and you combine that with the vertically integrated low-cost manufacturing, it's an exciting proposition. So we're really going to change the way underwear is being sold in the United States. I can tell you that with the development of our plan. We're going to explain all this to the market, but we are going to be investing in technology, innovation, ESG, all the things that are fundamental to our Gildan sustainable growth strategy. And we're going to put that into what we think is an under-invested brand in Haines. So despite the under-investment, the thing is doing well. And we think with the investment we're making, you know, innerwear as a category is going to continue to grow. And also, don't forget, is that, you know, Haines used to have a very large activewear business. That's another growth opportunity for Gildan is because, look, we can leverage our platform, our products, our innovation. everything that we have from an active work perspective as well to help grow it. I mean, and back in when Haynes was spun off from Sarah Lee, half of their business was active work and half their business was interwear. So, and today, active work is a very small part of their business. So, you know, we're excited. We think we have a lot to offer. We have a great team of people. Chuck is on the forefront of making sure that, and has now taken over both divisions and spending his time in in Winston-Salem where we're consolidating our retail groups together. And we're well positioned to continue to grow and we're excited.

Your next question comes from Brian Morrison with TD Cowan. Your line is open.

Thank you. Glenn, you mentioned the Q1D stock recovery later in this year and next. So why no change to the 2028 EPS CAGR guide with the increase in aggregate synergies to $250 million? That would be another $0.20 to $0.25. Is this a rounding error? Are you providing some cushion in that guidance? Maybe it's more appropriate for Luca.

Well, what I do understand is obviously, Luke, you want to do it? Yeah, sure.

So thanks for your question. So look, as we articulated in the press release, we're maintaining our view on the three-year guide, right? 3% to 5% on the top line in terms of the CAGR, low 20% range adjusted EPS. and, you know, 3% to 4% of net sales from a CapEx perspective and so on. So effectively, we've maintained that. You're right. We've increased the synergies to 250, you know, 100 in 26, 127, and 50 in 28. And, you know, our three-year guidance was put out really, you know, ahead of the increased synergy number. But, you know, there's puts and takes. But the ultimate takeaway is that we're very comfortable with what we put out We're continuing to chase the performance and push for it. And as Glenn articulated, we're not stopping there, right? We're going after more if it can come. So today, what we're saying is we're comfortable with that top-line CAGR. We're comfortable with that adjusted EPS growth over the three years. And we're encouraged by the synergies that we're estimating to date.

Okay. And then maybe just from a high level basis, maybe just update us with how far down the road the Australian process is. Obviously you announced this back in August, you had closure of the, of the HPI transaction in December. Is it well underway or is it really just commencing?

So, uh, again on the HAA process, first of all, uh, the takeaways, look, we're only going to proceed with something that if there's value, the terms are attractive for us. It's in the best interest of the company and our, on our stakeholders. So that's the headline. The other thing is that we've engaged, you know, our bankers were within a process. The process is unfolding as planned. But we don't intend to provide any further updates on that regarding the sale or transaction until it's either approved by the board or the process is concluded. So it's underway. It's progressing as planned. And that's what I can share at this time.

Your next question comes from Ian Leal with Scotiabank. Your line is open.

Good morning. Thank you. My first question is on O3 underwear or innerwear segment. I was wondering if you could help us unpack the performance this quarter, like organically how did Gildan and Haines innerwear business perform? How much did the timing shipment from Q3 into Q4 help? And maybe what other factors that drove the result? Just trying to understand the underlying business performance during the holiday season as well.

Okay, thanks for the question, Ian. I think the good thing is, as we said back in Q3 of last year, we said that the interwear business would improve in Q4, and it did improve as we suspected quarter over quarter. Organically, we were effectively flat in interwear for Q4, but again, great improvement over Q3, just as we had expected. One thing Glenn pointed out is both our business legacy in organic business as well as the Hanes business has continued to gain share in Interware and is performing quite well, not only through Q4, but as we've entered into Q1. So we feel good about where we're positioned in the category and our outlook on 2026, which Luca had mentioned in his comments. So again, I think we feel good about where we are. We're going to continue to drive share there. We're going to continue, as Glenn mentioned, to to look at product. Where can we innovate? Where can we make changes? Where can we improve our customer's experience? And we think that's going to bode well for us going forward.

Thank you. That's helpful. And then my second question is on the sales growth outlook. Thanks for all the colors so far, but could you maybe provide a bit more color on like the composition of the drivers of your organic growth expectations outside of the temporary inventory reduction? Maybe break it down by your expectations on active wear and inner wear or retail and wholesale and volume and pricing. Thank you.

Yeah, thanks for your question. So yeah, so the revenue guide for 2026, right between 6 to 6.2 billion. So as we spoke about earlier, fundamentally from a wholesale and retail perspective, there's growth that's in the plan. That's offset by the initiative, the proactive initiatives we're taking with reduction of inventories, as well as, you know, as we continue to look at the business and try to optimize the commercial mix and just really focusing on margin accretive growth. So when you kind of peel back the onion and you say, well, where's that growth coming from for wholesale and retail? They don't come as a surprise. We've got growth in key categories, right? Fleece, ring spun products, comfort colors, the champion brand, Allpro, the basics driven by innovation, strong national account growth, right? Our GLB customers. We have the wraparound of programs that contributed to 75% of our growth in 2025 that are coming in to 2026. And we have that visibility on the same type of composition as we move forward. So those really underpin the growth. And then when you take a look at retailers, really the retail growth across the categories that make up the underwear, right, in terms of underwear, hosiery, and so forth, it's across our key customers and channels. And where is that coming from? It's through share gains, expansion of space, and so forth, and the wraparound of programs. So that should give you a little bit of color on that front. And so we're pleased with the $6 to $6.2 billion of a top-line guide for 2026. And ultimately, with all of that contribution and the contribution of the synergy capture, we're going to see sequential improvement as we go through the year in terms of our operating margin and effectively deliver that, expect to deliver that adjusted EPS of 420 to 440, which is up 20% to 25% versus our reported 2025 results of 351. So we're encouraged by the growth profile.

Your next question comes from Martin Landry with Stifel. Your line is open.

Hi, good morning. Glenn, I'm just trying to understand mechanically how the integration will happen. You're talking about closing the two facilities that Hanes was operating. at similar revenue levels as you did. So help me understand, how are you going to cram two big facilities into what you had? I think you said an excess of 10% capacity that you mentioned last fall. So how is this going to work? Are you going to use third-party providers as well?

No. All this will be internalized in our own facilities. What we said last year is that we went through an expansion in our Bangladesh facility. We expanded it by 50% to be able to support the volumes of Haines. We had about 10% excess capacity in our system, and we said we added another about 10% in Central America. That's what we communicated to you during 2025. We're also going to be adding additional capacity in our facility in DR in 2026 by moving some of their equipment into our facility. So, overall, we have enough ample capacity support aids. Now, you have to understand there's a big difference between underwear and activewear, obviously, in terms of the amount of fabric and material it takes. It takes, you know, one pound to make an undergarment. It takes seven pounds to make, sorry, it takes seven pounds to make an average mix, 15 pounds to make a sweatshirt, one pound to make an undergarment. In terms of poundage, when we look at capacity, you have to understand the mix associated with that type of product offering. So overall, we're very excited. We have the capacity in place. We just have to get the volumes within those facilities running at the right capacity. And that's sort of the point of reflection here is that the capacity was installed and running at a certain rate. And now what we're doing is we're closing their facilities, their two facilities, which will be shuttered sometime at the end of, you know, Q1. And then that product amongst our product will be in our facilities. And then therefore, you know, we'll be a little tight as we continue to ramp up to the level of production run rate that's supported the capacity that's installed. And that's the whole important thing here. So, You know, we'll manage inventories in the channel. We feel very comfortable that we could, you know, we can do that without affecting our POS. And, you know, as we go through the end of the year, some of that may come back in, some of it may not. We're not sure. But that we always have the ability to put those goods back in the channel as we move into 2027. So, you know, I think this is a good plan. And you have to understand things is that, you know, and the reason why we're accelerating this is just because this is not just about our manufacturing activities. COG side of it, but it's also the SG&A side. We're looking at IT systems, for example. The time it takes to do an implementation on a textile factory from an IT perspective is nine months. So the lesser facilities that we have to integrate, the quicker that we can get the other parts of our SG&A associated expenses. And Hanes is spending a greater amount on IT systems than Gildan was just because of their complexity and other things that go with it. So We're looking at a comprehensive, cohesive view of how we're going to be able to attack these synergies and complexity, simplification. All the things that we do are going to be instrumental to achieving it. That's why we're so confident in our ability to execute and achieve these synergies.

Okay, thank you. That's helpful. Thanks for the call. And then, Luca, I don't know if you quantified it, but in your $6 to $6.2 billion revenue guide, what's the impact of that inventory reduction?

So as we went through the guide for the $6 to $6.2 billion, again, the takeaway is that fundamentally there's growth in the range that's consistent with what we're expecting over the three years of 3% to 5%. across both wholesale and retail. As that comes into play, there's two factors that are effectively offsetting, which is one, the proactive reduction of the inventories, and two, to a lesser extent, as we continue to optimize the operating footprint on the commercial mix. So I would say it's closer to two-thirds on the first item and one-third on the second item. And that's what yields a guidance of 6 to 6.2 against the pro forma of 2025, which is 6.089.

Your next question comes from Vishal Sridhar with National Bank. Your line is open.

Hi, thanks for taking my questions. Luke, I was just hoping to, you know, obviously when you do a deal like this, things shift and things change. But at closing, my understanding was that imagine previously articulated leverage of about in the mid twos and you're currently at three. Maybe you can help me understand that.

Yeah, absolutely. So when we did close, first of all, we closed the transaction earlier than expected, right? We were saying that it was, you know, end of the year, but really more in the first quarter. So we closed it earlier than expected, which we're really pleased because Now we have the keys and we can get going with our integration plan. That's number one. Number two, the elements that contributed to a leverage of around three times or three times at the end of the year, it was effectively slightly higher debt levels at closing. And also in terms of the EBITDA contribution, the EBITDA is pro forma. At the time, there was adjustments for differences between IFRS and US GAAP and so forth that came into play. So we just shored up the number. But the takeaway here is We're at three times leverage today. In the guide, we're going to generate over $850 million of free cash flow. That is a big number. And with that, we are putting that towards ensuring that we can deliver this transaction as quickly as possible. We did come out in the original announcement saying that we would deliver between 12 to 18 months. We are trying to deliver as quickly as we can, maintain our strong balance sheet. We're an investment-grade balance sheet, which is valuable to us and also valuable to our customers. So the focus is on delivering. And when we get to around the midpoint of our targeted range of one and a half to two and a half times, we'll then return to buying back stock. So we put that on pause. So we feel very comfortable with where the balance sheet is today with the cash flow generation that's within the guide. And to complement all of that is also our HAA sale process, which would also further accelerate that delivering. So we're comfortable with where the leverage is. and we're attacking it.

Okay. And with respect to the EPS CAGR, you took up the synergies, you chatted about that, but my understanding was previously management had indicated it would be 20% CAGR with something materially exceeding 20% in the first year. And at the time that was given, HBI's consideration for Australia was understood So just wondering how that's changed and what the thinking around that has changed.

Yeah, sure, Vishal. So it's a good question. I think nothing has changed really is the way to think about it because we're at 420 to 440 off of our 351. So we're growing between 20 to 25%. At the time, the discussion was around the consolidated entity. So now we've concluded our strategic review of HAA. HAA is now reported as a discontinued operation. And you'll see, as it gets reported, HAA is projected to contribute 21 cents of discontinued operations. That 21 cents is not in our guide of 420 to 440. So if you would aggregate the two, we would be exactly in line with what we had communicated. So the differential is simply HAA being recorded as an asset held for sale and a discontinued operation.

Your next question comes from Stephen McLeod with BMO Capital Markets. Your line is open.

Thank you. Good morning. I just had a couple of follow-up questions. The first one is with respect to the Q1 inventory reduction. How do you balance that with potential sell-through markets? challenges? Do you expect that lower inventory will lead to stock outs in some situations or not?

No, we feel comfortable that and we're very prudent about our approach and the inventory is going to be dispersed like we said through channels so it's not particularly in one place and we have good inventory levels in the channel because that's one of the things that have been allowing us to generate share. So we think we can optimize those levels. We have the capability of doing it and really not affect the POS at all. We're very comfortable. We have very good in stock levels, our percentages. And when you look in stock, it's not just the sheer volume we have in stock, but we really manage it by the percentage of the quality of that in stock. So our quality of our in stock today is very, very high. So sometimes you have good inventories, but your quality is not good because you're missing something. Like, for example, we've been chasing comfort colors now for the last three years because it's been growing by 40% a year. But, you know, during 2025, you know, we brought those inventories to an appropriate level to support the revenue of that as we increased our capacity. So, overall, we think that we're in a very good position, and we don't see any negative impact from POS. And, you know, that answers your question. Okay.

Okay, that's great. Thank you. And then just my second one would be, I don't know if you disclosed it in the notes, I haven't seen it, but can you give a little bit of color as to what Hanes Australia adjusted EBITDA would have been in Q4?

So what we've provided is, in terms of for 2026, we know the sales is $6.75 and the contribution is expected to be $0.21 of EBITDA. of earnings. With respect to the fourth quarter in the disclosures, you can see the sales that it contributed to the fourth quarter, which was around 70 million, and it contributed 4 cents of earnings to discontinued operations.

Your next question comes from Chris Lee with Desjardins Capital Markets. Your line is open.

Oh, thanks for squeezing me in. My first question is just, did you see any sequential improvement in terms of industry demand for both the wholesale and retail channel in Q4? And what is your outlook that underpins your guidance for 2026 in terms of industry demand? Thank you.

Thanks, Chris. I mean, I think overall the market was okay in Q4 on the dollar, from a dollar perspective, but units were down slightly. But again, We're continuing to see higher value products that we've talked about, for example, Comfort Colors, Champion, All Pro. So we're continuing to see where the market's been driven by those higher value products, and we're continuing to grow those and take share. And overall, the wholesale retail markets were a little bit softer than we expected, but we gained share in key categories, and we continue to go and grow on that. As we look at 2026, we think we're going to be you know, flat to upload single digits plus our new program. So the way we get the growth we've talked about is we have that plus, you know, we have new programs. Not only do we have the wraparound from some of the programs that we've talked about in 2025, but also new programs in 2026 from everything from Champion and All Pro to some GLB programs, as well as some new products and categories. You probably saw that we've talked about accessories. We've talked about scrubs. And then, again, new retail programs, not only in activewear but interwear, and not only in Hanes but also some private label programs as well. So we feel really good about where we are as we go into 2026 with those new programs and what we think the market assumption is.

Thank you for that. And my follow-up question is for Glenn. You mentioned earlier, you know, the Hanes, the U.S. intimate business has been underperforming because of structural factors. Is that potentially something you would consider divesting at some point as you continue to integrate the business within the Gildan platform? Thanks.

No, at this point in time, look, we think that it's sort of gone to a trough. I mean, there's one brand, which is really the... underperforming the most of the brands that they do offer. I think they have a plan to stabilize that and revigorate it. So look, time will tell, but we think that it's definitely not going to be a growth driver for the company, but we think that we can elevate it, improve margins, and stabilize the business basically. So that's where we are today, and we'll see how that goes as we go forward.

Your next question comes from Rylan Conrad with RBC Capital Markets. Your line is open.

Good morning. Thanks for squeezing me in. Just on the operating margin guidance, can you speak a bit to the assumed underlying margin expansion for standalone Gildan business and just what the puts and takes are there for 2026?

Yeah, thanks for your question. So for 2026, the adjusted operating margin guidance, right, approximately 20%. The Gildan's base profile was obviously higher than Haynes' base profile. So you have the two coming together, sequential improvement as you go through the year, given the synergies are coming in and so forth. But the growth drivers to the strong operating margin at the end of the day remain unchanged. If you take a look at what's been driving the operating margin performance at Gildan, we've We've had the optimization of our Central American capacity, our yarn optimization, the Bangladesh cost advantage. That's really bolstered the gross margin, you know, discipline around SG&A. So that's really the base. Then you tack on the Haynes profile, and then you tack on the synergies that are coming in in 2026, and that's effectively what's going to drive the 20%. And with that strong 20%, you know, delivering the earnings of 420 to 440, I do want to reiterate again that the quality of those earnings are strong because of the cash flow generation that we have in the plan, which is over 850 million. So I would say it's the usual suspects that were driving Gildan's margin that will continue, plus the synergies.

Okay, thanks. And I just saw in Comfort Colors expanding into new categories this year. Is there anything you could share maybe on initial conversations with your customers there and with respect to your net sales guidance for this year? Are there any assumptions baked into that around the contribution from those categories?

Yeah, Ronald, I think first on the expansions of Comfort Colors, one, the brand has continued to have a consumer that really seeks the brand, has an emotional connection to the brand, and it's going to open up our opportunity to go into other categories and things like the accessories category. we did have our show out in Long Beach earlier in the year where we launched hats and bags. And what I can tell you from the reception perspective is from the minute the show opened to the minute the show closed, there was a long line waiting at the booth to get a chance to win one and to see them. And the feedback, I was there on the floor with the customers. The feedback of the product was great. And so I think that customer gives us leeway to go into other categories, and we think we can continue to do that. And so we'll continue to grow that brand. Yes, there's contribution in our forecast for that. I would say it's muted in the first part of the year. I'm sorry, throughout the year, because we're introducing the new category as well. But yes, there is contribution. The other brand that we're spending a lot of time with is AllPro. All Pro, we've talked about that brand as well. It's growing. It's from a low base, but great reception from the brand. And it allows us to play more in performance and corporate wear and go into different categories that way. Champion, we talked about our license with Champion. It opens up other areas as well in fan wear, sports wear, kind of from the sports heritage brand that it is. So really what we're trying to do as we look out at the market overall is how do we How do we continue to expand that addressable market for us so that we can reach into other areas?

This concludes the question and answer session. I will turn the call to Jessie Hamm for closing remarks.

Thank you. Once again, we'd like to thank everyone for joining us and attending our call today, and we look forward to speaking with you soon. Have a great day.

This concludes today's conference call. Thank you for joining. You may now disconnect.

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