Gildan Activewear Reports Robust Third Quarter as HanesBrands Acquisition Nears

Gildan Activewear Posts Record Third Quarter Results as HanesBrands Acquisition Progresses

U.S. apparel manufacturer Gildan Activewear (TSX: GIL) reported record net sales for the third quarter ended September 28, 2025, alongside its ongoing preparations for the strategic acquisition of HanesBrands Inc. (NYSE: HBI). The results underscore the company's operational strength as it moves to significantly expand its market footprint in the global basic apparel sector.

Financial Performance in Detail

For the third quarter of 2025, Gildan Activewear achieved net sales of $911 million, marking a 2.2% increase compared to the same period last year. This performance was in line with the company's previous guidance of low single-digit growth. Activewear sales were particularly strong, contributing a 5.4% growth to the net sales figure.

Despite the rise in sales, operating income slightly declined by 0.4% to $192.1 million from $192.9 million in Q3 2024. Net profit also saw an 8.6% decline, reaching $120.2 million in Q3 2025, down from $131.5 million in Q3 2024. Gildan's President and CEO Glenn Chamandy expressed satisfaction with the quarter's results, highlighting the profitable growth driven by strong activewear sales and record adjusted diluted EPS.

Looking to the full year 2025, Gildan maintains its revenue growth guidance for mid-single digits. The company has revised its full-year adjusted operating margin guidance upward, anticipating an increase of approximately 70 basis points, compared to the previous estimate of 50 basis points. Adjusted diluted EPS is now projected in the range of $3.45 to $3.51, representing a year-over-year increase of 15% to 17%.

The HanesBrands Acquisition: Strategic Rationale and Terms

In August 2025, Gildan announced its intent to acquire HanesBrands, a move designed to leverage Gildan's operational expertise and enhance value creation, positioning the combined entity as a "leader" in the global basic apparel market. The deal, valued at approximately $2.2 billion in equity and an enterprise value of $4.4 billion including assumed net debt, is set to significantly transform the industry landscape.

Under the terms of the agreement, HanesBrands shareholders are expected to receive 0.102 shares of Gildan and $0.80 in cash for each share they own. This combination represents a 24% premium over HanesBrands' closing price on August 11, 2025. Upon the transaction's closing, HanesBrands investors will collectively hold approximately a 19.9% equity stake in the combined company on a non-diluted basis.

Market Reaction and Analytical Perspectives

Following the announcement of the HanesBrands acquisition, Gildan Activewear's stock experienced a notable positive reaction, with its share price increasing by 10% on July 2, 2025. This surge reflects investor confidence in the strategic merits of the deal.

Analysts have largely lauded the acquisition, citing its potential to diversify Gildan's product offerings, drive substantial earnings per share (EPS) growth, and establish a more balanced mix across activewear, innerwear, retail, and wholesale segments. TD Cowen analyst Brian Morrison issued a buy recommendation with a price target of $82.63, while Morningstar analyst David Swartz upgraded his target to $128.43.

Broader Context and Implications

The acquisition is poised to create a global powerhouse in basic apparel, projected to double Gildan's revenue and diversify its operational base. The combined entity anticipates achieving at least $200 million in annual run-rate cost synergies within three years post-acquisition. These synergies are expected to stem from operational efficiencies, optimized manufacturing, shared logistics, and enhanced sourcing strategies, leveraging Gildan's vertically integrated production model.

The pro forma leverage ratio, calculated at 3.2 times EBITDA, is projected to decrease to 2.8 times when accounting for the anticipated $200 million in synergies. The company aims for further reduction to 2.6 times, contingent on the timing of the deal's closing, potential deleveraging efforts, and proceeds from the anticipated investment of HanesBrands' Australian activities.

Outlook and Future Growth Trajectory

The transaction is expected to be immediately accretive to Gildan's adjusted diluted EPS, with projections indicating a 20%+ accretion to adjusted diluted EPS pro forma for the expected run-rate synergies. Management forecasts a 20% compound annual growth rate (CAGR) for EPS between 2026 and 2028, potentially reaching approximately $6 per share by 2028 from a $3.50 per share baseline projected for the current year. The successful realization of these synergies and strategic integration will be key determinants of the combined entity's future financial performance and market position.