Introduction
Gildan Activewear isn’t the kind of company that normally dominates conversations among Canadian investors. It doesn’t have the excitement of artificial intelligence, the familiarity of a major bank or the eye-catching dividend yield of a pipeline company. It makes T-shirts, underwear, fleece and socks. That may not sound particularly exciting, but after spending time looking through the business, I think that simplicity is part of the appeal.
Gildan has built a highly efficient manufacturing operation around products people buy repeatedly, regardless of what happens to the latest market trend. My honest opinion is that Gildan is an attractive long-term business trading at what appears to be a reasonable valuation. However, the company’s acquisition of HanesBrands has changed the investment considerably. There’s now more growth potential, but also more debt, integration risk and uncertainty. This is no longer quite the straightforward company it was a few years ago.
What This Company Actually Does
Gildan is one of the world’s largest manufacturers of basic apparel. Its products include blank T-shirts, sweatshirts, underwear and socks. Many of its shirts are sold through wholesalers to printing companies, which add corporate logos, school designs, sports branding or other graphics before selling them to customers. The company also owns brands including Gildan, American Apparel, Comfort Colors, GoldToe and Peds.
Following its acquisition of HanesBrands, its portfolio now includes well-known names such as Hanes, Maidenform and Bali. What separates Gildan from many apparel businesses is that it controls a large part of its own manufacturing process. Instead of outsourcing nearly everything, Gildan operates large-scale facilities that handle processes such as yarn spinning, textile production, sewing and distribution. That vertical integration gives the company more control over costs, production and product availability.
Why I’m Interested
I chose to look more closely at Gildan because it has several qualities I generally like in a long-term investment. The products are easy to understand. Demand is relatively consistent. The company has scale, recognizable brands and a history of producing strong margins. I’m also interested in businesses that compete through operational efficiency rather than constantly needing to invent the next big product. A basic T-shirt doesn’t become obsolete because a competitor releases a newer model.
Gildan’s advantage is its ability to produce large volumes of apparel at a competitive cost. That may not generate much hype, but it can generate dependable earnings and cash flow. The HanesBrands acquisition adds another layer. Gildan is attempting to combine its efficient manufacturing platform with HanesBrands’ established consumer brands and retail distribution. On paper, that makes sense. The real question is whether management can deliver the promised benefits without damaging the balance sheet or distracting the company from what it already does well.
What I Like
Before the HanesBrands acquisition materially changed the company’s financial profile, Gildan had already demonstrated strong execution. In 2025, revenue from continuing operations reached approximately $5.0 billion. Adjusted operating margin came in at 21.5%, while adjusted earnings per share increased 17% from the previous year. A margin above 20% is impressive for an apparel manufacturer. It tells me Gildan isn’t simply competing by selling commodity products at the lowest possible price. Its manufacturing network, scale and customer relationships create a meaningful economic advantage.
The acquisition could strengthen that advantage further. Management expects approximately $345 million in annual cost synergies by the end of 2028, including roughly $140 million during 2026. Why does that matter? Because Gildan may be able to improve the profitability of products that HanesBrands was already selling. The company doesn’t necessarily need explosive revenue growth to create value. If it can reduce costs, improve margins and use cash flow to repay debt, earnings could grow considerably faster than sales. I also like that founder Glenn Chamandy is back leading the company. His return followed a very public boardroom battle, which wasn’t exactly a high point for Gildan’s governance. Still, Chamandy understands the manufacturing model and has spent decades building the business. That doesn’t guarantee successful execution, but I’d rather see this integration led by someone who knows Gildan’s operating system inside and out.
The Numbers
For 2026, management expects revenue of approximately $8.3 billion to $8.6 billion, along with adjusted operating margins of roughly 20%. The revenue increase is largely the result of adding HanesBrands, so I wouldn’t interpret it as organic growth. The more important figures will be margins, earnings and debt reduction. The first quarter showed both the opportunity and the challenges of the integration. Revenue climbed to approximately $1.6 billion, but adjusted earnings softened compared to the previous year as Gildan absorbed higher costs associated with integrating HanesBrands.
Adjusted operating margin also declined to 14.3%, partly because HanesBrands historically operated with higher selling and administrative expenses than Gildan. Free cash flow was approximately negative $425 million during the quarter. I’m not overly concerned about one quarter of cash consumption because apparel businesses can experience significant seasonal swings in working capital. Still, it isn’t something I’d ignore, particularly while debt remains elevated.
What Gives Me Pause
The balance sheet is my biggest concern. Following the HanesBrands acquisition, Gildan finished the first quarter with approximately $6.7 billion in net debt and a net-debt-to-adjusted-EBITDA ratio of 3.3 times. That’s considerably higher than management’s longer-term target range of 1.5 to 2.5 times. The company has also paused share repurchases while it focuses on reducing leverage.
The debt looks manageable if integration proceeds as planned, cash flow improves and management captures the expected synergies. But that’s a meaningful “if.” HanesBrands came with weaker margins and had struggled before the acquisition. Gildan now needs to combine manufacturing operations, reduce overlapping costs, manage inventory, protect established brands and maintain customer relationships—all at the same time.
Tariffs, cotton prices, consumer weakness and currency movements could also pressure results. What would change my opinion? I’d become more cautious if leverage remained above three times for an extended period, synergy targets were repeatedly delayed or the core Gildan wholesale business began losing market share.
Valuation
Gildan recently traded around $74 CAD per share, well below its 52-week high. Based on management’s earnings outlook, the shares currently trade at roughly 12 times expected adjusted earnings. To me, that valuation is attractive—but it isn’t without risk. The market is clearly discounting integration uncertainty, higher debt and the possibility that management’s earnings targets prove optimistic.
If the company executes well, today’s valuation could eventually look inexpensive. If integration disappoints, investors may discover the discount was justified. Would I buy today? I’d be comfortable starting a small position, but I wouldn’t rush into a full allocation. I’d rather build my position gradually while watching cash flow, margins and debt reduction over the next several quarters.
Who Should Own This?
Gildan could suit investors looking for a combination of moderate growth, dividends and long-term capital appreciation. It isn’t primarily an income stock. Its dividend yield remains fairly modest at 1.9%, and debt repayment will likely take priority over aggressive share buybacks in the near term. I see it more as a long-term compounder—a high-quality manufacturer using a transformational acquisition to expand its earnings power over time. Investors who want perfectly predictable quarterly results or very conservative balance sheets may prefer to wait until the HanesBrands integration is further along.
My Final Thoughts
I like Gildan’s core business, its manufacturing advantages and the long-term logic behind combining that platform with HanesBrands’ consumer brands. At the same time, I don’t want to underestimate the challenge. This is a major acquisition, the debt is significant and many of the expected benefits still need to be proven. If I had to describe this investment in one sentence, it would be this:
Gildan is a high-quality Canadian manufacturer trying to turn a transformational acquisition into its next major growth story. For me, the biggest takeaway is simple: the future isn’t about selling dramatically more T-shirts. It’s about whether management can make a much larger company operate with the same discipline and efficiency that made Gildan successful in the first place.
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