Earnings call transcript: Gildan Activewear Q1 2025 misses EPS forecast

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presents a mixed picture. While there is positive sentiment regarding product innovation and market share gains, concerns arise from high cash flow usage and unclear guidance on margins and tariffs. Share repurchases are a positive aspect, but the lack of clarity in management's responses and the flat industry demand guidance balance out the positives, leading to a neutral stock price prediction.

Key Financial Performance

Sales $712,000,000, up 2.3% year-over-year, driven primarily by strong Activewear sales growth of 9%.

Adjusted Earnings Per Share (EPS) $0.59, essentially flat year-over-year, impacted by the global minimum tax and positive job credits.

Gross Margin 31.2%, a 90 basis point improvement year-over-year, primarily due to lower raw material costs.

SG&A Expenses $87,000,000, down from $105,000,000 last year, primarily due to significant proxy contest and leadership charges.

Adjusted Operating Income $135,000,000, or 19% of net sales, up 100 basis points year-over-year, driven by higher gross margins.

GAAP Diluted EPS $0.56, up 19% year-over-year.

Cash Flows Used in Operating Activities $142,000,000, compared to $27,000,000 in the first quarter of 2024, primarily due to an increase in non-cash working capital.

Free Cash Flow Approximately $166,000,000 consumed after accounting for CapEx of $23,000,000.

Share Repurchases Returned $62,000,000 to shareholders by repurchasing 1,200,000 shares in the quarter.

Net Debt About $1,800,000,000, with a leverage ratio of 2.2 times net debt to adjusted EBITDA.

You have reached the limit Upgrade to access full content

Get started

Operating Highlights

New Product Innovations: Gildan is excited about its innovation pipeline, including soft cotton technology, plasma print, and color blast, which are expected to enhance competitive advantage and market share.

Activewear Sales Growth: Activewear sales grew by 9% year-over-year, driven by higher sales volumes and favorable product mix.

Market Positioning: Gildan is maintaining its guidance for 2025, expecting mid single-digit sales growth, with about 75% of this growth coming from new programs.

Tariff Impact: The company is well-positioned to mitigate tariff impacts due to significant US cotton and yarn content in its products, which allows for tariff savings.

Operational Efficiency: Gildan's gross margin improved by 90 basis points to 31.2% due to lower raw material costs and effective cost management.

Capacity Utilization: The new manufacturing complex in Bangladesh is ramping up and is expected to significantly reduce costs, enhancing operational efficiency.

Strategic Shifts: Gildan is focusing on its ESG strategy and long-term shareholder value, while also exploring opportunities for capacity expansion in Central America.

You have reached the limit Upgrade to access full content

Get started

Risk or Challenges

Tariff Pressures: The company is facing a 10% reciprocal tariff on goods imported to the US from most countries, which could impact costs. However, Gildan's significant US cotton and yarn content in products may allow for tariff savings.

Competitive Pressures: The competitive landscape is changing, with some competitors exiting the market, which may provide Gildan with opportunities to gain market share. However, there is a risk of increased pricing pressure as competitors may adjust their pricing strategies.

Economic Factors: The macroeconomic environment remains challenging, with expectations of flat to low single-digit growth in industry demand. This uncertainty could impact Gildan's sales and profitability.

Supply Chain Challenges: The company has highlighted the need for flexibility in its supply chain to navigate tariff impacts and maintain competitive pricing. There is a concern about potential supply chain disruptions due to tariffs and changing market dynamics.

Regulatory Issues: The enactment of a global minimum tax has negatively impacted earnings, reflecting regulatory challenges that could affect financial performance.

Market Demand: There is a cautious outlook on market demand, with expectations of potential destocking among major customers, which could affect sales.

You have reached the limit Upgrade to access full content

Get started

Guidance & Outlook

Gildan Sustainable Growth Strategy (GSG): The GSG continues to drive profitable growth, with a focus on capacity, innovation, and ESG.

Innovation Pipeline: The company is excited about its innovation pipeline, including soft cotton technology and plasma print, which are expected to enhance competitive advantage.

New Manufacturing Complex in Bangladesh: The new complex is ramping up and is on track to support growth.

Market Share Gains: The company is positioned to gain market share through new programs and innovation.

2025 Revenue Growth: Expected to be up mid single digits.

Adjusted Operating Margin: Expected to increase approximately 50 basis points.

CapEx: Projected to be approximately 5% of sales.

Adjusted Diluted EPS: Guidance range of $3.38 to $3.58, representing a year-over-year increase of approximately 13-19%.

Free Cash Flow: Expected to exceed $450 million.

Q2 Guidance: Net sales expected to be up mid single digits year-over-year.

You have reached the limit Upgrade to access full content

Get started

Shareholder Return Plan

Share Repurchase: Returned $62,000,000 to shareholders by repurchasing 1,200,000 shares in the quarter.

Share Repurchase Program: Expected to continue repurchasing shares under the NCIB program, supported by strong free cash flow and a leverage framework target of 1.5 to 2.5 times net debt to adjusted EBITDA.

You have reached the limit Upgrade to access full content

Get started

Key Q&A

Q:Can you talk about POS trends in each of your major channels? And whether you’re seeing any signs of destocking amongst your major customers?

A:We had a very strong quarter from an activewear perspective, and we’re really happy with where we landed there. We continue to gain share in a market that was down low to mid single digits. Our innovation in tees and fleece with our soft cotton technology, our comfort colors and American Apparel were both of them, double digit again as well. As far as the inventory in the channel, it’s in good balance and we haven’t seen any sign of destocking.

Q:Can you talk about what specific tariff pressure you bake into guidance from a cost perspective? And what sort of mitigation you build in on the pricing side?

A:Our guidance is based on elements that we can control. We’ve taken the impact of the current measures that are in place and we’ve factored in how that impacts our operations, we factored in what that means in terms of demand, and we factored in those mitigating factors. Tariffs impact before any mitigation strategies is well below the 10% of the headline number. We benefit from the amount of U.S. Content that is in our product.

Q:Can you provide any color on what you’ve seen on a quarter second quarter to date basis with respect to the North American distributor channel in terms of the sales trends?

A:We’ve kind of seen the trend as we talked about last few quarters where a quarter would start out a little slower and then accelerate. But we’re actually seeing so in January, saw it start off a little slower, impacts of weather, fires, different things happening. It improved sequentially in February. It improved again in March. Well, the good news is it’s going ahead and improving again in April.

Q:Can you talk about pricing in the market? Have prices in your key categories already started to rise for tariff costs?

A:We’ve seen pricing remain fairly stable through Q1 and into early Q2. Not a lot of price changes at that point. We have taken selective minimal price so far to offset inflation and some of the tariffs.

Q:How sustainable is the margin level? And where could margins go next in the long term? Is there upside your 2025 level or are you maxed out?

A:We’ve guided to a similar operating margin for the second quarter of this year. You’re correct, last year included the positive benefit of the jobs credits. It is a strong operating margin and we’re comfortable with guidance that we’ve given for the second quarter.

Q:Can you confirm if competitor weakness, new product success, and vertical integration are leading to near shoring?

A:The change in the competitive landscape is really some of the competitors that left the channel. Delta, who closed down last year, other competitors have vacated the channel, and a combination of potentially near shoring and other activities coming back to this hemisphere.

Q:How do you adjust to meet growth if Bangladesh tariffs are reinstated at that higher rate? Is there capacity in Honduras?

A:We have a lot of flexibility in our supply chain. Bangladesh represents around 9% of the apparel going back into The US. We do have available capacity in Central America.

Q:What’s embedded in your guidance regarding industry demand?

A:We did add that element of conservatism and the market is now the assumption is that it will be flat to down low single digit. But we’re in a great position to take share.

Q:How secure are the new programs that are expected to drive growth? Are they dependent on market conditions?

A:Overall, I would say to you that they’re pretty secure because we’re taking space to spaces quantified into sales per square foot.

Q:Can you provide more granularity on the innovation pipeline for 2025?

A:We revamped almost all of our product lines. We also have a pipeline of other product categories. We’re constantly innovating across all of our product lines.

Q:Review of Unclear Management Responses

A:Management appeared to avoid giving a direct answer regarding the sustainability of margin levels in the long term, as they did not provide specific figures or projections beyond the current guidance. Additionally, there was a lack of clarity on the exact impact of tariff pressures on pricing strategies, with vague language used in discussing mitigation strategies.

You have reached the limit Upgrade to access full content

Get started

Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

GIL Transcript

Gildan Activewear Inc. (GIL:CA) Q3 2025 Earnings Call Transcript

Positive10-29

The earnings call summary and Q&A reveal a stable market with expected growth in key areas, such as Activewear and Comfort Colors. Despite some concerns in the innerwear business and imprintables market, management expects improvement. Strong financial metrics, including margin improvements and shareholder returns, coupled with optimistic guidance, suggest a positive outlook. The company's strategic positioning amidst tariff challenges also adds to the positive sentiment. Thus, a stock price increase of 2% to 8% is anticipated over the next two weeks.

Gildan Activewear Inc. (GIL) Q2 2025 Earnings Call Transcript

Positive7-31

The earnings call summary and Q&A reflect a positive sentiment. Strong financial performance in Q2, optimistic guidance, and strategic initiatives like new product launches and capacity expansion in Bangladesh support this. Although there were some vague responses, overall, the company is well-positioned for growth, with improved operating margins, shareholder returns, and market share gains. The positive outlook for revenue and EPS, despite some risks, suggests a likely stock price increase in the short term.

Gildan Activewear, Inc. (GIL) Q1 2025 Earnings Call Transcript

Unknown4-29

The earnings call presents a mixed outlook. Financial health is stable with shareholder returns through repurchases. However, cautious guidance and potential tariff impacts raise concerns. Product innovation and competitive gains are positive, yet management's unclear responses in Q&A suggest uncertainties. The overall sentiment is balanced, leading to a neutral prediction.

Earnings call transcript: Gildan Activewear Q1 2025 misses EPS forecast

Unknown4-29

GIL Report

Gildan Activewear Inc. 6-K

6-K

2025-08-20

Gildan Activewear Inc. 6-K

6-K

2024-08-01

Gildan Activewear Inc. 6-K

6-K

2024-08-01

Gildan Activewear Inc. 6-K

6-K

2024-05-30

Frequently Asked Questions

Where does this earnings call transcript come from?

All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.

How soon is the transcript available after the earnings call ends?

Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.

Is the transcript edited or altered in any way?

No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.

Why do some answers appear as “Unclear” or “Inaudible”?

When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.

Who creates the AI Summary and Key Q&A highlights shown above the transcript?

They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.