Gildan's Q4 Earnings Miss Overshadows Margin Gains and Acquisition Boost

What happened

Gildan Activewear reported Q4 earnings that missed analyst estimates, with EPS rising 16% but falling short due to potential integration costs or unanticipated expenses. Sales jumped 31%, largely attributed to the HanesBrands acquisition, indicating immediate top-line contribution but raising questions about underlying organic growth. Gross margin expanded, aligning with the DeepValue report's emphasis on cost-leadership execution and input cost normalization. The company set its 2026 outlook, projecting confidence, yet this may gloss over persistent risks such as HanesBrands integration complexity and trade policy volatility. Investors must scrutinize beyond the positive spin to evaluate margin sustainability and synergy realization amidst the earnings disappointment.

Implication

The earnings miss signals potential execution hiccups or higher costs, which could dampen near-term stock sentiment despite the sales surge from HanesBrands. Margin improvement underscores Gildan's competitive edge but must be sustained against tariff pressures and input cost swings. The acquisition's early contribution is promising, yet synergy targets of over $200 million remain ambitious and dependent on flawless integration over three years. Strong free cash flow guidance above $450 million offers downside protection, but leverage from the deal necessitates diligent de-leveraging monitoring. Overall, focus should be on regulatory approvals, synergy milestones, and quarterly execution to validate the long-term investment case.

Thesis delta

The earnings miss introduces a note of caution, tempering near-term enthusiasm despite margin gains and acquisition-driven growth. However, the core BUY thesis—rooted in cost leadership, FCF generation, and synergy potential—remains intact, contingent on effective HanesBrands integration and stable trade policies. A shift to HOLD would occur if earnings underperformance persists or synergy delays emerge.