Gildan Activewear Inc. GIL has fallen 11.1% in the past four weeks, extending pressure on a stock that is down 22.7% over the past three months. The decline reflects investor caution around a softer retail backdrop and the execution risks tied to the HanesBrands integration.
The recovery case remains supported by higher earnings expectations, synergy capture and an improved margin outlook. Still, weak retail demand, elevated leverage and acquisition-related costs leave little room for operational slippage.
Retail is the most immediate pressure point. In the second quarter of 2026, Retail sales reached $813.1 million, primarily because of the HanesBrands acquisition, but fell from the prior-year pro forma level of $900.9 million. Softer consumer demand, cautious inventory management by large retailers and lower seasonal inventory builds weighed on volumes.
That caution is not isolated to Gildan. Columbia Sportswear Company COLM said continued softness in the United States partly offset international resilience in its second quarter. Crocs, Inc. CROX, however, raised its 2026 revenue outlook after record second-quarter revenue, showing that consumer demand across apparel and footwear remains uneven rather than uniformly weak.
Gildan's operating performance provides an offset. Adjusted earnings of $1.28 per share rose 32% year over year in the second quarter and topped the Zacks Consensus Estimate of $1.11. Adjusted operating income increased 68.8% to $352.3 million, while adjusted gross margin expanded 300 basis points to 34.5%, helped by the HanesBrands contribution, lower raw-material costs and pricing actions.
Gildan Activewear, Inc. Price, Consensus and EPS Surprise
Gildan Activewear, Inc. price-consensus-eps-surprise-chart | Gildan Activewear, Inc. Quote
Management also lifted its 2026 outlook. Adjusted operating margin is now expected at about 21.8%, up from the prior forecast of roughly 20%, while adjusted earnings are projected at $4.65-$4.75 per share. Free cash flow is expected to reach about $1 billion. Gildan remains on track for roughly $100 million of synergies in 2026 and about $250 million of annual run-rate cost savings over three years.
The balance sheet remains a key constraint. Net debt was about $4.7 billion at the end of the first half, with leverage at 3.2 times net debt to trailing 12-month pro forma adjusted EBITDA. The planned sale of HanesBrands Australia for about $490 million should support debt reduction, but higher borrowing has already pushed second-quarter net financial expenses to $69 million.
Valuation offers some support after the selloff. GIL trades at 8.03X forward 12-month earnings, below the textile-apparel industry's 15.3X and its own five-year median of 12.3X. Yet a lower multiple alone may not drive a rebound if retail softness persists or integration costs remain elevated.
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The near-term setup is therefore balanced. Gildan has a clearer earnings and margin path than the share-price trend suggests, but the retail slowdown and leverage burden make execution central to the recovery case.
GIL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
It also has a Value Score of B, Growth Score of B, Momentum Score of B and VGM Score of A. The favorable Style Scores point to solid value, growth and momentum characteristics, while the Hold rank suggests a more measured near-term stance. Together, they support monitoring the recovery without treating the recent decline as a clear buy signal.
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Gildan Activewear, Inc. (GIL): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).