Mr. Glenn Chamandy reports

GILDAN ACTIVEWEAR REPORTS RESULTS FOR THE SECOND QUARTER OF 2023 AND UPDATES ITS FULL YEAR OUTLOOK

Gildan Activewear Inc. has released its results for the second quarter ended July 2, 2023 (all amounts are in U.S. dollars except where otherwise indicated).

Highlights:

• Sales of $840 million
• Operating margin of 21.7%, adjusted operating margin1 of 16.5%
• GAAP diluted EPS of $0.87 and adjusted diluted EPS1 of $0.63
• Cash flow from operations of $182 million and free cash flow1 of $126 million
• Approximately $145 million of capital returned to shareholders during the quarter through dividends and share repurchases
• Company announces renewal of Normal Course Issuer Bid to repurchase up to 5% of issued and outstanding shares
• Company lowers its FY 2023 outlook to reflect the impact of current market conditions

"We are pleased with our top line performance which came in ahead of our expectations for the quarter, up against a strong comparative period," said Glenn J. Chamandy, Gildan's President and CEO. "Further, in a challenging macro environment, we are driving market share gains given our strong competitive position and continued execution on our GSG strategy."

During the second quarter, we generated net sales of $840 million, driven by better-than-expected sales volume in activewear which offset weaker-than-expected product mix in this category. Our operating margin came in at 21.7% and reflected a net insurance gain of $74 million, partly offset by restructuring charges of $30 million. Excluding these items, our adjusted operating margin1 of 16.5% was slightly above our expectations. Consequently, we ended the quarter with GAAP diluted EPS of $0.87 and adjusted diluted EPS1 of $0.63. In line with our capital allocation priorities and our commitment to return capital to shareholders, we continued to be active on our share buyback program during the quarter, repurchasing approximately 2.6 million shares at a cost of $78 million. With our current program now approaching expiry in August, our Board of Directors approved the implementation of a renewal of our normal course issuer bid (NCIB) program to repurchase up to 5% of the Company's issued and outstanding common shares over the next twelve months. The Company ended the second quarter of 2023 with net debt1 of $1,170 million and a leverage ratio1 of 1.8 times net debt to trailing twelve months adjusted EBITDA1 within our targeted debt levels.

Q2 2023 Operating Results

Net sales for the second quarter were above our expectations at $840 million but reflected a 6% decline over a record quarter last year. In activewear, we generated sales of $692 million, down 9% compared to the same period last year which had benefited from distributor inventory replenishment, following destocking which occurred during the pandemic and a tight manufacturing environment in 2021. During the second quarter, our year-over-year POS trend for the activewear category was positive driven by performance in North America. International markets were more challenging than we expected, with sales in the quarter down 2% versus the prior year with POS trends softening sequentially. We saw increasing momentum in the hosiery and underwear category in the quarter with sales totaling $149 million, up 8% year-over-year. This increase was mainly driven by underwear sales volume growth, reflecting the expansion of our private label offering and the roll-out of new programs in the mass retail channel. Further, while industry demand for men's underwear remained down year-over-year, we were pleased to see POS trends improve sequentially.

We generated gross profit of $217 million, or 25.8% of sales in the second quarter, down $48 million over the prior year, primarily driven by higher year-over-year fiber costs, as expected, as well as unfavorable product mix, which together more than offset the year-over-year benefit of higher net selling prices during the quarter.

SG&A expenses of $78 million, or 9.3% of sales, were down $11 million, or 13%, compared to last year due to lower variable compensation expenses and our continued cost containment efforts, which more than offset the impact of cost inflation. This represents a year-over-year improvement of 70 basis points despite the impact of sales deleverage.

For the second quarter operating income of $183 million, or 21.7% of sales, included a net insurance gain of $74 million related to the two hurricanes which impacted the Company's operations in Central America in 2020, partly offset by restructuring charges of $30 million which included the closure of a sewing facility in Honduras. This compared to operating income of $174 million, or 19.4% of sales, in the prior year. Excluding these items, our adjusted operating income1 of $139 million, or 16.5% of sales, which came in slightly better than expected, was down $37 million, or 310 basis points, compared to the prior year, reflecting lower sales and lower adjusted gross margin1, partly offset by lower SG&A expenses.

After reflecting net financial expenses of $21 million, up $13 million over the prior year due to higher interest rates and average net borrowing levels, and the positive benefit of a lower outstanding share base, we reported GAAP diluted EPS and adjusted diluted EPS for the quarter of $0.87, and $0.63, respectively, up from $0.85 and down from $0.86, in the prior year. GAAP net earnings for the quarter included the after-tax impact of the net insurance gain and restructuring charges as described above.

Cash flows from operating activities in the second quarter totaled $182 million which includes the net positive effect from the insurance gain mentioned above. This compares to $210 million in the prior year, mainly due to higher working capital requirements and lower net earnings. After accounting for capital expenditures totaling $56 million, we generated $126 million of free cash flow in the second quarter, compared to $159 million in the second quarter of 2022, mainly due to lower operating earnings. Capital expenditures during the quarter included investments in our new manufacturing complex in Bangladesh. At the end of the second quarter of 2023, net debt stood at $1,170 million with a leverage ratio of 1.8 times net debt to trailing twelve months adjusted EBITDA within targeted debt levels.

Year-to-date Operating Results

Net sales for the first half ended July 2, 2023 were $1,543 million, down 8% over the prior year sales. In activewear, we generated sales of $1,280 million, down $146 million or 10% compared to the same period last year which benefited from distributor inventory replenishment following the pandemic and a tight manufacturing environment in 2021. Year-over-year POS trends for the activewear category showed progressive improvement from the first to the second quarter. While our activewear sales volume was better than expected in the first half, we saw the macro environment impact our activewear product mix unfavorably as we moved through the first half. International sales of $118 million were down 10% versus the prior year period. In the hosiery and underwear category, we observed notable strength with sales totaling $264 million, up $18 million over the prior year, or 7%, driven by both underwear and sock volume growth. We are benefiting from the expansion and the roll-out of mass retail programs for these products, following a period of inventory adjustments at retailers.

We generated gross profit of $404 million in the first half, down $101 million over the prior year, driven by the decline in sales and lower gross margins. Gross margin of 26.2% was down by 410 basis points year-over year. This is mainly a result of the flow-through impact on our cost of sales of peak fiber costs and higher manufacturing input costs, both of which were anticipated, in addition to unfavourable product mix. These factors were partly offset by higher net selling prices.

SG&A expenses for the first half of 2023 of $160 million were $11 million below prior year levels and SG&A expenses as a percentage of net sales were 10.4% compared to 10.2% last year, primarily due to sales deleverage partly offset by the benefit of lower expenses including lower variable compensation.

We generated operating income of $311 million, or 20.1% of sales, which included the benefit of a $77 million net insurance gain and a $25 million gain from the sale and leaseback of one of our U.S. distribution facilities, partly offset by higher restructuring costs of $33 million, compared to operating income of $336 million, or 20.1% of sales in the first half of last year. Excluding these items, adjusted operating income was $241 million, or 15.6% of sales, down $93 million, or 440 basis points over the prior year, mainly reflecting lower sales and gross margin pressure in the first half as noted above.

After reflecting increased net financial expenses of $38 million due to higher interest rates and average net borrowing levels, higher GAAP income taxes tied to the adjustments above, and the positive benefit of a lower outstanding share base, we reported GAAP diluted EPS and adjusted diluted EPS for the first half of $1.41 and $1.08 respectively, both down from GAAP diluted EPS and adjusted diluted EPS of $1.62, in the prior year. GAAP net earnings included the after-tax impact of the net gains and restructuring charges described above.

Outlook

We believe that our vertically integrated model, our competitive cost structure, leadership in pricing, product availability, and strength in sustainability are enabling us to grow our market share in key product categories and outperform our peers. Further, with strong comparative periods now behind us, we continue to expect our revenues to grow in the second half of the year supported by the planned roll-out of incremental retail programs. That being said, and despite continued market share gains, we are seeing current market conditions unfavourably impact activewear product mix, both in North American and International markets, as customers focus on lower-priced products. Combined with near-term uncertainty related to the macro-environment, we believe it is prudent to temper our previous FY 2023 expectations for revenue growth and operating margins.

Accordingly, for FY 2023, we are updating our outlook as follows:

Revenues for the full year flat to down low single digits, compared to our previous expectations of a low single digit year-over-year increase;

Full year adjusted operating margin slightly below the low end of our current 18% to 20% annual target range;

Adjusted diluted EPS in the range of $2.55 to $2.65, including the impact of assumed share repurchases of 5% of the outstanding public float in 2023. Our previous guidance called for EPS to be in line with record FY 2022 adjusted diluted EPS of $3.11;

Capex maintained at the lower end of our 6% to 8% target range;

Strong full year free cash flow generation above $425 million.

The above outlook assumes no meaningful deterioration from current market conditions including the pricing and inflationary environment, and reflects the assumptions noted above. Further, it reflects our expectations as of August 3, 2023 and is subject to significant risks and business uncertainties, including those factors described under "Forward-Looking Statements" in this press release and in our annual MD&A for the year ended January 1, 2023. The board may modify, extend or terminate current or future share repurchase programs at any time.

ESG

"On June 28, 2023, we were pleased to be recognized again as one of Canada's best 50 corporate citizens by Corporate Knights," said Glenn J. Chamandy, Gildan President and CEO. "Reinforcing our continued leadership in ESG, which is an integral part of our GSG strategy, this distinction highlights once again our Company's strong focus and efforts to support and drive towards a more fair and sustainable future."

During the quarter, we achieved another significant milestone in the advancement of our Next Generation ESG strategy when the Science Based Targets initiative (SBTi) validated Gildan's 2030 near-term emissions targets for Scopes 1, 2 and 3. Gildan has committed to reducing absolute Scope 1 and 2 greenhouse gas emissions by 30% by 2030 from a 2018 base year2 Gildan has also committed to reducing its absolute Scope 3 emissions by 13.5% by 2030 from a 2019 base year.

Declaration of Quarterly Dividend

The Board of Directors has declared a cash dividend of $0.186 per share, payable on September 18, 2023 to shareholders of record as of August 24, 2023. This dividend is an "eligible dividend" for the purposes of the Income Tax Act (Canada) and any other applicable provincial legislation pertaining to eligible dividends.

Renewal of Normal Course Issuer Bid

Gildan received approval from the Toronto Stock Exchange (TSX) to renew its NCIB commencing on August 9, 2023, to purchase for cancellation up to 8,778,638 common shares, representing approximately 5% of Gildan's issued and outstanding common shares. As of July 31, 2023, Gildan had 175,572,760 common shares issued and outstanding.

Gildan is authorized to make purchases under the NCIB until August 8, 2024, in accordance with the requirements of the TSX. Purchases will be made by means of open market transactions on both the TSX and the New York Stock Exchange (NYSE), or alternative Canadian trading systems, if eligible, or by such other means as may be permitted by securities regulatory authorities, including pre-arranged crosses, exempt offers, private agreements under an issuer bid exemption order issued by securities regulatory authorities and block purchases of common shares. The average daily trading volume of common shares on the TSX (ADTV) for the six-month period ended July 31, 2023, was 370,447. Consequently, and in accordance with the requirements of the TSX, Gildan may purchase, in addition to purchases made on other exchanges including the NYSE, up to a maximum of 92,611 common shares daily through the facilities of the TSX, which represents 25% of the ADTV for the most recently completed six calendar months.

The price to be paid by Gildan for any common shares will be the market price at the time of the acquisition, plus brokerage fees, and purchases made under an issuer bid exemption order will be at a discount to the prevailing market price in accordance with the terms of the order. The actual number of common shares purchased under the NCIB and the timing of such purchases will be at Gildan's discretion and shall be subject to the limitations set out in the TSX Company Manual.

Under its current NCIB that commenced on August 9, 2022, and will end on August 8, 2023, Gildan is authorized to repurchase for cancellation up to 9,132,337 common shares, representing approximately 5% of Gildan's issued and outstanding common shares as at July 31, 2022. Of this amount, Gildan purchased a total of 7,492,700 common shares at a weighted average price of $31.00. Common shares were purchased through the facilities of the TSX and the NYSE, and through alternative Canadian trading systems.

Gildan will enter into an automatic securities purchase plan (ASPP) with a designated broker in relation to the NCIB on or about the commencement date of the NCIB. The ASPP will allow for the purchase of common shares under the NCIB, subject to certain trading parameters, at times when Gildan ordinarily would not be permitted to purchase its common shares due to applicable regulatory restrictions or self-imposed trading black-out periods. Outside of the predetermined black-out periods, common shares may be purchased under the NCIB based on the discretion of the Company's management, in compliance with TSX rules and applicable securities laws.

Gildan's management and the Board of Directors believe the repurchase of common shares represents an appropriate use of Gildan's financial resources and that share repurchases under the NCIB will not preclude Gildan from continuing to pursue organic growth and complementary acquisitions.

Disclosure of Outstanding Share Data

As at July 28, 2023, there were 175,692,760 common shares issued and outstanding along with 2,516,773 stock options and 76,799 dilutive restricted share units (Treasury RSUs) outstanding. Each stock option entitles the holder to purchase one common share at the end of the vesting period at a predetermined exercise price. Each Treasury RSU entitles the holder to receive one common share from treasury at the end of the vesting period, without any monetary consideration being paid to the Company.

Conference Call Information

Gildan Activewear Inc. will hold a conference call to discuss the Company's second quarter 2023 results today at 8:30 AM ET. A live audio webcast of the conference call, as well as a replay, will be accessible on the investors section of Gildan's corporate website at the following link: https://gildancorp.com/en/investors/events-and-presentations/. The conference call may be accessed by dialing (800) 715-9871 (Canada & U.S.) or (646) 307-1963 (international) and entering passcode 9038229#. A replay of the conference call will be available for 7 days starting at 1:00 PM ET, by dialing (800) 770-2030 (Canada & U.S.) or (609) 800-9909 (international) and entering the same passcode.

This release should be read in conjunction with Gildan's Management's Discussion and Analysis and its unaudited condensed interim consolidated financial statements as at and for the three and six months ended July 2, 2023, which will be filed by Gildan with the Canadian securities regulatory authorities and with the U.S. Securities and Exchange Commission and which will be available on Gildan's corporate website.

Certain minor rounding variances may exist between the condensed consolidated financial statements and the table summaries contained in this press release.

About Gildan

Gildan is a leading manufacturer of everyday basic apparel. The Company's product offering includes activewear, underwear and socks, sold to a broad range of customers, including wholesale distributors, screenprinters or embellishers, as well as to retailers that sell to consumers through their physical stores and/or e-commerce platforms and to global lifestyle brand companies. The Company markets its products in North America, Europe, Asia Pacific, and Latin America, under a diversified portfolio of Company-owned brands including Gildan(TM), American Apparel(TM), Comfort Colors(TM), GOLDTOE(TM), Peds(TM), in addition to the Under Armour(TM) brand through a sock licensing agreement providing exclusive distribution rights in the United States and Canada.

Gildan owns and operates vertically integrated, large-scale manufacturing facilities which are primarily located in Central America, the Caribbean, North America, and Bangladesh. Gildan operates with a strong commitment to industry-leading labour, environmental and governance practices throughout its supply chain in accordance with its comprehensive ESG program embedded in the Company's long-term business strategy. More information about the Company and its ESG practices and initiatives can be found at www.gildancorp.com.

We seek Safe Harbor.