Gildan Activewear's Cost-Competitive Edge: Sustaining Profitability Amid Revenue Challenges in 2025

Gildan Activewear's Q3 2025 earnings report revealed a mixed performance: while revenue of $910.6 million fell short of estimates by $4.3 million, the company's non-GAAP EPS of $1.00 exceeded expectations by $0.02. This divergence highlights a critical question for investors: Can Gildan's cost-competitive business model sustain profitability amid revenue headwinds? The answer lies in its operational efficiency, strategic cost management, and long-term sustainability initiatives.

Cost Structure and Operational Efficiency: A Double-Edged Sword

Gildan's adjusted SG&A expenses for Q3 2025 rose to $95 million, or 10.4% of net sales, compared to $78 million, or 8.8%, in the prior year. The increase was driven by higher variable compensation and IT-related expenses, reflecting investments in digital infrastructure and workforce incentives, according to Gildan's press release. However, this upward trend in expenses contrasts with the company's broader cost-cutting narrative. For the first nine months of 2025, adjusted SG&A expenses totaled $262 million, or 10.3% of net sales, down from $230 million, or 9.4%, in 2024, according to a GlobeNewswire release. This suggests that while short-term investments are elevating costs, Gildan's long-term cost discipline remains intact.

The company's revised full-year guidance underscores this duality. It now projects a 70-basis-point increase in adjusted operating margin (up from prior guidance of 50 basis points) and capital expenditures (Capex) of 4% of sales, down from 5%, as noted in a Seeking Alpha note. These adjustments signal a strategic shift toward optimizing resource allocation, particularly in supply chain operations. For instance, Gildan's gross margin of 33.7% in Q3 2025 reflects cost reductions and price increases to offset tariffs, demonstrating its ability to absorb external pressures, as the press release noted.

Long-Term Sustainability: Beyond Cost-Cutting

Gildan's cost-competitive edge is not solely a function of short-term measures. The company's Next Generation ESG Strategy, unveiled in 2025, ties sustainability to cost efficiency. By 2027, Gildan aims to achieve zero manufacturing waste, use 75% recycled or sustainable packaging, and source 30% recycled polyester or alternative fibers, as described in Gildan's ESG strategy. These initiatives align with circular economy principles, reducing material costs and enhancing brand value in an industry increasingly prioritizing environmental responsibility.

Moreover, Gildan's proposed acquisition of HanesBrands-expected to close by late 2025 or early 2026-positions it to leverage scale economies. The combined entity could streamline supply chains, reduce per-unit costs, and expand into higher-margin product categories, such as branded apparel, a point the StockTitan release also highlighted. This strategic move mirrors Nike's recent focus on direct-to-consumer channels and premium offerings, which have bolstered margins despite macroeconomic challenges, according to a TradingView preview.

Industry Context: Navigating a Shifting Landscape

The apparel sector in 2025 faces dual pressures: U.S. tariffs disrupting global supply chains and shifting consumer demand toward sustainable and personalized products, according to a StockTwits article. Gildan's Q3 results reflect these dynamics. While activewear sales grew 5.4% due to favorable pricing and product mix, hosiery and underwear sales declined 22.1%, attributed to shipment timing and market weakness, as the Gildan release indicated. International sales also dipped 6.1% year-over-year, underscoring the fragility of demand in key markets.

Yet, Gildan's vertically integrated business model provides a buffer. By controlling manufacturing, distribution, and sourcing, the company can mitigate supply chain risks and maintain cost advantages over less integrated peers. For example, Adidas reported a 16% surge in apparel sales in Q3 2025, but its reliance on third-party suppliers likely exposed it to higher logistics costs, as covered in the StockTwits article. Gildan's in-house production capabilities, by contrast, offer greater flexibility to adjust to tariffs and input price fluctuations.

Competitor Comparisons: A Benchmarking Gap

Direct comparisons with peers like Hanesbrands, Nike, or Under Armour remain challenging due to limited Q3 2025 data. Nike's Q3 2025 revenue growth of 1.1% exceeded estimates, but specifics on its cost structure or EBITDA margins are absent, as noted in the TradingView preview. Similarly, Hanesbrands' financials for the period are not disclosed in the provided sources. However, Gildan's adjusted EBITDA of $248.7 million in Q3 2025 suggests robust operational efficiency relative to its scale. For context, EQT Corporation-a non-apparel peer-achieved a total operating cost of $1.00 per Mcfe in Q3 2025, 7% below guidance, illustrating cross-industry trends in cost optimization, according to Investing.com coverage.

Conclusion: A Sustainable Model in a Competitive Arena

Gildan Activewear's ability to balance cost management with strategic investments positions it as a resilient player in the apparel sector. While Q3 revenue fell short of expectations, the company's margin expansion, Capex discipline, and sustainability initiatives demonstrate a sustainable path forward. The proposed HanesBrands acquisition and long-term ESG goals further reinforce this trajectory. For investors, the key takeaway is clear: Gildan's cost-competitive model is not a temporary fix but a foundational strategy designed to thrive in an evolving market.