Gildan Activewear, the Montreal-based apparel maker known for its T-shirts and socks, may be closer to restarting its share buyback program than investors had thought. That's the view from RBC Capital Markets, which said the company's latest quarter and its higher profitability target for 2026 have made a buyback restart by year-end look more realistic.
The optimism comes even after Gildan reported a modest miss on revenue in its second quarter. RBC's analysts said the raised 2026 margin target appears "structural," meaning it's not just a one-time boost but something that could persist. The bank also noted that tariffs are playing a role in that improved outlook.
What's behind the margin improvement?
Gildan has been working to cut costs and streamline its operations, and those efforts appear to be paying off. The company's ability to raise its 2026 margin target suggests management sees room for profitability to keep climbing, even if sales growth is uneven.
Tariffs are a key part of the story. While tariffs often raise costs for companies that import goods, Gildan has a large manufacturing footprint in countries like Bangladesh, Honduras, and the Dominican Republic. In some cases, tariffs can actually help companies that produce in certain regions by making competitors' imports more expensive, giving Gildan a pricing advantage. RBC's note suggests that tariff dynamics are working in Gildan's favor, at least for now.
This is not the first time Gildan has surprised on the upside. Earlier this year, the company reported a 32% jump in profits, driven by cost controls that offset weaker-than-expected sales. That pattern—strong earnings despite soft revenue—has become a theme for the company, and it's one reason analysts are paying close attention to its cash flow.
Why buybacks matter to investors
Share buybacks are a way for a company to return cash to shareholders. When a company buys back its own stock, it reduces the number of shares outstanding, which can boost earnings per share and often supports the share price. For investors, a buyback can be a sign that management believes the stock is undervalued and that the company has enough cash to spare.
Gildan has been cautious about restarting its buyback program, likely because it wants to preserve cash and maintain financial flexibility. But with margins improving and cash flow looking stronger, RBC thinks the company could feel confident enough to resume repurchases by the end of the year.
This is a similar situation to what other companies have done recently. For example, NatWest lifted its 2026 target and announced buybacks after beating profit forecasts. And Marcus could boost dividends and buybacks after cleaning up its theater business, according to Wedbush. The pattern is clear: when companies see their margins improve and their outlook brighten, they often turn to buybacks as a way to reward shareholders.
What it means for investors
For everyday investors, the key takeaway is that Gildan's profitability is on a stronger footing than its revenue might suggest. The company is generating more profit from each dollar of sales, and that could lead to more cash being returned to shareholders through buybacks or dividends.
However, it's important to note that a buyback is not guaranteed. RBC's view is an analyst opinion, and the company itself has not confirmed any plans. Investors should also consider that tariffs can be unpredictable, and changes in trade policy could alter the picture quickly.
Gildan's situation is also a reminder that revenue misses aren't always bad news. Sometimes, a company can miss on the top line but still deliver strong profits, which is what matters most for long-term value. As Gildan's profit jump showed, cost control can be just as important as sales growth.
Looking ahead, investors will likely watch for any official announcement from Gildan about its capital return plans. If the company does restart buybacks, it could be a positive signal for the stock. But as always, it's wise to consider the broader risks, including the impact of tariffs and the company's ability to sustain its margin improvements.
In the meantime, Gildan's story is a useful example of how a company can create value even in a challenging retail environment. By focusing on efficiency and cost discipline, it has built a runway for potential shareholder returns—one that RBC believes is getting clearer.
