Gildan Activewear : 2021 First Quarter Shareholder Report

2021 First Quarter

Shareholder Report

Contents
MD&A
1.0	Preface	2
2.0	Caution regarding forward-looking statements	2
3.0	Our business	4
4.0	Strategy and objectives	9
5.0	Operating results	10
6.0	Financial condition	18
7.0	Cash flows	20
8.0	Liquidity and capital resources	21
9.0	Legal proceedings	25
10.0	Outlook	25
11.0 Financial risk management	25
12.0	Critical accounting estimates and judgments	25
13.0 Accounting policies and new accounting standards not yet applied	26
14.0	Internal control over financial reporting	27
15.0	Risks and uncertainties	27
16.0	Definition and reconciliation of non-GAAP financial measures	28
Condensed interim consolidated financial statements	32
Notes to the condensed interim consolidated financial statements	36

MANAGEMENT'S DISCUSSION AND ANALYSIS

1.0 PREFACE

In this Management's Discussion and Analysis (MD&A), "Gildan", the "Company", or the words "we", "us", and "our" refer, depending on the context, either to Gildan Activewear Inc. or to Gildan Activewear Inc. together with its subsidiaries.

This MD&A comments on our operations, financial performance, and financial condition as at and for the three months ended April 4, 2021. All amounts in this MD&A are in U.S. dollars, unless otherwise noted. For a complete understanding of our business environment, trends, risks and uncertainties, and the effect of accounting estimates on our results of operations and financial condition, this MD&A should be read in conjunction with Gildan's unaudited condensed interim consolidated financial statements as at and for the three months ended April 4, 2021, and the related notes, and with our MD&A for the year ended January 3, 2021 (2020 Annual MD&A).

In preparing this MD&A, we have taken into account all information available to us up to May 5, 2021, the date of this MD&A. The unaudited condensed interim consolidated financial statements as at and for the three months ended April 4, 2021 and this MD&A were reviewed by Gildan's Audit and Finance Committee and were approved and authorized for issuance by our Board of Directors on May 5, 2021.

The unaudited condensed interim consolidated financial statements as at and for the three months ended April 4, 2021 have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB). All financial information contained in this MD&A is consistent with International Financial Reporting Standards (IFRS), except for certain information discussed in the section entitled "Definition and reconciliation of non-GAAP financial measures" in this MD&A.

Additional information about Gildan, including our 2020 Annual Information Form, is available on our website at www.gildancorp.com, on the SEDAR website at www.sedar.com, and on the EDGAR section of the U.S. Securities and Exchange Commission website (which includes the Annual Report on Form 40-F) at www.sec.gov.

2.0 CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this MD&A constitute "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities legislation and regulations and are subject to important risks, uncertainties, and assumptions. This forward-looking information includes, amongst others, information with respect to our objectives and the strategies to achieve these objectives, as well as information with respect to our beliefs, plans, expectations, anticipations, estimates, and intentions. In particular, information appearing under the headings "Our business", "Strategy and objectives", "Operating results", "Liquidity and capital resources - Long-term debt and net indebtedness", "Outlook", "Financial risk management", and "Risk and uncertainties" contain forward looking statements. Forward-looking statements generally can be identified by the use of conditional or forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "project", "assume", "anticipate", "plan", "foresee", "believe", or "continue", or the negatives of these terms or variations of them or similar terminology. We refer you to the Company's filings with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission, as well as the risks described under the "Financial risk management", "Critical accounting estimates and judgments", and "Risks and uncertainties" sections of this MD&A and of the 2020 Annual MD&A for a discussion of the various factors that may affect the Company's future results. Material factors and assumptions that were applied in drawing a conclusion or making a forecast or projection are also set out throughout this document.

Forward-looking information is inherently uncertain and the results or events predicted in such forward-looking information may differ materially from actual results or events. Material factors, which could cause actual results or events to differ materially from a conclusion, forecast, or projection in such forward-looking information, include, but are not limited to:

• the magnitude and length of economic disruption as a result of the worldwide coronavirus (COVID-19) pandemic and the more recent appearance of COVID variants, including the scope and duration of government mandated general, partial, or targeted private sector shutdowns, travel restrictions, social distancing measures, and the pace of mass vaccination campaigns;

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MANAGEMENT'S DISCUSSION AND ANALYSIS

• changes in general economic and financial conditions globally or in one or more of the markets we serve, including those resulting from the impact of the COVID-19 pandemic and the more recent appearance of COVID variants;
• our ability to implement our growth strategies and plans;
• our ability to successfully integrate acquisitions and realize expected benefits and synergies;
• the intensity of competitive activity and our ability to compete effectively;
• our reliance on a small number of significant customers;
• the fact that our customers do not commit to minimum quantity purchases;
• our ability to anticipate, identify, or react to changes in consumer preferences and trends;
• our ability to manage production and inventory levels effectively in relation to changes in customer demand;
• fluctuations and volatility in the price of raw materials used to manufacture our products, such as cotton, polyester fibres, dyes and other chemicals;
• our reliance on key suppliers and our ability to maintain an uninterrupted supply of raw materials and finished goods;
• the impact of climate, political, social, and economic risks, natural disasters, epidemics, pandemics and endemics, such as the COVID-19 pandemic, in the countries in which we operate or sell to, or from which we source production;
• disruption to manufacturing and distribution activities due to such factors as operational issues, disruptions in transportation logistic functions, labour shortages or disruptions, political or social instability, weather- related events, natural disasters, epidemics and pandemics, such as the COVID-19 pandemic, and other unforeseen adverse events;
• the impacts of the COVID-19 pandemic on our business and financial performance and consequently on our ability to comply with the financial covenants under our debt agreements;
• compliance with applicable trade, competition, taxation, environmental, health and safety, product liability, employment, patent and trademark, corporate and securities, licensing and permits, data privacy, bankruptcy, anti-corruption, and other laws and regulations in the jurisdictions in which we operate;
• the imposition of trade remedies, or changes to duties and tariffs, international trade legislation, bilateral and multilateral trade agreements and trade preference programs that the Company is currently relying on in conducting its manufacturing operations or the application of safeguards thereunder;
• factors or circumstances that could increase our effective income tax rate, including the outcome of any tax audits or changes to applicable tax laws or treaties;
• changes to and failure to comply with consumer product safety laws and regulations;
• changes in our relationship with our employees or changes to domestic and foreign employment laws and regulations;
• negative publicity as a result of actual, alleged, or perceived violations of human rights, labour and environmental laws or international labour standards, or unethical labour or other business practices by the Company or one of its third-party contractors;
• changes in third-party licensing arrangements and licensed brands;
• our ability to protect our intellectual property rights;
• operational problems with our information systems as a result of system failures, viruses, security and cyber security breaches, disasters, and disruptions due to system upgrades or the integration of systems;
• an actual or perceived breach of data security;
• our reliance on key management and our ability to attract and/or retain key personnel;
• changes in accounting policies and estimates; and
• exposure to risks arising from financial instruments, including credit risk on trade accounts receivables and other financial instruments, liquidity risk, foreign currency risk, and interest rate risk, as well as risks arising from commodity prices.

These factors may cause the Company's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. Forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made may have on the Company's business. For example, they do not include the effect of business dispositions, acquisitions, other business transactions, asset write-downs, asset impairment losses, or other charges announced or occurring after forward-looking statements are made. The financial impact of such transactions and non-recurring and other special items can be complex and necessarily depends on the facts particular to each of them.

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MANAGEMENT'S DISCUSSION AND ANALYSIS

There can be no assurance that the expectations represented by our forward-looking statements will prove to be correct. The purpose of the forward-looking statements is to provide the reader with a description of management's expectations regarding the Company's future financial performance and may not be appropriate for other purposes. Furthermore, unless otherwise stated, the forward-looking statements contained in this report are made as of the date hereof, and we do not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events, or otherwise unless required by applicable legislation or regulation. The forward-looking statements contained in this report are expressly qualified by this cautionary statement.

3.0 OUR BUSINESS

COVID-19-related impacts and Back to Basics initiatives

In March of 2020 after the World Health Organization declared the novel COVID-19 coronavirus as a global pandemic, governments, public health organizations and businesses around the world began to implement various containment measures, closures and restrictions in order to limit the spread of the virus. The impact of these restrictions and other factors led to a sharp decline in global economic activity. Consequently, starting in the second half of March 2020, we experienced a major reduction in sales for both our imprintables and retail channels, incurred costs associated with the temporary shutdown of our global manufacturing operations and other COVID-related costs, as well as charges related to our Back to Basics initiatives in order to further reduce our cost base and strengthen our level of financial flexibility as we navigated through the impacts of the pandemic. As a result, the Company reported a significant earnings loss for fiscal 2020, particularly in the first half of the year. In the second half of 2020, economic activity started to recover and continued to improve due to easing restrictions. Despite the continued absence of large events, during the first quarter of 2021, sell-through (POS) trends for our imprintables products were up year-over- year. Compared to the first quarter of 2019, POS in the U.S. and international markets remained relatively stable with the levels we saw entering the quarter, down 10% to 15% over 2019. In retail, we continued to see strong year-over- year growth in sales of underwear and activewear products.

Prioritizing the health and safety of our employees, customers, suppliers, and other partners, and concurrent with global government mandated private sector shutdowns, we closed our manufacturing facilities starting on March 17, 2020. As restrictions started to ease and economic activity began to pick up in the latter part of the second quarter of 2020, we restarted production at our facilities and progressively increased operating levels across our global manufacturing network aligning operations with inventory levels and improving demand through the course of 2020. However, during the fourth quarter last year, we experienced additional production disruption at our Central American hub as a result of the impact of two major hurricanes that affected the region in November and certain facilities were temporarily closed through November and part of December.

From a liquidity perspective, from the onset of the pandemic, we took swift and prudent measures to preserve cash and pre-emptively ensure that we were well-positioned to manage through the evolving COVID-19-related environment. During 2020 we deferred non-critical capital spend and discretionary expenses, suspended share repurchases and our quarterly cash dividend, secured an additional $400 million of long-term debt, and negotiated a 12-month covenant amendment to our existing credit agreements providing increased financial flexibility as we navigated through the pandemic. As the economic recovery progressed, by the end of the first quarter of 2021, our net debt had declined to $541.6 million and our net debt to EBITDA ratio for external reporting purposes decreased to

2.1 from 3.5 at the end 2020. Further, subsequent to the quarter-end, the Company fully repaid its $400 million unsecured two-year term loan which was due on April 6, 2022. On May 5, 2021, our Board of Directors approved the reinstatement of the Company's quarterly dividend of $0.154 per share, in line with Gildan's previous cash dividend rate prior to suspending these payments after the first quarter in 2020. The Board's action to reinstate dividend payments reflects increased confidence from the economic recovery so far, the Company's solid foundation for future cash flow generation, and the improvement in the Company's reported net debt leverage ratio which has come down to near the high end of the Company's historical target range of one to two times net debt to adjusted EBITDA. The Board will assess further capital returns to shareholders through the potential reinstatement of our share repurchase program when we gain further visibility on the COVID-19 recovery outlook and when the Company's debt leverage ratio falls well within its historical target range.

While efforts related to our Back to Basics strategy to simplify and optimize our business operations positioned us well operationally and financially as we entered the COVID-19 crisis, starting in the second quarter of 2020 we accelerated a number of Back to Basics initiatives to further reduce our cost base and strengthen our level of financial flexibility to navigate through the pandemic. These actions included changes to our pricing, additional stock-keeping unit (SKU) rationalization of our imprintables and retail product offerings, the closure of a yarn-spinning facility, as well

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MANAGEMENT'S DISCUSSION AND ANALYSIS

as workforce reductions, affecting manufacturing employees and our selling, general and administrative (SG&A) employee base.

Overall, we are encouraged by the economic recovery we are seeing related to continued re-openings, the impact of U.S. stimulus on consumer demand, and the strong progress of the vaccine rollout in the U.S. In countries where Gildan has its textiles and sewing production and where the pace of the vaccine rollout has been much slower than in the U.S., we continue to monitor health risks to our employees and keep in place all the necessary safety measures and processes that have been effective in minimizing impacts on our production. Despite the economic recovery so far, large gatherings have not yet restarted and on the supply chain side we are monitoring labour shortages in the U.S. affecting certain industries, including yarn spinners, tightness in raw material inputs, as well as the impact of port backlogs and transportation-related factors globally. Consequently, we remain cautious regarding the pace of overall recovery. However, we believe that the progress we have made in driving our Back to Basics strategy will continue to strengthen our financial and operational flexibility. The current and potential impacts of the COVID-19 pandemic on the Company's liquidity, credit, and other risks are described in the "Financial risk management" and "Risk and uncertainties" sections of the 2020 annual MD&A.

3.1 Overview

Gildan is a leading vertically integrated manufacturer of everyday basic apparel, including activewear, underwear, and hosiery products. Our products are sold to wholesale distributors, screenprinters or embellishers in North America, Europe, Asia-Pacific, and Latin America, as well as to retailers in North America, including mass merchants, department stores, national chains, specialty retailers, craft stores, and online retailers that sell directly to consumers through their physical stores and/or e-commerce platforms. We also manufacture products for global lifestyle brand companies who market these products under their own brands through their own retail establishments, e-commerce platforms, and/or to third-party retailers.

Manufacturing and operating as a socially responsible producer are at the heart of what we do. More than 90% of our sales are derived from products we manufacture ourselves. Since the Company's formation, we have made significant capital investments in developing and operating our own large-scale, vertically integrated manufacturing facilities, including yarn production, textile and sock manufacturing, as well as sewing operations, controlling all aspects of the production process from start to finish for the garments we produce.

We believe the skill set that we have developed in designing, constructing, and operating our own manufacturing facilities, the level of vertical integration of our supply chain and the above industry average capital investments that we have made over the years differentiate us from our competition who are not as vertically integrated and may rely more heavily on third-party suppliers. Owning and operating the vast majority of our manufacturing facilities allows us to exercise tighter control over our production processes, efficiency levels, costs and product quality, as well as to provide reliable service with short production/delivery cycle times. In addition, running our own operations allows us to achieve adherence to high standards for environmental and social responsibility practices employed throughout our supply chain.

3.2 Our Operations

3.2.1 Brands, Products and Customers

The products we manufacture and sell are marketed under our Company-owned brands, including Gildan®, American Apparel®, Comfort Colors®, Gildan® Hammer™, Prim + Preux®, GoldToe®, Anvil® by Gildan®, Alstyle®, Secret®, Silks®, Kushyfoot®, Secret Silky®, Therapy Plus®, Peds® and MediPeds®. Through a sock licensing agreement providing us exclusive distribution rights in the United States and Canada, we also sell socks under the Under Armour® brand. In addition, we manufacture for and supply products to select leading global athletic and lifestyle brands, as well as to certain retail customers who market these products under their own brands.

Our primary product categories include activewear tops and bottoms (activewear), socks (hosiery), and underwear. Some of our brands also extend to other categories such as intimates, sheer hosiery and shapewear, which are sourced through third-party suppliers.

We sell our activewear products primarily in "blank" or undecorated form, without imprints or embellishment. The majority of our activewear sales are currently derived from activewear sold to wholesale distributors in the imprintables channels in North America and internationally. These wholesale distributors then sell the blank garments to screenprinters/embellishers who decorate the products with designs and logos, and who in turn sell the embellished/imprinted activewear into a highly diversified range of end-use markets. These include educational

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