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Exhibit 99.1



2012

REPORT TO

SHAREHOLDERS

December 7,
2012

|MD&A:                                                                  |   
|---------------------------------------------------------------------- | --
|OUR BUSINESS                                                           | 2 
|STRATEGY AND OBJECTIVES                                                | 6 
|OPERATING RESULTS                                                      | 9 
|SUMMARY OF QUARTERLY
      RESULTS                                     | 15
|FINANCIAL CONDITION                                                    | 18
|CASH FLOWS                                                             | 19
|LIQUIDITY AND CAPITAL RESOURCES                                        | 20
|LEGAL PROCEEDINGS                                                      | 22
|OUTLOOK                                                                | 22
|FINANCIAL RISK
      MANAGEMENT                                        | 22
|CRITICAL ACCOUNTING ESTIMATES AND
      JUDGMENTS                      | 27
|ACCOUNTING POLICIES AND
      NEW ACCOUNTING STANDARDS NOT YET APPLIED | 29
|RELATED PARTY TRANSACTIONS                                             | 31
|DISCLOSURE CONTROLS AND
      PROCEDURES                               | 31
|INTERNAL CONTROL OVER FINANCIAL
      REPORTING                        | 32
|RISKS AND UNCERTAINTIES                                                | 33
|DEFINITION AND RECONCILIATION OF
      NON-GAAP MEASURES               | 41
|CAUTION REGARDING
      FORWARD-LOOKING STATEMENTS                     | 43
|                                                                       |   
|MANAGEMENT'S
      RESPONSIBILITY FOR FINANCIAL REPORTING              | 45
|                                                                       |   
|AUDITED CONSOLIDATED
      FINANCIAL STATEMENTS                        | 46
|                                                                       |   
|NOTES TO AUDITED
      CONSOLIDATED FINANCIAL STATEMENTS               | 52

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

This Managements Discussion and Analysis (MD&A) comments
on Gildans operations, performance and financial condition as at and for the
years ended September 30, 2012 and October 2, 2011, compared to the preceding
years. 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 annual MD&A should be read together
with the 2012 audited annual consolidated financial statements and the related
notes. This annual MD&A is dated December 7, 2012. All amounts in this
report are in U.S. dollars, unless otherwise noted.

International Financial Reporting Standards (IFRS)This is the Companys first annual report under IFRS as issued
by the International Accounting Standards Board (IASB) and should be read in
conjunction with our audited annual consolidated financial statements for the
year ended September 30, 2012. For periods beginning after October 2, 2011, the
Company has adopted IFRS for the preparation of its consolidated financial
statements and has applied IFRS 1, First-time adoption of IFRS. The
comparative figures for the fiscal year ended October 2, 2011, have been recast
to comply with IFRS. Prior to October 2, 2011, the Company prepared its
consolidated financial statements in accordance with previous Canadian GAAP. See
note 29 to the 2012 audited annual consolidated financial statements for details
on the reconciliations of the Companys financial statements from previous
Canadian GAAP to IFRS.

All financial information contained in this annual MD&A and
in the audited annual consolidated financial statements has been prepared in
accordance with International Financial Reporting Standards (IFRS), except for
information pertaining to periods prior to fiscal 2011 and certain information
discussed in the paragraph entitled Definition and Reconciliation of Non-GAAP
Measures in this annual MD&A. The audited annual consolidated financial
statements and this MD&A were reviewed by Gildans Audit and Finance
Committee and were approved by our Board of Directors.

Additional information about Gildan, including our 2012 Annual
Information Form, is available on our website at www.gildan.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.

This document contains forward-looking statements, which are
qualified by reference to, and should be read together with, the Caution
Regarding Forward-Looking Statements notice on page 43.

In this annual MD&A, Gildan, the Company, or the words
we, us, our refer, depending on the context, either to Gildan Activewear
Inc. or to Gildan Activewear Inc. together with its subsidiaries.

OUR BUSINESS

OVERVIEW

Gildan is a marketer and globally low-cost
vertically-integrated manufacturer of quality branded basic family apparel. We
market our products under a portfolio of company-owned brands, including the
Gildan®, Gold Toe® and Anvil® brands and brand extensions, as well as under
licensing arrangements for the Under Armour® and New Balance® brands. We design,
manufacture and source basic products characterized by low-fashion risk and
frequent replenishment, such as T-shirts, fleece, sport shirts, socks and
underwear, the majority of which are made of cotton and synthetic fibres. We
sell our products to customers requiring an efficient supply chain and
consistent product quality for high-volume continuous replenishment programs in
the North American and international printwear markets and to U.S. retailers.
Gildan®is the leading activewear brand in the printwear market in
the U.S. and Canada, and is increasing its penetration in international markets,
such as Europe, Mexico and the Asia-Pacific region. In the U.S. retail market,
we are one of the largest suppliers of athletic, casual and dress socks sold to
a broad spectrum of retailers and are pursuing a strategy to become a major
supplier of basic branded activewear and underwear for this market. In addition
to supplying retailers, Gildan also manufactures select activewear programs for
leading global consumer brands. With over 30,000 employees worldwide, Gildan
owns and operates highly

GILDAN 2012 REPORT TO SHAREHOLDERS P.2

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

efficient, large-scale, environmentally and socially
responsible manufacturing facilities in Central America and the Caribbean Basin
and also owns and operates a facility in Bangladesh to support its sales in Asia
and Europe.

OUR OPERATING SEGMENTS

As of fiscal 2012, the Company began managing and reporting its
business as two operating segments, Printwear and Branded Apparel, each of which
is a reportable segment for financial reporting purposes. Each segment has its
own management that is accountable and responsible for the segments operations,
results and financial performance. These segments are principally organized by
the major customer markets they serve. The following summary describes the
operations of each of the Companys operating segments:

Printwear segmentThe Printwear segment,
headquartered in Christ Church, Barbados, designs, manufactures, sources and distributes
undecorated activewear products in large quantities primarily to wholesale
distributors in printwear markets in over 30 countries across North America,
Europe and the Asia-Pacific region. The products sold through our Printwear
segment consist mainly of undecorated or blank T-shirts, fleece and sport
shirts marketed primarily under our Gildan® brand. More recently, following the
acquisition of Anvil Holdings, Inc. (Anvil) on May 9, 2012, the Anvil® brand and
brand extensions were added to our brand portfolio. In addition, during fiscal
2012, we reached an agreement to license the New Balance® brand for performance
activewear products in the printwear distributor channel in the U.S. and Canada.
Wholesale distributors buy our products and subsequently sell to screenprinters
and embroiderers who decorate the products with designs and logos.
Screenprinters and embroiderers then sell the imprinted activewear to a highly
diversified range of end-use markets, including educational institutions,
athletic dealers, event merchandisers, promotional product distributors, charity
organizations, entertainment promoters, travel and tourism venues and retailers.
Our activewear products are used in a variety of daily activities by
individuals, including work and school uniforms and athletic team wear, and for
various other purposes to convey individual, group and team identity.

Branded Apparel segmentThe Branded Apparel segment,
headquartered in Charleston, South Carolina, designs, manufactures, sources, and
distributes branded family apparel, which includes socks, underwear and
activewear products, primarily to U.S. retailers. Currently, the majority of our
Branded Apparel segment sales consist of a variety of styles of socks, sold
primarily under various company-owned and licensed brands, as well as select
national retailers brands. We are now pursuing a strategy to grow our sales of
underwear and activewear products in the U.S. retail market as we add new
production capacity. We are increasingly focused on developing the Gildan brand
within the retail channel. In fiscal 2011, the acquisition of Gold Toe Moretz
Holdings Corp. (Gold Toe Moretz), a leading supplier of high-quality branded
athletic, casual and dress socks for U.S. retailers, allowed us to significantly
expand our brand portfolio to include the core Gold Toe® brand, which has high
consumer brand recognition in national chains, department stores, and price
clubs; the SilverToe® brand sold to a national chain; the GT® brand which we
believe has further potential for development in the mass-market; the PowerSox®
athletic performance brand which is  distributed mainly through sports specialty
retailers and national chains; the Auro® brand for the mass-market; and All
Pro®, an athletic sock brand for the mass-market. We also have contractual
licensing relationships with Under Armour® and New Balance® as the exclusive
U.S. sock licensee for these brands. Furthermore, with the acquisition of Anvil,
the Branded Apparel segment now also includes the manufacture and distribution
of activewear products for leading consumer brands, including major sportswear
and family entertainment brands.

GILDAN 2012 REPORT TO SHAREHOLDERS P.3

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

OUR OPERATIONS

Manufacturing operationsWe have developed a
significant manufacturing infrastructure in two main hubs in Central America and
the Caribbean Basin, where we have built modern textile and sock manufacturing
facilities and have established sewing operations. In addition, we own a small
vertically-integrated manufacturing facility for the production of activewear in
Bangladesh which mainly serves our international markets.

Central American manufacturing hubOur
largest manufacturing hub is based in Honduras and includes three large-scale
vertically-integrated textile facilities for the production of activewear and
underwear, Rio Nance 1, Rio Nance 2 and Rio Nance 5. Our newest and largest
facility, Rio Nance 5 commenced operations at the end of fiscal 2011 and
continued to ramp-up production during fiscal 2012. Rio Nance 5 is expected to
be the most cost efficient of our manufacturing facilities once it is fully
ramped-up. While accelerating the production ramp-up of Rio Nance 5, we
suspended production at the Rio Nance 1 facility temporarily in order to modernize and refurbish the facility
and improve the facilitys
cost efficiency. The textiles produced at the Rio Nance complex are sewn in our
sewing facilities in Honduras and Nicaragua. At the same complex, we have also
constructed and operate two large-scale, integrated sock manufacturing
facilities, Rio Nance 3 and Rio Nance 4. Rio Nance 4 began production during
fiscal 2010 and is expected to support future sales growth in the sock category
in addition to supporting production for a portion of our sock product-line
previously sourced from third-party contractors, in order to reduce our sock
manufacturing costs. In addition, during fiscal 2012, we acquired a small
textile facility in Honduras and sewing facilities in Honduras and Nicaragua
through the acquisition of Anvil.

Caribbean Basin manufacturing hubOur
Caribbean Basin manufacturing hub includes a vertically-integrated textile
facility for the production of activewear fabric in Bella Vista, Dominican
Republic. Textiles produced at our manufacturing facility in the Dominican
Republic are sewn at third-party contractor operations in Haiti and at our
sewing facility in the Dominican Republic.

While we internally produce the majority of the products we
sell, we also have sourcing capabilities to complement Gildans large scale,
vertically-integrated manufacturing.

Yarn-spinningWe satisfy our yarn requirements
primarily by sourcing in the U.S. from third-party yarn suppliers with which we
have supply agreements, as well as from our own yarn-spinning facilities in the
U.S. previously owned by a joint venture, CanAm Yarns, LLC (CanAm). During the
first quarter of fiscal 2013, CanAm became a wholly-owned subsidiary, following
our acquisition of the remaining 50% interest. The Company is currently planning
to modernize and expand the two CanAm yarn-spinning facilities and is also
planning a new yarn-spinning facility in the U.S. for the production of
ring-spun yarn which will be utilized as part of the Companys branded product
offering in the Branded Apparel segment.

Sales, marketing and distributionOur sales and
marketing offices are responsible for customer-related functions, including
sales management, marketing, customer service, credit management, sales
forecasting and production planning, and inventory control and logistics for
each of their respective operating segments.

Printwear segmentOur sales and marketing
office servicing our global printwear markets is located in Christ Church,
Barbados. Following the acquisition of Anvil during fiscal 2012, Anvils U.S.
and international distributor sales infrastructure was consolidated and
integrated into our operations in Barbados. We distribute our activewear
products for the printwear markets primarily out of our main distribution centre
in Eden, North Carolina. We also use third-party warehouses in the western
United States, Canada, Mexico, Europe and Asia to service our customers in these
markets.

GILDAN 2012 REPORT TO SHAREHOLDERS P.4

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

Branded Apparel segmentOur primary sales and
marketing office for our Branded Apparel segment is located in Charleston, South
Carolina at the same location as our primary distribution centre servicing our
retail customers. In addition, we also service retail customers from smaller
distribution centres in North Carolina and South Carolina. We also operate 32
Gold Toe retail stores located in outlet malls throughout the United States.

Employees and corporate officeWe currently employ
over 30,000 full-time employees worldwide. Our corporate head office is located
in Montreal, Canada.

COMPETITIVE ENVIRONMENT

The market for our products is highly competitive and is served
by domestic and international manufacturers or suppliers. Competition is
generally based upon price, with reliable quality and service also being
critical requirements for success. Consumer brand recognition and appeal are
also factors in the retail market. Our competitive strengths include our
expertise in building and operating large-scale, vertically-integrated,
strategically-located manufacturing hubs. Our capital investments in
manufacturing allow us to operate efficiently and reduce costs, offer
competitive pricing, consistent product quality, and a reliable supply chain,
which efficiently services replenishment programs with short production/delivery
cycle times. Continued innovations in our manufacturing processes have also
allowed us to deliver enhanced product features, further improving the value
proposition of our product offering to our customers. We have enhanced our
consumer brand portfolio with the addition of the Gold Toe® brand and brand
extensions and the Under Armour® and New Balance® licensed brands. The Company
is focused on further developing its brands and is making a significant
investment in advertising in support of further enhancement of its Gildan® and
Gold Toe® brands. Our commitment to pursuing leading environmental and social
responsibility practices is also an increasingly important factor for our
customers.

Printwear segmentOur primary competitors in
North America include major apparel manufacturers such as Fruit of the Loom,
Inc. (Fruit of the Loom) and Russell Corporation (Russell), both subsidiaries of
Berkshire Hathaway Inc. (Berkshire), Hanesbrands Inc., and smaller U.S.-based
manufacturers, including Alstyle Apparel, a division of Ennis Corp., Delta
Apparel Inc., as well as Central American and Mexican manufacturers. Competitors
in the European printwear market include Fruit of the Loom and Russell, as well
as competitors that do not have integrated manufacturing operations and source
products from suppliers in Asia.

Branded Apparel segmentIn the retail channel
we compete primarily with Hanesbrands Inc. and Berkshires subsidiaries, Fruit
of the Loom and Russell. In addition, our company-owned and licensed sock brands
compete with companies such as Renfro Corporation, which manufactures and sources
socks for owned and licensed brands, as well as brands from well-established
U.S. fashion apparel and sportswear companies, which primarily source their
products from Asia.

ECONOMIC ENVIRONMENT AND BUSINESS OUTLOOK

Demand in the U.S. distributor channel, the largest market for
our Printwear segment, began to recover in the second quarter of fiscal 2012,
after selling prices were reduced to reflect lower cotton costs, and has
continued on a positive trend. However, there can be no assurance that improved
demand trends will be maintained or will continue. For our Branded Apparel
segment, weak macroeconomic conditions during fiscal 2012 affected the retail
market resulting in retailers carefully managing inventory levels during the
year. While we anticipate sales growth in our Branded Apparel segment for fiscal
2013, which is expected to result from having secured new Gildan® branded
programs in fiscal 2012 and early in fiscal 2013, it is difficult to assess the
health of consumer demand in the market going forward. Growth in the U.S. has
been slow and uncertainty about the economy remains, which could negatively
affect consumer sentiment and spending.

GILDAN 2012 REPORT TO SHAREHOLDERS P.5

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

The unprecedented volatility in the cost of cotton in fiscal
2011, which saw cotton prices reach historic highs in the first half of the year
followed by an equally rapid and steep reversal in the second half of fiscal
2011, hurt overall profitability in the apparel industry in the first half of
fiscal 2012. Activewear margins in the first half of fiscal 2012 for our
Printwear segment were significantly negatively affected by the consumption of
inventory produced in fiscal 2011 with high cost cotton. In addition, the
Companys net loss reported in the first quarter of fiscal 2012 was impacted by
significant inventory destocking by U.S. distributors in anticipation of selling
price reductions from suppliers. In the first quarter of fiscal 2012, we reduced
our selling prices in the U.S. distributor channel. We believe that lower
selling prices helped stimulate the recovery in demand in the U.S. distributor
channel in fiscal 2012 and reinforced our industry leading position in this
market. Similarly, in the first half of fiscal 2012, the Branded Apparel segment
was also affected by the consumption of inventory produced with high cost
cotton.

We anticipate results in fiscal 2013 will benefit from the
consumption of inventory produced with lower year over year cotton costs based
on our current cotton commitments and assuming current levels of cotton futures
prices for the portion of our cotton commitments that have not been fixed at
this time. However, inflation in labour and electricity and other input costs in
fiscal 2013 are expected to offset in part the benefit of lower cotton costs.
For fiscal 2013, the Company is assuming lower selling prices and increased
promotional discounting for its Printwear segment. There can be no assurance
that selling prices in fiscal 2013 will not come under more pressure than the
level of pricing assumed by the Company, as a result of deteriorating market
conditions, increased competitive promotional activity or a further decline in
cotton futures prices. In the Branded Apparel segment, Gildan has maintained
selling prices during fiscal 2012 after having implemented price increases
mainly towards the end of fiscal 2011, as Gildans selling price increases to
retailers at that time did not reflect the full pass-through of high-cost
cotton. There can be no assurance that selling prices in the retail market will
remain stable during fiscal 2013.

A discussion of managements expectations as to our outlook for
fiscal 2013 is contained in our fourth quarter earnings results press release
dated November 29, 2012 under the sections entitled Fiscal 2013 Guidance and
Fiscal 2013 Cash Flow.

STRATEGY AND OBJECTIVES

Our growth strategy comprises the following initiatives:

|1. | Maximize printwear market penetration and
      opportunities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | While we have achieved a leadership position in the U.S.
      and Canadian printwear market, particularly in the U.S. wholesale
      distributor market, we continue to pursue additional growth opportunities
      to increase our penetration in the North American and international
      printwear markets as we expand our production capacity and introduce new
      products for these markets.                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | During fiscal 2012, we began the ramp-up of our newest
      textile facility, Rio Nance 5. During the production ramp-up of Rio Nance
      5, we suspended production temporarily at our most mature facility, Rio
      Nance 1, in order to modernize and refurbish the facility and improve its
      cost efficiency. Rio Nance 1 is expected to be available to resume
      operations in the second half of fiscal 2013 and production at the
      facility will be ramped-up as required. The addition of Rio Nance 5 and
      the resumption of production at Rio Nance 1 are expected to support our
      capacity requirements for our planned growth over the next few years.                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In the third quarter of fiscal 2012, we acquired Anvil,
      as described under the heading entitled Business Acquisitions in the
      Operating Results section. The acquisition of Anvil further enhances the
      Companys leadership position in the U.S. printwear market. We believe the
      Anvil® brand positioning is complementary to the Gildan® brand. Anvil has
      positioned itself as a supplier of niche products within the U.S.
      distributor channel, including products such as Anvilorganic®,
      Anvilrecycled® and Anvilsustainable®. We believe we have an opportunity to
      further grow our sales in the U.S. printwear market and increase our
      combined market share.

GILDAN 2012 REPORT TO SHAREHOLDERS P.6

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

|   | The introduction of new products such as softer T-shirts
      and sport shirts, new styles tailored for women, a product-line with
      tear-away labels, performance products, enhanced sport shirts offerings
      and work wear assortments could enable us to further increase our market
      share penetration by servicing certain niches of the printwear market in
      which we previously did not participate. Recent product initiatives
      include our upcoming introduction of a New Balance® sports performance
      line for activewear products in the printwear distributor channel in the
      U.S. and Canada. This initiative represents an expansion of our licensing
      relationship with New Balance® for which the Company is the exclusive U.S.
      sock licensee. Additionally, in fiscal 2013 we will be introducing a basic
      performance activewear product-line under the Gildan Performance® brand.
      Through innovations in our manufacturing process, our Gildan Performance®
      line will have advanced features in moisture management, such as our
      Aquafx® technology delivering premium wicking and evaporation properties,
      as well as our Freshcare® anti-microbial properties incorporated into the
      textile production process to ensure long-lasting performance.
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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | We also intend to continue to expand our presence in
      targeted international printwear markets which currently represent less
      than 10% of the Companys consolidated sales. During fiscal 2012, our unit
      sales from international markets increased approximately 30% compared to
      fiscal 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|2. | Continue penetration of retail market as a full-line
      supplier of branded family apparel                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | We intend to continue to leverage our existing core
      competencies, successful business model and competitive strengths to
      further grow our sales to U.S. retailers. As in the printwear market,
      success factors in penetrating the retail channel include consistent
      quality, competitive pricing and fast and flexible replenishment, together
      with a commitment to corporate social responsibility and environmental
      sustainability. We sell our products in the retail channel under the
      Gildan® and Gold Toe® brands and related brand extensions, as well as
      under licensing agreements for the Under Armour® and New Balance® brands.
      We are a leading supplier of socks in the U.S. mass-market retail channel.
      We are increasingly focusing on the steady development of our
      company-owned and exclusively licensed brands to retailers. We intend to
      leverage our current distribution with retailers, our manufacturing scale
      and expertise and our ongoing marketing investment to support the further
      development of company-owned and licensed brands to create additional
      sales growth opportunities in socks and other product
categories.                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | During fiscal 2012 and early in fiscal 2013, we secured
      new branded programs for fiscal 2013 with national retail customers, as
      well as with regional retail chains, which will provide significant
      exposure and visibility for the Gildan® brand. These new programs include
      underwear, socks and activewear. We also made significant progress in our
      key initiative to grow the proportion of our sales of Company branded
      programs. The Company also reached an agreement to further extend the term
      of its exclusive U.S. sock license for the Under Armour® brand. In fiscal
      2012, we retained a U.S. branding and marketing agency for the further
      development of the Gildan® and Gold Toe® portfolio of consumer brands and
      we intend to increase our investment in advertising in support of these
      brands.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | We are also focused on building our relationships as a
      supply chain partner to global consumer brands that are increasingly
      looking to source large-scale replenishment programs from manufacturers
      that meet rigorous quality and social compliance criteria and have an
      efficient supply chain strategically located in the Western Hemisphere.
      With the acquisition of Anvil, we now have strong established
      relationships with major sportswear and family entertainment companies.
      While we pursue further sales growth within this customer segment we
      believe there is an opportunity to leverage these relationships to expand
      into other product categories. We also believe there are potential
      opportunities to expand existing brand license relationships into new
      product categories.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|3. | Continue to generate manufacturing and distribution
      cost reductions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | We continuously seek to improve our manufacturing and
      distribution processes and cost structure by developing and investing in
      projects for capacity expansion, cost-reduction, as well as for further
      product quality enhancement. As previously discussed, during fiscal 2012,
      we proceeded with the ramp-up of Rio Nance 5 and initiated plans to
      modernize and refurbish our Rio Nance 1 facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

GILDAN 2012 REPORT TO SHAREHOLDERS P.7

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

|   | and  improve its cost efficiency. Rio Nance 5 is expected
      to be the most cost efficient of our manufacturing facilities. During the
      first quarter of fiscal 2013, the Company completed the acquisition of the
      remaining 50% of CanAm. Gildan is currently planning to modernize and
      expand the two CanAm yarn-spinning facilities and is also planning a new
      yarn-spinning facility in the U.S. The strategic rationale for the
      Companys investment in vertically-integrated yarn-spinning is to support
      its projected sales growth and to continue to pursue its business model of
      investing in global low-cost manufacturing technology and in product
      technology which will provide consistent superior product quality. The
      Company is investing in ring-spun yarn technology which will provide
      enhanced quality features as well as qualify for duty-free access to U.S.
      markets under the Dominican RepublicCentral AmericaUnited States Free
      Trade Agreement (CAFTA-DR), which requires the use of U.S. yarn or yarn
      spun in other CAFTA-DR member countries. Ring-spun products will be
      utilized as part of the Companys branded product offering in Branded
      Apparel.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | We continue to execute our plans to reduce our reliance
      on high-cost fossil fuels and further reduce our impact on the environment
      by installing additional biomass facilities as an alternate source of
      natural renewable energy, and other initiatives to increase the efficiency
      of our energy-intensive equipment and processes, which reflect the
      Companys commitment to environmental sustainability. During fiscal 2012,
      we completed the installation of biomass facilities for steam generation
      for our textile production in Honduras, which is expected to lower our
      energy costs related to steam generation in fiscal 2013. The Company plans
      to continue to invest in biomass projects during fiscal 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The acquisition of Gold Toe Moretz also creates the
      potential to achieve cost synergies by combining certain overhead
      functions of both companies and integrating certain high-volume products
      supplied by Gold Toe Moretz into Gildans vertically-integrated sock
      manufacturing in Honduras. We are also seeking to achieve acquisition
      synergies from the integration of Anvils production for the printwear
      market into Gildans low-cost vertical manufacturing, the integration of
      Anvils U.S. and international distributor sales and marketing functions
      into Gildans existing Printwear business, consolidation of purchasing of
      raw materials and other purchased cost inputs, the elimination of certain
      duplicate administrative functions, and savings on ongoing working capital
      requirements.                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4. | Reinvest cash flow                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | We will continue to evaluate opportunities to reinvest
      our cash flows generated from operations. We believe we will generate free
      cash flow after financing our working capital and capital expenditure
      requirements to support our organic growth. In order to re-invest our free
      cash flow, we will continue to seek complementary strategic acquisition
      opportunities which meet our return on investment criteria, based on our
      risk-adjusted cost of capital. In addition, we pay a dividend. On November
      29, 2012, the Company announced that its Board of Directors approved an
      increase in the amount of the current quarterly dividend per share by
      20%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

We are subject to a variety of business risks that may affect
our ability to maintain our current market share and profitability, as well as
our ability to achieve our short and long-term strategic objectives. These risks
are described under the Financial Risk Management and Risks and
Uncertainties sections of this annual MD&A.

GILDAN 2012 REPORT TO SHAREHOLDERS P.8

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

OPERATING RESULTS

BUSINESS ACQUISITIONS

AnvilOn May 9, 2012, the Company acquired 100% of
the common shares of Anvil for cash consideration of $87.4 million, net of cash
acquired. Anvil is a supplier of high-quality basic T-shirts and sport shirts.
The acquisition of Anvil further enhances the Companys leadership position in
the U.S. printwear market, and also positions the Company with potential growth
opportunities as a supply chain partner to leading consumer brands with rigorous
criteria for product quality and social responsibility. The acquisition is also
expected to generate cost savings from integration synergies. The Company
financed the acquisition by the utilization of its revolving long-term credit
facility.

The Company accounted for this acquisition using the
acquisition method in accordance with IFRS 3, Business Combinations, and the
results of Anvil have been consolidated with those of the Company from the date
of acquisition. Consequently, the audited annual consolidated financial
statements for the year ended September 30, 2012 include the results of Anvil
from May 9, 2012 to September 30, 2012. We have determined the fair value of the
assets acquired and liabilities assumed based on managements best estimate of
their fair values and taking into account all relevant information available at
that time. Please refer to note 5 to the 2012 audited annual consolidated
financial statements for a summary of the amounts recognized for the assets
acquired and liabilities assumed at the date of acquisition.

Gold Toe MoretzOn April 15, 2011, the Company
acquired 100% of the common shares of Gold Toe Moretz for consideration
transferred of $347.7 million, net of cash acquired, including contingent
consideration of $5.3 million. Gold Toe Moretz is a leading supplier of
high-quality branded athletic, casual and dress socks for national chains,
mass-market retailers, price clubs, department stores and specialty sporting
goods stores in the United States. The acquisition of Gold Toe Moretz provided
the Company with enhanced brand management expertise which is being utilized to
further the development of the Gildan® brand. In addition to the introduction of
leading consumer brands, the acquisition significantly expanded and diversified
the Companys channels of distribution in the U.S. retail market. The Company
financed the acquisition by using approximately $100 million of cash on hand and
approximately $250 million drawn on its revolving long-term credit facility.

Gildan accounted for this acquisition using the acquisition
method in accordance with IFRS 3, Business Combinations, and the results of Gold
Toe Moretz have been consolidated with those of Gildan from the date of
acquisition. Consequently, the 2011 audited annual consolidated financial
statements include the results of Gold Toe Moretz from April 15, 2011 to October
2, 2011. We have determined the fair value of the assets acquired and
liabilities assumed based on managements best estimate of their fair values and
taking into account all relevant information available at that time. Please
refer to note 5 to the 2012 audited annual consolidated financial statements for
a summary of the amounts recognized for the assets acquired and liabilities
assumed at the date of acquisition.

NON-GAAP MEASURES

We use non-GAAP measures to assess our operating performance.
Securities regulations require that companies caution readers that earnings and
other measures adjusted to a basis other than IFRS do not have standardized
meanings and are unlikely to be comparable to similar measures used by other
companies. Accordingly, they should not be considered in isolation. We use
non-GAAP measures including adjusted net earnings, adjusted diluted EPS, EBITDA,
free cash flow, total indebtedness, and net indebtedness to measure our
performance from one period to the next without the variation caused by certain
adjustments that could potentially distort the analysis of trends in our
operating performance, and because we believe such measures provide meaningful
information on the Companys financial condition and financial performance.

GILDAN 2012 REPORT TO SHAREHOLDERS P.9

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

We refer the reader to the section entitled Definition and
Reconciliation of Non-GAAP Measures in this MD&A for the definition and
complete reconciliation of all non-GAAP measures used and presented by the
Company to the most directly comparable IFRS measures.

SELECTED ANNUAL INFORMATION

|                                                                                          |  | IFRS    |   |  | Previous Canadian GAAP |  
|----------------------------------------------------------------------------------------- |  | ------- | - |  | ---------------------- | -
|(in $ millions, except per share amounts)                                                 |  | 2012    |   |  | 2011                   |  
|Net sales                                                                                 |  | 1,948.3 |   |  | 1,725.7                |  
|Cost of sales                                                                             |  | 1,552.1 |   |  | 1,288.1                |  
|Gross profit                                                                              |  | 396.2   |   |  | 437.6                  |  
|Selling, general and administrative expenses                                              |  | 226.0   |   |  | 198.8                  |  
|Restructuring and acquisition-related costs                                               |  | 15.0    |   |  | 18.2                   |  
|Operating income                                                                          |  | 155.2   |   |  | 220.6                  |  
|Financial expenses, net                                                                   |  | 11.6    |   |  | 6.1                    |  
|Non-controlling interest in consolidated joint venture                                    |  | -       |   |  | -                      |  
|Equity earnings in investment in joint venture                                            |  | (0.6    | ) |  | (0.5                   | )
|Earnings before income taxes                                                              |  | 144.2   |   |  | 215.0                  |  
|Income tax recovery                                                                       |  | (4.3    | ) |  | (19.2                  | )
|Net earnings                                                                              |  | 148.5   |   |  | 234.2                  |  
|                                                                                          |  |         |   |  |                        |  
|Earnings per share:                                                                       |  |         |   |  |                        |  
|Basic                                                                                     |  | 1.22    |   |  | 1.93                   |  
|Diluted                                                                                   |  | 1.22    |   |  | 1.91                   |  
|                                                                                          |  |         |   |  |                        |  
|Total assets                                                                              |  | 1,896.4 |   |  | 1,858.5                |  
|Total long-term financial liabilities                                                     |  | 181.0   |   |  | 209.0                  |  
|Certain minor rounding variances exist between the financial
statements and this summary. | 

The analysis that follows is for fiscal 2012, fiscal 2011 and
fiscal 2010. The Company did not recast its fiscal 2010 financial information in
accordance with IFRS and, as such, fiscal 2010 financial information is not
entirely comparable with fiscal 2012 financial information. The variance
analysis between fiscal 2011 and fiscal 2010, in this MD&A, is based on
figures in accordance with previous Canadian GAAP for both fiscal 2011 and
fiscal 2010.

Net salesConsolidated net sales in fiscal 2012
amounted to $1,948.3 million, up $222.6 million, or 12.9%, from $1,725.7 million
in fiscal 2011. Printwear segment sales in fiscal 2012 were $1,334.3 million, up
slightly from sales of $1,327.7 million last year. Branded Apparel segment sales
were $614.0 million, up $216.0 million, or 54.3% from $398.0 million in fiscal
2011. Consolidated net sales for fiscal 2012 were in line with the Company's
guidance provided on August 2, 2012 of sales of approximately $1,950
million.

The increase in consolidated net sales in fiscal 2012 compared
to fiscal 2011 was due to the impact of the acquisitions of Gold Toe Moretz and
Anvil, higher Printwear unit sales volumes, as well as higher selling prices and
more favourable product-mix for Branded Apparel, partially offset by lower net
selling prices for Printwear and lower organic unit volumes in Branded Apparel
due to weak retail market conditions and the transition out of private label
programs. The increase in Printwear unit sales volumes in fiscal 2012 was mainly
attributable to increased demand in the U.S. distributor channel and further
market share penetration in the U.S. and international printwear markets, partly
offset by significant inventory destocking in the first quarter of fiscal 2012
in the U.S. distributor channel, which was not fully replenished during the
year. Sales from Canada of $67.8 million in fiscal 2012 were up 6.9% compared to
sales of $63.4 million in fiscal 2011 driven by higher unit sales volumes. Net
sales from international markets of $141.9 million during fiscal 2012 increased
$19.6 million, or 16.0% compared to $122.3 million in fiscal 2011 reflecting

GILDAN 2012 REPORT TO SHAREHOLDERS P.10

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

higher unit sales volumes, offset in part by lower average
selling prices and the impact of the decrease in the value of local currencies
compared to the U.S. dollar.

Fiscal 2011 compared to fiscal 2010Net sales
in fiscal 2011 totalled $1,726.0 million, up 31.6%, from $1,311.5 million in
fiscal 2010. Sales of activewear and underwear in fiscal 2011 were $1,406.0
million, up 29.6% from $1,085.0 million in fiscal 2010, and sales of socks were
$320.0 million, up 41.3% from $226.5 million in fiscal 2010.

The increase in activewear and underwear sales in fiscal 2011
compared to fiscal 2010 was primarily due to higher average net selling prices
and increased unit sales volumes. Unit sales growth of activewear and underwear
was due to an increase in industry demand in the U.S. distributor channel in the
first half of fiscal 2011, increased market share penetration in other printwear
markets and increased shipments of activewear and underwear to mass-market
retailers, partially offset by a decline in overall market demand in the U.S.
distributor channel in the second half of fiscal 2011. Canadian sales totalled
$63.4 million in fiscal 2011, up 17.0% compared to sales of $54.2 million in
fiscal 2010 due to higher average selling prices and the appreciation of the
Canadian dollar, partially offset by lower unit volume sales. Net sales from
international markets of $122.3 million during fiscal 2011 increased $19.8
million, or 19.3% compared to international sales of $102.5 million in fiscal
2010 due to higher average selling prices and higher unit volume sales in most
of the markets we serve, partially offset by the discontinuation of certain
programs previously serviced from our Bangladesh facility. The increase in socks
sales for fiscal 2011 was due to the impact of the acquisition of Gold Toe
Moretz and the implementation of selling price increases, partially offset by
lower organic sales of socks, in part attributable to inventory destocking by
mass-market retailers.

Gross profitConsolidated gross profit is the result
of our net sales less cost of sales. Gross margin reflects gross profit as a
percentage of sales. Our cost of sales includes all raw material costs,
manufacturing conversion costs, including manufacturing depreciation expense,
sourcing costs, inbound freight and inter-facility transportation costs, and
outbound freight to customers. Cost of sales also includes the costs of
purchased finished goods, costs relating to purchasing, receiving and inspection
activities, manufacturing administration, third-party manufacturing services,
sales-based royalty costs, insurance, inventory write-downs, and customs and
duties. Our reporting of gross profit and gross margin may not be comparable to
these metrics as reported by other companies, since some entities include
warehousing and handling costs, and/or exclude depreciation expense, outbound
freight to customers and royalty costs from cost of sales.

Consolidated gross profit for fiscal 2012 was $396.2 million,
down $41.4 million from gross profit of $437.6 million in fiscal 2011. As a
percentage of sales, gross margins in fiscal 2012 were 20.3%, down from 25.4% in
fiscal 2011. The decline in gross margin was mainly due to higher cotton costs,
lower average net selling prices for Printwear and a special distributor
inventory devaluation discount incurred in the first quarter of fiscal 2012, as
well as manufacturing inefficiencies, including the impact of transitional
inefficiencies related to the ramp-down of our Rio Nance 1 facility and the
ramp-up of Rio Nance 5, and manufacturing shutdown costs during the year. The
negative effect of these factors was partially offset by the impact of the Gold
Toe Moretz acquisition, favourable efficiencies in sock manufacturing and higher
selling prices and more favourable product-mix in the Branded Apparel segment.
Gross margins in the second half of fiscal 2012 improved significantly compared
to gross margins in the first half of the fiscal year as the Company consumed
inventory with increasingly lower cost cotton compared to the first half of
fiscal 2012.

Fiscal 2011 compared to fiscal 2010Gross
profit for fiscal 2011 was $437.7 million, up $73.4 million from gross profit of
$364.3 million in fiscal 2010. As a percentage of sales, gross margin in fiscal
2011 declined to 25.4% compared to gross margin of 27.8% in fiscal 2010. The
decline in gross margin was primarily due to significantly higher cotton costs
compared to the prior year, which as a percentage of net sales, more than offset
the impact of higher average net selling prices.

GILDAN 2012 REPORT TO SHAREHOLDERS P.11

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

Selling, general and administrative expensesSelling,
general and administrative (SG&A) expenses include warehousing and handling
costs, selling and administrative personnel costs, co-op advertising and
marketing expenses, costs of leased facilities and equipment, professional fees,
non-manufacturing depreciation and amortization expense, and other general and
administrative expenses. SG&A expenses also include bad debt expense and
amortization of intangible assets.

SG&A expenses were $226.0 million in fiscal 2012, or 11.6%
of net sales, up $27.2 million compared to SG&A expenses of $198.8 million,
or 11.5% of net sales in fiscal 2011. The increase in SG&A expenses in
fiscal 2012 compared to last year was due to the impact of the acquisitions of
Gold Toe Moretz and Anvil. Excluding the impact of the acquisitions of Gold Toe
Moretz and Anvil, SG&A expenses in fiscal 2012 declined compared to last
year primarily due to lower variable compensation expenses, distribution
efficiencies in the Branded Apparel segment and the non-recurrence of a prior
year loss relating to the early termination of the Companys previous corporate
aircraft lease, which more than offset higher amortization of intangible assets
related to the acquisition of Gold Toe Moretz, and increased marketing
expenses.

Fiscal 2011 compared to fiscal 2010SG&A
expenses were $199.1 million in fiscal 2011, up $44.4 million compared to
SG&A expenses of $154.7 million in fiscal 2010. SG&A expenses as a
percent of net sales for fiscal 2011 decreased to 11.5% compared to 11.8% of net
sales in fiscal 2010. The increase in SG&A expenses was primarily due to the
impact of the acquisition of Gold Toe Moretz, increases in compensation
expenses, legal and professional fees and retail marketing expenses combined
with the impact of the higher-valued Canadian dollar on corporate administrative
expenses.

Restructuring and acquisition-related
costsRestructuring and acquisition-related costs amounted to $15.0
million in fiscal 2012, including $9.0 million related to business acquisitions
and changes in management structure and $6.0 million related to facility
closures and relocations. In fiscal 2011, restructuring and acquisition-related
costs amounted to $18.2 million, including $11.2 million related to business
acquisitions and changes in management structure and $7.0 million related to
facility closures. Costs related to facility closures in fiscal 2012 and fiscal
2011 consisted primarily of asset write-downs and employee termination benefits
incurred in connection with facilities closed in prior years, which are
currently included in assets held for sale. Costs related to business
acquisitions and changes in management structure in fiscal 2012 consisted
primarily of transaction, exit and integration costs, and employee termination
benefits in connection with the acquisition of Anvil, net of a purchase gain of
$6.7 million, as well as employee termination benefits in connection with the
acquisition of Gold Toe Moretz. Costs related to business acquisitions and
changes in management structure in fiscal 2011 consisted primarily of
transaction costs and costs relating to the wind-up of a pension plan in
connection with the acquisition of Gold Toe Moretz.

The Company expects to incur additional carrying costs relating
to the closed facilities, which will be accounted for as restructuring charges
as incurred and until all assets related to the closures are disposed. Any fair
value adjustments and gains or losses on the disposal of the assets held for
sale will also be accounted for as restructuring charges as incurred.

Fiscal 2011 compared to fiscal
2010Restructuring and acquisition-related costs in fiscal 2011 and
fiscal 2010 under previous Canadian GAAP were $8.5 million and $8.7 million,
respectively and were comprised of costs related to facility closures. An IFRS
adjustment of $9.7 million resulted in higher restructuring and
acquisition-related costs for fiscal 2011 under IFRS when compared to previous
Canadian GAAP primarily due to the difference in accounting between IFRS and
previous Canadian GAAP for acquisition-related costs in connection with business
combinations.

GILDAN 2012 REPORT TO SHAREHOLDERS P.12

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

Operating incomeDuring fiscal 2012, the Company
reported operating income of $155.2 million, down $65.4 million or 29.6%
compared to operating income of $220.6 million for fiscal 2011. The decrease in
consolidated operating income reflected lower operating income from the
Printwear segment, particularly as it incurred an operating loss in the first
quarter of fiscal 2012. The operating income decline in Printwear was
partially offset by improved operating income performance in the Branded Apparel
segment and lower corporate and other expenses related mainly to lower variable
compensation expenses and the non-recurrence of a prior year loss related to the
early termination of the Companys previous corporate aircraft lease.

Financial expenses, netNet financial expenses
include: interest expense on borrowings, including realized gains and/or losses
on interest rate swaps designated for hedge accounting; bank and other financial
charges; interest income on funds invested; accretion of interest on discounted
provisions; net foreign currency losses and/or gains; and losses and/or gains on
financial derivatives that do not meet the criteria for effective hedge
accounting. Net financial expense amounted to $11.6 million in fiscal 2012,
compared to net financial expense of $6.1 million in fiscal 2011. The increase
of $5.5 million in net financial expense in fiscal 2012 was primarily due to
higher interest expense resulting from increased borrowings from the Companys
revolving long-term credit facility.

Fiscal 2011 compared to fiscal 2010Net
financial expense amounted to $5.4 million in fiscal 2011, compared to net
financial expense of $0.8 million in fiscal 2010. The increase of $4.6 million
in net financial expense in fiscal 2011 resulted mainly from increased interest
expense and bank charges due primarily to the financing of the acquisition of
Gold Toe Moretz and a loss related to derivative financial instruments which
were not designated as hedges for accounting purposes.

Income taxesThe Company recorded an income tax
recovery of $4.3 million for fiscal 2012 compared to an income tax recovery of
$19.2 million for fiscal 2011. Excluding the impact of restructuring and
acquisition-related costs in both years, the Company recorded an income tax
expense of $1.9 million for fiscal 2012 compared to an income tax recovery of
$13.7 million in fiscal 2011. The income tax recovery for fiscal 2011 was due
primarily to the recognition of deferred income tax assets related to higher tax
losses incurred by the Companys U.S. legal entities during the year related to
the Branded Apparel segment, the benefits of which have been recognized as it is
probable that we will be able to utilize the losses in future years. The lower
income tax recovery in fiscal 2012 compared to fiscal 2011 was due to the
improved profitability of our Branded Apparel segment.

The Company’s growth plans for the Branded Apparel segment are expected to result in an increased proportion of the Company’s profits earned in higher tax rate jurisdictions, and consequently, would result in an increase to the Company’s overall effective income tax rate in future years.

Net earningsNet earnings for fiscal 2012 of $148.5
million, or $1.22 per share on a diluted basis, were down 36.6% and 36.1%,
respectively compared with net earnings of $234.2 million, or $1.91 per share on
a diluted basis in fiscal 2011. Before the after tax impact of restructuring and
acquisition-related costs, the Company reported adjusted net earnings and
adjusted diluted EPS for fiscal 2012 of $157.3 million and $1.29 compared with
adjusted net earnings of $246.9 million, or $2.02 per share, respectively, for
the prior year. The decline in the Companys earnings compared to last year was
primarily due to lower consolidated gross margins compared to last year and
higher income taxes, partially offset by the accretive impact of the
acquisitions of Gold Toe Moretz and Anvil, and higher Printwear unit sales
volumes.

Adjusted diluted EPS for fiscal 2012 were essentially in line
with the Companys earnings guidance of approximately $1.30 per share provided
on August 2, 2012.

Fiscal 2011 compared to fiscal 2010Net
earnings for fiscal 2011 of $239.9 million, or $1.96 per share on a diluted
basis, were up 21.0% and 20.2%, respectively compared with net earnings of
$198.2 million, or $1.63 per share on a diluted basis in fiscal 2010. Adjusted
net earnings and adjusted diluted EPS for fiscal 2011 totalled $245.5 million
and $2.01 per share compared with adjusted net earnings of $203.6 million, or
$1.67 per share for the prior

GILDAN 2012 REPORT TO SHAREHOLDERS P.13

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

year. The increase in the Companys earnings results for fiscal
2011 compared to the prior year was due to sales growth for activewear, the
earnings accretion from the Gold Toe Moretz acquisition and higher income tax
recoveries, which more than offset higher cotton and other input costs, lower
organic sock sales and increased selling, general and administrative
expenses.

SEGMENTED OPERATING REVIEW

|(in $ millions)                                                                                                                                                                                                             |  | 2012    |   |  | 2011    |   |  | Variation |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | - |  | ------- | - |  | --------- | -
|Segment net sales:                                                                                                                                                                                                          |  |         |   |  |         |   |  |           |  
|Printwear                                                                                                                                                                                                                   |  | 1,334.3 |   |  | 1,327.7 |   |  | 6.6       |  
|Branded Apparel                                                                                                                                                                                                             |  | 614.0   |   |  | 398.0   |   |  | 216.0     |  
|Total net sales                                                                                                                                                                                                             |  | 1,948.3 |   |  | 1,725.7 |   |  | 222.6     |  
|                                                                                                                                                                                                                            |  |         |   |  |         |   |  |           |  
|Segment operating income (loss):                                                                                                                                                                                            |  |         |   |  |         |   |  |           |  
|Printwear                                                                                                                                                                                                                   |  | 209.4   |   |  | 330.2   |   |  | (120.8    | )
|Branded Apparel                                                                                                                                                                                                             |  | 32.8    |   |  | (16.2   | ) |  | 49.0      |  
|Total segment operating income                                                                                                                                                                                              |  | 242.2   |   |  | 314.0   |   |  | (71.8     | )
|Corporate and
      other(1)                                                                                                                                                                                                |  | (87.0   | ) |  | (93.4   | ) |  | 6.4       |  
|Total operating income                                                                                                                                                                                                      |  | 155.2   |   |  | 220.6   |   |  | (65.4     | )
|(1) Includes corporate head office expenses, restructuring and
acquisition-related costs, and amortization of intangible assets. 
Certain minor
rounding variances exist between the financial statements and this summary. | 

Printwear

Net salesPrintwear segment net sales in fiscal 2012
amounted to $1,334.3 million, slightly up from $1,327.7 million in fiscal 2011.
The slight improvement in sales reflected the benefit of the Anvil acquisition
and sales growth from our international markets driven by increased market share
penetration, which essentially offset lower net selling prices for the year that
resulted from the Companys decision to reduce selling prices in the first
quarter of fiscal 2012. Excluding the impact of Anvil, unit sales volumes were
up in fiscal 2012 due to increased unit volumes from international markets,
partly offset by a unit volume decline in the U.S. printwear market as a result
of the significant inventory destocking by U.S. distributors in the first
quarter of fiscal 2012, which was not fully offset by the replenishment of
inventories by U.S. distributors and the recovery in demand during the balance
of the year.

Operating incomeThe Printwear segment reported operating income of $209.4
million for fiscal 2012 compared to operating income of $330.2 million in fiscal
2011. The operating income decline in fiscal 2012 was primarily due to higher
cotton costs in the first half of fiscal 2012 and lower net selling prices
combined with the impact of significant inventory destocking by U.S.
distributors in the first quarter of fiscal 2012, which was not fully
replenished during the year. Operating income in fiscal 2012 was also negatively
impacted by a special inventory devaluation discount of approximately $19 million granted to
U.S. distributors in the first quarter of fiscal 2012, transitional
manufacturing inefficiencies related to the ramp-up of Rio Nance 5 and the
ramp-down of Rio Nance 1, and higher costs related to production downtime during
the year. These negative factors more than offset the benefit of increased
penetration in international markets and the impact of the Anvil acquisition.

Branded Apparel

Net salesBranded Apparel segment net sales amounted
to $614.0 million for fiscal 2012, up $216.0 million, or 54.3%, compared to
fiscal 2011. The growth in Branded Apparel segment sales compared to last year
was primarily due to the Gold Toe Moretz and Anvil acquisitions together with
higher net selling prices and

GILDAN 2012 REPORT TO SHAREHOLDERS P.14

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

more favourable product-mix, partially offset by lower organic
unit volumes due to weak retail market conditions and the exit from private
label programs.

Operating income / lossThe Branded Apparel segment
reported operating income of $32.8 million in fiscal 2012, up $49.0 million
compared to an operating loss of $16.2 million in the same period last year. The
significant improvement in operating performance in fiscal 2012 compared to last
year was due to the accretive impact of the Gold Toe Moretz and Anvil
acquisitions, higher net selling prices and more favourable product mix as the
Company increasingly continues to focus on more profitable branded programs.
These positive factors were partially offset by higher cotton costs in the first
half of fiscal 2012 and the impact of retailers managing inventories during weak
market conditions in fiscal 2012.

SUMMARY OF QUARTERLY RESULTS

The table below sets forth certain summarized unaudited
quarterly financial data for the eight most recently completed quarters, in
accordance with IFRS. This quarterly information is unaudited and has been
prepared on the same basis as the audited annual consolidated financial
statements. The operating results for any quarter are not necessarily indicative
of the results to be expected for any period.

|                                                                                                                                                                                                                                                                                                       |  |         |  |  |         |     |  |         |  |  | 2012    |   |  |         |  |  |         |     |  |         |  |  | 2011    | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------- |  |  | ------- | --- |  | ------- |  |  | ------- | - |  | ------- |  |  | ------- | --- |  | ------- |  |  | ------- | 
|(in $ millions, except per share amounts)                                                                                                                                                                                                                                                              |  | Q4      |  |  | Q3      | (2) |  | Q2      |  |  | Q1      |   |  | Q4      |  |  | Q3      | (1) |  | Q2      |  |  | Q1      | 
|                                                                                                                                                                                                                                                                                                       |  |         |  |  |         |     |  |         |  |  |         |   |  |         |  |  |         |     |  |         |  |  |         | 
|Net sales                                                                                                                                                                                                                                                                                              |  | 561.7   |  |  | 600.2   |     |  | 482.6   |  |  | 303.8   |   |  | 481.6   |  |  | 529.7   |     |  | 383.2   |  |  | 331.2   | 
|Net earnings (loss)                                                                                                                                                                                                                                                                                    |  | 89.0    |  |  | 78.6    |     |  | 26.9    |  |  | (46.1   | ) |  | 48.5    |  |  | 88.1    |     |  | 61.7    |  |  | 35.9    | 
|Net earnings (loss) per share                                                                                                                                                                                                                                                                          |  |         |  |  |         |     |  |         |  |  |         |   |  |         |  |  |         |     |  |         |  |  |         | 
|Basic(3)                                                                                                                                                                                                                                                                                               |  | 0.73    |  |  | 0.65    |     |  | 0.22    |  |  | (0.38   | ) |  | 0.40    |  |  | 0.72    |     |  | 0.51    |  |  | 0.30    | 
|Diluted(3)                                                                                                                                                                                                                                                                                             |  | 0.73    |  |  | 0.64    |     |  | 0.22    |  |  | (0.38   | ) |  | 0.40    |  |  | 0.72    |     |  | 0.50    |  |  | 0.29    | 
|Total assets                                                                                                                                                                                                                                                                                           |  | 1,896.4 |  |  | 1,939.2 |     |  | 1,854.5 |  |  | 1,806.8 |   |  | 1,858.5 |  |  | 1,857.3 |     |  | 1,433.7 |  |  | 1,359.8 | 
|Total long-term financial
      liabilities                                                                                                                                                                                                                                                            |  | 181.0   |  |  | 306.0   |     |  | 333.0   |  |  | 305.0   |   |  | 209.0   |  |  | 252.0   |     |  | -       |  |  | -       | 
|Weighted average number of shares outstanding
      (in 000s)                                                                                                                                                                                                                                         |  |         |  |  |         |     |  |         |  |  |         |   |  |         |  |  |         |     |  |         |  |  |         | 
|Basic                                                                                                                                                                                                                                                                                                  |  | 121,473 |  |  | 121,527 |     |  | 121,518 |  |  | 121,434 |   |  | 121,548 |  |  | 121,649 |     |  | 121,515 |  |  | 121,394 | 
|Diluted                                                                                                                                                                                                                                                                                                |  | 122,322 |  |  | 122,047 |     |  | 121,985 |  |  | 121,434 |   |  | 122,143 |  |  | 122,506 |     |  | 122,273 |  |  | 122,161 | 
|(1) Results reflect the acquisition of Gold Toe Moretz from
April 15, 2011. (2) Results reflect the acquisition of Anvil from May 9,
2012.(3) Quarterly EPS may not add to year-to-date EPS due to
rounding.
Certain minor rounding variances exist between the financial
statements and this summary. | 

SEASONALITY AND OTHER FACTORS AFFECTING THE VARIABILITY OF
RESULTS AND FINANCIAL CONDITION

Our results of operations for interim periods and for full
fiscal years are impacted by the variability of certain factors, including, but
not limited to, changes in end-use demand and customer demand, our customers
decision to increase or decrease their inventory levels, changes in our sales
mix, and fluctuations in selling prices and raw material costs. While our
products are sold on a year-round basis, our business experiences seasonal
changes in demand which results in quarterly fluctuations in operating results.
Historically, net sales have been lowest in the first quarter and highest in the
third quarter of the fiscal year, reflecting the seasonality of the Printwear
segment net sales, which have historically accounted for a majority of the
Companys consolidated net sales. Demand for T-shirts is lowest in the first
fiscal quarter and highest in the third quarter of each fiscal year, when
distributors purchase inventory for the peak Summer selling season. Demand for
fleece is typically highest, in advance of the Fall and Winter seasons, in the
third and fourth quarters of each fiscal year. For our sock products, demand is
typically highest in the first and fourth quarters of each fiscal year,
stimulated largely by the cooler weather and the need to support requirements
for the back-to-school period and the holiday season in retail.

GILDAN 2012 REPORT TO SHAREHOLDERS P.15

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

Historically, we have typically operated our mature facilities
at full capacity throughout the year in order to be cost efficient.
Consequently, with the seasonal sales trends of our business, we experience
fluctuations in our inventory levels throughout the year, in particular a
build-up of T-shirt inventory levels in the first half of the year.

In the first quarter of fiscal 2012, the Company reported a net
loss due to the impact of significant distributor inventory destocking, a
special distributor inventory devaluation discount of approximately $19 million,
and a charge to cost of sales of approximately $9 million relating to extended
holiday production downtime in December.

Our results are also impacted by fluctuations in the price of
raw materials and other input costs. Cotton and polyester fibres are the primary
raw materials used in the manufacture of our products, and we also use
chemicals, dyestuffs and trims which we purchase from a variety of suppliers.
Cotton prices, which directly affect the cost of the cotton fibres we purchase,
are affected by weather, consumer demand, speculation on the commodities market,
the relative valuations and fluctuations of the currencies of producer versus
consumer countries and other factors that are generally unpredictable. While we
enter into contracts in advance of delivery to establish firm prices for the
cotton component of our yarn, our realized cotton costs can fluctuate
significantly between interim and annual reporting periods. Energy costs in our
results of operations are also affected by fluctuations in crude oil and
petroleum prices, which can also influence transportation costs and the cost of
related items used in our business, such as polyester fibres, chemicals,
dyestuffs and trims.

As noted under the section entitled Economic Environment and
Business Outlook, the Companys results in the first half and in part in the
third quarter of fiscal 2012 were significantly negatively affected by the
consumption of inventory manufactured with cotton purchased at historically high
cotton price levels during the unprecedented rise of cotton prices which
occurred in 2011. In addition, in the first quarter of fiscal 2012, the Company
reduced selling prices for its Printwear products ahead of the consumption of
this high-cost inventory. Consequently, gross margins were negatively impacted
during this period relative to historical levels due to the misalignment of
industry selling prices and the cost of cotton in inventories being consumed.
Gross margins in the fourth quarter of fiscal 2012 reflected the return to more
normal levels of historical profitability as industry selling prices and the
cost of cotton in inventories consumed in the quarter were more closely
aligned.

Business acquisitions may affect the comparability of results.
As noted in the table under Summary of Quarterly Results, the quarterly
financial data reflects the acquisition of Gold Toe Moretz from April 15, 2011
and the acquisition of Anvil from May 9, 2012.

Management decisions to consolidate or reorganize operations,
including the closure of facilities, may result in significant restructuring
costs in an interim or annual period. In addition, the effect of asset
write-downs, including provisions for bad debts and slow moving inventories, can
affect the variability of our results. The section entitled Restructuring and
acquisition-related costs in this annual MD&A contains a discussion of
costs related to the Companys restructuring activities and business
acquisitions.

In the third quarter of fiscal 2012, following the transition
of production from Rio Nance 1 to Rio Nance 5, the Company suspended production
at its Rio Nance 1 facility temporarily as it proceeds with plans to modernize
and refurbish the facility. Consequently, a non-cash charge of approximately
$0.03 per share to write off obsolete equipment at Rio Nance 1 was recorded in
the third quarter of fiscal 2012 and results in the second half of the fiscal
year also include transitional manufacturing inefficiencies related to the
ramp-down of the Rio Nance 1 facility and the ramp-up of Rio Nance 5.
Depreciation expense will continue to be recorded on non-obsolete idle equipment
during the temporary closure of Rio Nance 1.

Our reported amounts for sales, SG&A expenses, and
financial expenses/income are impacted by fluctuations in the U.S. dollar versus
certain other currencies as described in the Financial Risk Management section
of this annual MD&A. The Company may periodically use derivative financial
instruments to manage risks related to fluctuations in foreign exchange
rates.

GILDAN 2012 REPORT TO SHAREHOLDERS P.16

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

FOURTH QUARTER RESULTS

Consolidated net sales in the fourth quarter of fiscal 2012
amounted to $561.7 million, up $80.1 million, or 16.6% from $481.6 million in
the fourth quarter of fiscal 2011, and in line with the Companys guidance of
approximately $560 million provided on August 2, 2012. Sales for the Printwear
segment amounted to $376.8 million, up $26.3 million, or 7.5% from $350.5
million in the fourth quarter of fiscal 2011, and sales for the Branded Apparel
segment were $184.8 million, up $53.7 million, or 41.0%, from $131.1 million in
the fourth quarter of last year.

The increase in sales in the Printwear segment compared to the
fourth quarter of fiscal 2011 was due to higher unit sales volumes, as a result
of continuing organic growth in the U.S. market, the impact of the Anvil
acquisition, and continuing penetration in the Companys target international
markets. The impact on Printwear net sales revenues of higher unit sales volumes
was partially offset by lower net selling prices, unfavourable product-mix, and
higher seasonal inventory destocking in the U.S. distributor channel compared to
the fourth quarter of fiscal 2011.

The growth in sales for the Branded Apparel segment was due
primarily to the impact of the acquisition of Anvil, together with more
favourable product-mix and higher net selling prices. Excluding Anvil, sales
revenues for Branded Apparel in the fourth quarter were up approximately 18%
compared to the fourth quarter of fiscal 2011.

Consolidated gross profit for the fourth quarter of fiscal 2012
of $160.2 million increased by $60.8 million from consolidated gross profit of
$99.4 million during the fourth quarter of fiscal 2011. As a percentage of
sales, gross margins for the fourth quarter of fiscal 2012 were 28.5%, up from
20.6% in the fourth quarter of fiscal 2011. The significant increase in gross
margins was due to the impact of lower-cost cotton and more favourable
product-mix and higher selling prices for Branded Apparel, partially offset by
lower selling prices and unfavourable product-mix for Printwear, together with
higher manufacturing input costs, as well as a charge related to a product
labelling issue in the Branded Apparel segment which was disclosed in the
Companys press release dated October 16, 2012.

SG&A expenses in the fourth quarter of fiscal 2012 were
$64.1 million, or 11.4% of net sales, compared with $53.4 million, or 11.1% of
net sales, in the fourth quarter of fiscal 2011. The increase in SG&A
expenses was largely due to the impact of the acquisition of Anvil, increased
marketing and advertising expenses and higher legal and professional fees.
Excluding the impact of the acquisition of Anvil, SG&A expenses in the
fourth quarter of fiscal 2012 were approximately $58.0 million up approximately
8.6% from fiscal 2011.

In the fourth quarter, the Printwear segment reported operating
income of $100.7 million, compared with $68.4 million in the fourth quarter of
fiscal 2011. The operating income increase in Printwear was primarily due to the
impact of lower cotton costs, higher unit sales volumes, and the accretive
impact of the Anvil acquisition, partially offset by lower selling prices and
unfavourable product-mix. The Branded Apparel segment reported quarterly
operating income of $15.1 million, compared with an operating loss of $5.7
million in the fourth quarter of fiscal 2011. The improved results for Branded
Apparel were due to lower cotton costs, more favourable product-mix, higher
selling prices, and the accretive impact of the Anvil acquisition, partially
offset by the charge for the labelling issue, previously noted.

Net earnings for the fourth quarter of fiscal 2012 were $89.0
million or $0.73 per share on a diluted basis, up respectively 83.5% and 82.5%
from $48.5 million or $0.40 per share in the fourth quarter of fiscal 2011.
Results for the fourth quarter of fiscal 2012 and fiscal 2011 include after-tax
restructuring and acquisition-related costs of $5.9 million, and $3.5 million,
respectively, primarily related to the write-down of real estate assets held for
divestiture since the closure of U.S. sock manufacturing operations, as well as
severance costs resulting from the integration of acquisitions. Excluding
restructuring and acquisition-related costs in both years, adjusted net earnings
for the fourth quarter of fiscal 2012 amounted to $94.9 million, or $0.78 per
share, up 82.5% and 81.4% respectively, compared to $52.0 million, or $0.43 per
share in the fourth quarter of fiscal 2011. The Company had previously projected
adjusted net earnings of close to $0.80 per share for the fourth quarter, when
it reported its third quarter results on August 2, 2012. Adjusted net

GILDAN 2012 REPORT TO SHAREHOLDERS P.17

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

earnings for the fourth quarter included an after-tax charge of
$0.02 per share related to the product labelling issue previously noted, which
had not been anticipated in the Companys fourth quarter EPS guidance. The
growth in the Companys net earnings in the fourth quarter compared to last year
was due to the benefit of significantly lower cotton costs, higher Printwear
unit sales volumes, more favourable product-mix and higher selling prices for
Branded Apparel and the initial accretion from the acquisition of Anvil. These
positive factors were partially offset by lower net selling prices for
Printwear, primarily reflecting the selling price reduction implemented in the
first quarter of fiscal 2012, unfavourable Printwear product-mix, higher
electricity, labour and other manufacturing input costs, the above-mentioned
charge relating to the labelling issue, and higher income taxes due to the
improved profitability of Branded Apparel.

FINANCIAL CONDITION

Trade accounts receivable, which are net of accrued sales
discounts, amounted to $260.6 million as at September 30, 2012 compared to
$191.6 million at the end of fiscal 2011. The increase in trade accounts
receivable of $69.0 million, or 36% was mainly due to higher sales in the fourth
quarter compared to the same period of fiscal 2011, and the inclusion of
accounts receivable from the acquisition of Anvil which amounted to $26.1
million as of September 30, 2012.

Inventories as at September 30, 2012 were $553.1 million
compared to $568.3 million at the end of fiscal 2011. Excluding the inventories
from the acquisition of Anvil which amounted to $65.6 million as at September
30, 2012, inventories decreased by $80.8 million from the end of fiscal 2011,
due mainly to lower average unit costs as a result of significantly lower cotton
costs, partially offset by a planned increase in activewear inventory volumes to
service projected demand.

Assets held for sale of $8.0 million as at September 30, 2012
and $13.1 million as at October 2, 2011 include property, plant and equipment
primarily relating to closed facilities. The decrease in assets held for sale
was due mainly to a $5.0 million charge recorded for the reduction in the fair
value of assets held for sale, primarily for our former sock manufacturing and
distribution facilities in Fort Payne, Alabama that were closed in prior
years.

Property, plant and equipment, which are net of accumulated
depreciation, including asset impairment losses, amounted to $552.4 million at
September 30, 2012, compared to $550.3 million at October 2, 2011. The slight
increase of $2.1 million reflected net capital additions of $68.1 million and
the inclusion of $14.8 million of property, plant and equipment acquired from
Anvil, offset by depreciation of $80.8 million. Capital additions included
expenditures primarily for our Rio Nance 5 textile facility and our biomass
energy project in Honduras. Capital expenditures for fiscal 2012 were slightly
below the Companys previous projection of approximately $90 million provided
on August 2, 2012 due to the later timing of certain expenditures which will now
be incurred in fiscal 2013.

Deferred income tax assets net of deferred income tax
liabilities were $3.4 million at September 30, 2012 compared to net deferred
income tax liabilities of $12.0 million at the end of fiscal 2011. The variation
in deferred income taxes was due to a deferred income tax recovery of $10.3
million and the acquisition of Anvil, which resulted in the assumption of
approximately $5.1 million of net deferred income tax assets at May 9, 2012 due
to the tax effect of temporary differences between the accounting and tax basis
of net assets acquired.

Intangible assets are comprised of customer contracts and
relationships, trademarks, license agreements, non-compete agreements and
computer software, and amounted to $260.0 million as at September 30, 2012
compared to $261.7 million at the end of fiscal 2011. The decrease of $1.7
million reflects amortization of $16.8 million, partially offset by $9.7 million
related to the acquisition of Anvil and $5.4 million related to expenditures for
the acquisition of the rights to the Gold Toe® trademark in Canada and computer
software.

GILDAN 2012 REPORT TO SHAREHOLDERS P.18

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

Goodwill of $141.9 million as at September 30, 2012 remained
unchanged from the end of fiscal 2011. Management performed its annual review
for impairment of goodwill, and trademarks which are considered to be indefinite
life intangible assets, and concluded that there has been no impairment as at
September 30, 2012.

Total assets were $1,896.4 million as at September 30, 2012,
compared to $1,858.5 million at the end of the previous year. Working capital
was $659.2 million as at September 30, 2012 compared to $577.7 million as at
October 2, 2011. The current ratio at the end of fiscal 2012 was 3.6 compared to
2.9 at the end of fiscal 2011.

Accounts payable and accrued liabilities amounted to $256.4
million as at September 30, 2012 compared to $298.0 million at the end of fiscal
2011. Excluding the accounts payable related to the acquisition of Anvil which
amounted to $34.6 million as at September 30, 2012, accounts payable and accrued
liabilities decreased by $76.2 million. The decrease from the end of fiscal 2011
was mainly due to the impact of lower cotton costs, as well as lower accruals
for variable compensation expenses.

Employee benefit obligations of $19.6 million as at September
30, 2012 (October 2, 2011 - $20.2 million) include liabilities related to the
Companys defined benefit plans, which consists primarily of $12.2 million
(October 2, 2011 - $12.6 million) related to the Companys statutory severance
obligations for its active employees located in the Caribbean Basin and Central
America, and $5.8 million (October 2, 2011 - $6.4 million) related to the
pension liability assumed in connection with the acquisition of Gold Toe Moretz
in fiscal 2011.

Provisions of $13.0 million as at September 30, 2012 increased
by $4.8 million compared to $8.2 million at the end of fiscal 2011. The increase
is due primarily to a provision of $4.5 million related to decommissioning and
site-restoration liabilities recorded in connection with the acquisition of
Anvil.

CASH FLOWS

Cash flows from operating activities in fiscal 2012 were $219.6
million compared to cash flows from operating activities of $163.6 million for
the previous year. Despite significantly lower net earnings this year due
primarily to the net loss that was reported in the first quarter of fiscal 2012,
operating cash flows increased by $56.0 million in fiscal 2012 when compared to
last year primarily as a result of lower increases in non-cash working capital
balances. The increase in non-cash working capital for fiscal 2012 negatively
impacted operating cash flows by $23.1 million compared with a negative impact
of $118.4 million for fiscal 2011. The year-over-year variance in working
capital was due mainly to the impact during fiscal 2012 of changes in cotton
prices on average inventory costs, with declining prices resulting in a
significant decrease in inventories during fiscal 2012, while increasing cotton
prices during fiscal 2011 contributed to an increase in inventories at the end
of last year. The positive impact of the decrease in inventories was partially
offset by the negative impact on operating cash flows of the decrease in
accounts payable as a result of declining cotton costs, as well as the increase
in accounts receivable as noted in the Financial Condition section of this
annual MD&A.

Cash flows used in investing activities were $162.0 million in
fiscal 2012, compared to $488.0 million in fiscal 2011. Cash flows used in
investing activities in fiscal 2012 included cash outflows for the acquisition
of Anvil of $87.4 million combined with capital spending of $76.8 million. Cash
flows used in investing activities in fiscal 2011 included cash outflows for the
acquisition of Gold Toe Moretz of $342.4 million combined with capital spending
of $160.0 million, partially offset by proceeds on the disposal of a corporate
asset of $13.2 million. For fiscal 2012, capital additions included expenditures
primarily for our Rio Nance 5 textile facility and our biomass energy project in
Honduras as noted under the Financial Condition section of this annual
MD&A. For fiscal 2011, capital additions consisted primarily of the
construction of our Rio Nance 5 textile facility, as well as expenditures
related to the ramp-up of our Rio Nance 4 sock facility, our biomass energy
project in Honduras, and other capacity expansion projects.

GILDAN 2012 REPORT TO SHAREHOLDERS P.19

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

Free cash flow totalled $145.0 million in fiscal 2012 compared
to $18.0 million for the same period last year, due to the higher operating cash
flows as noted above, and lower capital expenditures. Free cash flow for fiscal
2012 exceeded the Companys previous estimate of free cash flow in excess of
$100 million provided on August 2, 2012 primarily as a result of the lower than
anticipated working capital requirements and capital expenditures. Free cash
flow is comprised of cash flows from operating activities, including net changes
in non-cash working capital balances, less cash used in investing activities,
excluding business acquisitions. See the heading entitled Free Cash Flow under
the section entitled Definition and Reconciliation of Non-GAAP Measures in
this annual MD&A.

Cash flows used in financing activities in fiscal 2012 amounted
to $69.1 million compared to cash flows from financing activities of $155.6
million in fiscal 2011. Net cash flows used in financing activities in fiscal
2012 reflected a net reduction of amounts drawn on our revolving long-term
credit facility of $28.0 million, compared to an increase in funds drawn on the
revolving long-term credit facility of $209.0 million for the same period last
year which reflected funds that were utilized to finance the acquisition of Gold
Toe Moretz. The Company paid an aggregate of $36.6 million of dividends during
fiscal 2012 for dividends declared in November 2011, February 2012, May 2012,
and August 2012. During fiscal 2011, the Company only paid three quarterly
dividends due to the timing of the Companys initiation of its quarterly
dividend in fiscal 2011. The Company also repurchased and cancelled 0.4 million
common shares during fiscal 2011 for a total cost of $10.5 million under our
normal course issuer bid. During fiscal 2012, the Company purchased common
shares of Gildan on the open market for an amount totaling $6.0 million compared
to $2.2 million in fiscal 2011, for the purpose of settling the vesting of
non-Treasury RSUs in lieu of cash.

LIQUIDITY AND CAPITAL RESOURCES

In recent years, we have funded our operations and capital
requirements with cash generated from operations. A revolving long-term credit
facility has been periodically utilized to finance seasonal peak working capital
requirements and business acquisitions, including our acquisition of Anvil in
May 2012 and Gold Toe Moretz in April 2011. Our primary uses of funds on an
ongoing basis are for working capital requirements, capital expenditures, and
payment of dividends. In addition, we may also use funds for business
acquisitions.

We have a committed revolving long-term credit facility of $800
million, on an unsecured basis. Amounts drawn under the facility during fiscal
2012 bore interest at a variable bankers acceptance or U.S. LIBOR-based
interest rate plus a spread ranging from 125 to 200 basis points. As at
September 30, 2012, $181 million (October 2, 2011  $209 million) was drawn
under this facility bearing an effective interest rate for the period of
2.2%, including the impact of interest rate swaps. In addition, an amount of
$6.0 million (October 2, 2011 - $5.8 million) has been committed against this
facility to cover various letters of credit.In November 2012, we amended
the revolving long-term credit facility to extend the maturity date from June
2016 to January 2018. The amended agreement provides for an annual extension
clause, subject to the approval of the lenders. It also provides for a reduction
in drawn pricing when the net debt to EBITDA ratio is below 1.0:1, and reduced
undrawn pricing. Amounts drawn under the facility now bear interest at a
variable bankers acceptance or U.S. LIBOR-based interest rate plus a spread
ranging from 100 to 200 basis points.

Total indebtedness as at September 30, 2012 was $181.0 million
compared to $209.0 million as at October 2, 2011. We ended the year with net
indebtedness of $110.6 million compared to net indebtedness of $127.0 million as
at the end of fiscal 2011, as the excess of free cash flows over cash
requirements for acquisitions and divided payments was used to reduce our level
of net indebtedness. Total indebtedness is comprised of bank indebtedness and
long-term debt (including the current portion), and net indebtedness is
calculated as total indebtedness net of cash and cash equivalents as described
under the section entitled Definition and Reconciliation of Non-GAAP measures
in this annual MD&A.

As disclosed in note 12 to the 2012 audited annual consolidated
financial statements, the Company is required to comply with certain covenants
including maintenance of a net debt to trailing twelve months

GILDAN 2012 REPORT TO SHAREHOLDERS P.20

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

EBITDA ratio below 3.0:1, although the credit agreement
provides that this limit may be exceeded in the short term under certain
circumstances, as well as an interest coverage ratio of at least 3.5:1. EBITDA
is defined under the facility as net earnings before interest, income taxes,
depreciation and amortization, with adjustments for certain non-recurring items.
As at September 30, 2012, the Company was in compliance with these
covenants.

Gildan is currently projecting capital expenditures for fiscal
2013 of approximately $200 million, including a total of approximately $85
million for yarn-spinning investments. The balance of the fiscal 2013 capital
expenditure program is primarily for expansion of textile capacity in Honduras,
including the carry-over of expenditures from fiscal 2012 for Rio Nance 5 and
the refurbishment of Rio Nance 1, as well as for expansion of distribution
capacity, including the construction of a new distribution centre in Honduras
and continued investments in biomass projects.

We expect that cash flows from operating activities and the
unutilized financing capacity under our revolving long-term credit facility will
continue to provide us with sufficient liquidity for the foreseeable future to
fund our organic growth strategy, including anticipated working capital and
capital expenditure requirements, to fund dividends to shareholders, as well as
provide us with financing flexibility to take advantage of potential acquisition
opportunities which complement our organic growth strategy.

The Company, upon approval from its Board of Directors, may
issue or repay long-term debt, issue or repurchase shares, or undertake other
activities as deemed appropriate under the specific circumstances.

OUTSTANDING SHARE DATA

Our common shares are listed on the New York Stock Exchange
(NYSE) and the Toronto Stock Exchange (TSX) under the symbol GIL. As at November
30, 2012 there were 121,612,283 common shares issued and outstanding along with
1,233,323 stock options and 877,514 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 pre-determined option 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. However, the vesting of at least 50% of each Treasury RSU grant is
contingent on the achievement of performance conditions that are primarily based
on the Companys average return on assets performance for the period as compared
to the S&P/TSX Capped Consumer Discretionary Index, excluding income trusts,
or as determined by the Board of Directors.

DECLARATION OF DIVIDEND

During fiscal 2012, the Company paid dividends of $36.6
million. On November 28, 2012, the Board of Directors approved a 20% increase in
the amount of the current quarterly dividend and declared a cash dividend of
$0.09 per share for an expected aggregate payment of $10.9 million which will be
paid on January 7, 2013 on all of the issued and outstanding common shares of
the Company, rateably and proportionately to the holders of record on December
13, 2012. 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.

The Board of Directors consider several factors when deciding
to declare quarterly cash dividends, including the Companys present and future
earnings, cash flows, capital requirements and present and/or future regulatory
and legal restrictions. There can be no assurance as to the declaration of
future quarterly cash dividends. Although the Companys revolving long-term
credit facility requires compliance with lending covenants in order to pay
dividends, these covenants are not currently, and are not expected to be, a
constraint to the payment of dividends under the Companys dividend policy.

GILDAN 2012 REPORT TO SHAREHOLDERS P.21

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

NORMAL COURSE ISSUER BID

In December 2011, the Company implemented a normal course
issuer bid to repurchase for cancellation up to one million outstanding common
shares of the Company on the TSX and the NYSE representing approximately 0.8% of
its issued and outstanding common shares, in accordance with the requirements of
the TSX (the NCIB). During fiscal 2012, there were no repurchases under the
NCIB. The Company did not renew the NCIB which expired on December 5, 2012.

LEGAL PROCEEDINGS

Securities class actionsIn June 2008, the Company
and certain of its senior officers were named as defendants in a number of class
action lawsuits filed in the United States District Court for the Southern
District of New York, which were subsequently consolidated, alleging claims
under the U.S. securities laws, as well as in class action lawsuits filed in the
Ontario Superior Court of Justice and in the Quebec Superior Court. Each of
these U.S. and Canadian lawsuits alleged, among other things, that the
defendants misrepresented the Companys financial condition and its financial
prospects in its earnings guidance concerning the 2008 fiscal year, which
guidance was subsequently revised on April 29, 2008.

In August 2010, the Company entered into an agreement to settle
all claims raised in these class action lawsuits and final court approval of the
settlement was obtained from each of the courts in February and March 2011.
Consequently, all of the actions have been dismissed. The settlement agreement
provided for a total settlement amount of $22.5 million, which was entirely
funded by the Companys insurers. Therefore no provision has been recorded in
the consolidated financial statements and no amounts have been disbursed by the
Company in respect of the settlement.

Claims and litigationOn October 12, 2012, Russell
Brands, LLC, an affiliate of Fruit of the Loom, filed a lawsuit against the
Company in the United States District Court of the Western District of Kentucky
at Bowling Green, alleging trademark infringement and unfair competition and
seeking injunctive relief and unspecified money damages. The litigation concerns
labelling errors on certain inventory products shipped by Gildan to one of its
customers. Upon being made aware of the error, the Company took immediate action
to retrieve the disputed products. The Company believes that the value of the
products in dispute is immaterial.

OUTLOOK

A discussion of managements expectations as to our outlook for
fiscal 2013 is contained in our fourth quarter earnings results press release
dated November 29, 2012 under the sections entitled Fiscal 2013 Guidance and
Fiscal 2013 Cash Flow. The press release is available on the SEDAR website at
www.sedar.com, on the EDGAR website at www.sec.govand on our
website at www.gildan.com.

FINANCIAL RISK MANAGEMENT

This section of the MD&A provides disclosures relating to
the nature and extent of the Companys exposure to risks arising from financial
instruments, including credit risk, liquidity risk, foreign currency risk and
interest rate risk, as well as risks arising from commodity prices, and how the
Company manages those risks. The disclosures under this section, in conjunction
with the information in note 16 to the 2012 audited annual consolidated
financial statements, are designed to meet the requirements of IFRS 7,
Financial Instruments: Disclosures, and are therefore incorporated into,
and are an integral part of, the 2012 audited annual consolidated financial
statements.

The Company may periodically use derivative financial
instruments to manage risks related to fluctuations in foreign exchange rates,
commodity prices and interest rates. Derivative financial instruments are not
used for trading purposes.

GILDAN 2012 REPORT TO SHAREHOLDERS P.22

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

CREDIT RISK

Credit risk is the risk of an unexpected loss if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises primarily from the Companys trade receivables. The
Company may also have credit risk relating to cash and cash equivalents, forward
foreign exchange contracts, zero-cost collar options and interest rate swaps,
which it manages by dealing only with highly-rated North American and European
financial institutions. Our trade receivables and credit exposure fluctuate
throughout the year based on the seasonality of our sales and other factors. The
Companys average trade receivables and credit exposure during an interim
reporting period may be significantly higher than the balance at the end of that
reporting period.

The Companys credit risk for trade receivables is
concentrated, as the majority of its sales are to a relatively small group of
wholesale distributors within the Printwear segment and mass-market retailers
within the Branded Apparel segment. As at September 30, 2012, the Companys ten
largest trade debtors accounted for 56% of trade accounts receivable, of which
one wholesale customer within the Printwear segment accounted for 9% and one
mass-market retailer within the Branded Apparel segment accounted for 11%. Of
the Companys top ten trade debtors, seven are in the Printwear segment, three
are in the Branded Apparel segment and all ten are located in the United States.
The remaining trade receivable balances are dispersed among a larger number of
debtors across many geographic areas including the United States, Canada,
Europe, Mexico and the Asia-Pacific region.

Most sales are invoiced with payment terms of between 30 to 60
days. In accordance with industry practice, sales to wholesale distributors of
certain seasonal products, primarily in the second half of the fiscal year, are
invoiced with extended payment terms, generally not exceeding six months. From
time-to-time, the Company may initiate other special incentive programs with
extended payment terms.

Most of the Companys customers have been transacting with the
Company or its subsidiaries for several years. Many distributors and other
customers in the Printwear segment are highly-leveraged with significant
reliance on trade credit terms provided by a few major vendors, including the
Company, and third-party debt financing, including bank debt secured with
accounts receivable and inventory pledged as collateral. The financial leverage
of these customers may limit or prevent their ability to refinance existing
indebtedness or to obtain additional financing, and could affect their ability
to comply with restrictive debt covenants and meet other obligations. The
profile and credit quality of the Companys customers in the Branded Apparel
segment varies significantly. Adverse changes in a customers financial
condition could cause us to limit or discontinue business with that customer,
require us to assume more credit risk relating to that customers future
purchases or result in uncollectible accounts receivable from that customer.
Future credit losses relating to any one of our top ten customers could be
material and could result in a material charge to earnings.

The Companys extension of credit to customers involves
considerable judgment and is based on an evaluation of each customers financial
condition and payment history. The Company has established various internal
controls designed to mitigate credit risk, including a dedicated credit function
which recommends customer credit limits and payment terms that are reviewed and
approved on a quarterly basis by senior management at the Companys sales
offices in Barbados and Charleston, South Carolina. Where available, the
Companys credit departments periodically review external ratings and customer
financial statements, and in some cases obtain bank and other references. New
customers are subject to a specific vetting and pre-approval process. From time
to time, the Company will temporarily transact with customers on a prepayment
basis where circumstances warrant. While the Companys credit controls and
processes have been effective in mitigating credit risk, these controls cannot
eliminate credit risk and there can be no assurance that these controls will
continue to be effective, or that the Companys low credit loss experience will
continue.

The Companys exposure to credit risk for trade receivables by
geographic area and operating segment was as follows as at:

GILDAN 2012 REPORT TO SHAREHOLDERS P.23

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

|(in $ millions)                                                    |  | September 30, 2012 |   |  | October 2, 2011 |   |  | October 4, 2010 |  
|------------------------------------------------------------------ |  | ------------------ | - |  | --------------- | - |  | --------------- | -
|Trade receivables by geographic area:                              |  |                    |   |  |                 |   |  |                 |  
|United States                                                      |  | 237.5              |   |  | 163.3           |   |  | 118.4           |  
|Canada                                                             |  | 5.1                |   |  | 8.2             |   |  | 6.4             |  
|Europe and
      other                                             |  | 18.0               |   |  | 20.1            |   |  | 20.9            |  
|Total trade receivables                                            |  | 260.6              |   |  | 191.6           |   |  | 145.7           |  
|                                                                   |  |                    |   |  |                 |   |  |                 |  
|Trade receivables by operating segment:                            |  |                    |   |  |                 |   |  |                 |  
|Printwear                                                          |  | 142.5              |   |  | 118.0           |   |  | 96.3            |  
|Branded Apparel                                                    |  | 118.1              |   |  | 73.6            |   |  | 49.4            |  
|Total trade
      receivables                                      |  | 260.6              |   |  | 191.6           |   |  | 145.7           |  
|                                                                   |  |                    |   |  |                 |   |  |                 |  
|The aging of trade receivable
      balances was as follows as at: | 
|                                                                   |  |                    |   |  |                 |   |  |                 |  
|(in $
      millions)                                              |  | September 30, 2012 |   |  | October 2, 2011 |   |  | October 4, 2010 |  
|Not past due                                                       |  | 226.6              |   |  | 166.9           |   |  | 129.1           |  
|Past due 0-30 days                                                 |  | 32.9               |   |  | 21.0            |   |  | 17.5            |  
|Past due 31-60 days                                                |  | 3.0                |   |  | 2.8             |   |  | 3.5             |  
|Past due 61-120 days                                               |  | 1.2                |   |  | 1.4             |   |  | 1.2             |  
|Past due over 121 days                                             |  | 1.4                |   |  | 3.6             |   |  | 1.4             |  
|Trade receivables                                                  |  | 265.1              |   |  | 195.7           |   |  | 152.7           |  
|Less allowance for doubtful accounts                               |  | (4.5               | ) |  | (4.1            | ) |  | (7.0            | )
|Total trade
      receivables                                      |  | 260.6              |   |  | 191.6           |   |  | 145.7           |  

LIQUIDITY RISK

Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they fall due. We require continued access to
capital markets to support our operations as well as to achieve our strategic
plans. We rely on cash resources, debt and cash flows generated from operations
to satisfy our financing requirements. Any impediments to our ability to
continue to meet the covenants and conditions contained in our revolving
long-term credit facility as well as our ability to access capital markets, or
the failure of a financial institution participating in our revolving long-term
credit facility, or an adverse perception in capital markets of our financial
condition or prospects, could have a material impact on our financing
capability. In addition, our access to financing at reasonable interest rates
could become influenced by the economic and credit market environment.

We manage liquidity risk through the management of our capital
structure and financial leverage, as outlined in note 26 to the 2012 audited
annual consolidated financial statements. In addition, we manage liquidity risk
by continuously monitoring actual and projected cash flows, taking into account
the seasonality of our sales and receipts. We also monitor the impact of credit
market conditions in the current environment. The Board of Directors reviews and
approves the Companys operating and capital budgets, as well as transactions
such as the declaration of dividends, the initiation of share repurchase
programs, mergers, acquisitions and other major investments or divestitures.

Off-balance sheet arrangements and maturity analysis of
contractual obligationsIn the normal course of business, we enter into
contractual obligations that will require us to disburse cash over future
periods. All commitments have been reflected in our consolidated statements of
financial position except for operating leases and other purchase obligations
including minimum annual lease payments under operating leases for premises,
equipment, aircraft and minimum royalty payments, which are included in the
table of contractual obligations that follows. The following table sets forth
the maturity of our contractual obligations by period for the following items as
at September 30, 2012, excluding derivative financial instruments and future
interest payments:

GILDAN 2012 REPORT TO SHAREHOLDERS P.24

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

|                                         |  | Carrying |  |  | Contractual      |  |  | Less than
      1 |  |  | 1 to 3             |  |  | 4 to 5             |  |  | More than
      5  | 
|---------------------------------------- |  | -------- |  |  | ---------------- |  |  | ----------------- |  |  | ------------------ |  |  | ------------------ |  |  | ------------------ | 
|(in $
      millions)                    |  | amount   |  |  | cash
      flows |  |  | fiscal
      year |  |  | fiscal
      years |  |  | fiscal
      years |  |  | fiscal
      years | 
|                                         |  |          |  |  |                  |  |  |                   |  |  |                    |  |  |                    |  |  |                    | 
|Accounts payable and accrued liabilities |  | 256.4    |  |  | 256.4            |  |  | 256.4             |  |  | -                  |  |  | -                  |  |  | -                  | 
|Long-term debt                           |  | 181.0    |  |  | 181.0            |  |  | -                 |  |  | 181.0              |  |  | -                  |  |  | -                  | 
|Purchase obligations                     |  | -        |  |  | 131.1            |  |  | 131.1             |  |  | -                  |  |  | -                  |  |  | -                  | 
|Operating leases and other obligations   |  | -        |  |  | 140.3            |  |  | 26.7              |  |  | 75.4               |  |  | 32.8               |  |  | 5.4                | 
|Total contractual
      obligations      |  | 437.4    |  |  | 708.8            |  |  | 414.2             |  |  | 256.4              |  |  | 32.8               |  |  | 5.4                | 

As disclosed in note 25 to our 2012 audited annual consolidated
financial statements, we have granted corporate guarantees, irrevocable standby
letters of credit and surety bonds to third parties to indemnify them in the
event the Company and some of its subsidiaries do not perform their contractual
obligations. As at September 30, 2012, the maximum potential liability under
these guarantees was $16.5 million, of which $6.9 million was for surety bonds
and $9.6 million was for corporate guarantees and standby letters of credit.

Derivative financial instrumentsThe Company may
periodically use derivative financial instruments to manage risks related to
fluctuations in exchange rates, commodity prices and interest rates. Derivative
financial instruments are not used for speculative purposes. As at September 30,
2012, the Company had forward foreign exchange contracts outstanding in order to
minimize the exposure of forecasted cash inflows and outflows in currencies
other than the U.S. dollar. Please refer to note 16 to the 2012 audited annual
consolidated financial statements for a description of the maturities, carrying
values and fair values of the derivative financial instruments outstanding as at
September 30, 2012.

FOREIGN CURRENCY RISK

The majority of the Companys cash flows and financial assets
and liabilities are denominated in U.S. dollars, which is the Companys
functional and reporting currency. Foreign currency risk is limited to the
portion of the Companys business transactions denominated in currencies other
than U.S. dollars, primarily for sales and distribution expenses for customers
outside of the United States, and head office expenses in Canada. The Companys
exposure relates primarily to changes in the U.S. dollar versus the Canadian
dollar, the British pound, the Euro, the Australian dollar and the Mexican peso
exchange rates. For the Companys foreign currency transactions, fluctuations in
the respective exchange rates relative to the U.S. dollar will create volatility
in the Companys cash flows and the reported amounts for sales and SG&A
expenses in its consolidated statements of earnings and comprehensive income,
both on a period-to-period basis and compared with operating budgets and
forecasts. Additional earnings variability arises from the translation of
monetary assets and liabilities denominated in currencies other than the U.S.
dollar at the rates of exchange at each reporting dates, the impact of which is
reported as a foreign exchange gain or loss and included in financial expense
(income) in the statements of earnings and comprehensive income.

The Company also incurs a portion of its manufacturing costs in
foreign currencies, primarily payroll costs paid in Honduran Lempiras. The
Lempira to U.S. dollar exchange rate has not fluctuated significantly in recent
years. However, should there be a change in the Lempira to U.S. dollar exchange
rate in the future, such change may have an impact on our operating results.

The Companys objective in managing its foreign currency risk
is to minimize its net exposures to foreign currency cash flows, by transacting
with third parties in U.S. dollars to the maximum extent possible and practical,
and holding cash and cash equivalents and incurring borrowings in U.S. dollars.
The Company monitors and forecasts the values of net foreign currency cash
flows, and from time-to-time will authorize the use of derivative financial
instruments such as forward foreign exchange contracts, and zero-cost collar

GILDAN 2012 REPORT TO SHAREHOLDERS P.25

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

options to economically hedge a portion of foreign currency
cash flows, with maturities of up to two years. The Company had forward foreign
exchange contracts outstanding as at September 30, 2012 consisting primarily of
contracts to sell or buy Euros, British pounds, Australian dollars, Canadian
dollars, and Mexican pesos in exchange for U.S. dollars. These outstanding
contracts and other foreign exchange contracts that were settled during fiscal
2012 were designated as cash flow hedges and qualified for hedge accounting. We
refer the reader to note 16 to the 2012 audited annual consolidated financial
statements for details of these financial derivative contracts and the impact of
applying hedge accounting.

The following tables provide an indication of the Companys
significant foreign currency exposures included in the consolidated statement of
financial position as at September 30, 2012 arising from financial
instruments:

|                                         |  | September 30, 2012 |  
|---------------------------------------- |  | ------------------ | -
|(in U.S. $
      millions)               |  | CAD                |  
|Cash and cash equivalents                |  | 16.0               |  
|Trade accounts receivable                |  | 4.8                |  
|Accounts payable and accrued liabilities |  | (24.9              | )

Based on the Companys foreign currency exposures arising from
financial instruments noted above, and the impact of outstanding derivative
financial instruments designated as effective hedging instruments, varying the
foreign exchange rates to reflect a 5 percent strengthening of the U.S. dollar
would have increased (decreased) net earnings and other comprehensive income as
follows, assuming that all other variables remained constant:

|                                                               |  | For the year ended September 30,
      2012 | 
|-------------------------------------------------------------- |  | ------------------------------------------- | 
|(in U.S. $
      millions)                                     |  | CAD                                         | 
|Impact on net earnings before income taxes                     |  | 0.2                                         | 
|Impact on other
      comprehensive income before income taxes |  | 1.3                                         | 

An assumed 5 percent weakening of the U.S. dollar during the
year ended September 30, 2012 would have had an equal but opposite effect on the
above currencies to the amounts shown above, on the basis that all other
variables remain constant.

COMMODITY RISK FOR COTTON

The Company is subject to the commodity risk of cotton prices
and cotton price movements, as the majority of its products are made of 100%
cotton or blends of cotton and synthetic fibres. The Company purchases
cotton-based yarn from third party yarn manufacturers as well as from its
yarn-spinning joint venture, CanAm. The Company assumes the risk of cotton price
fluctuations for these yarn purchases. The Company enters into contracts, up to
eighteen months in advance of future delivery dates, to establish fixed prices
for its cotton and cotton yarn purchases in order to reduce the effects of
fluctuations in the cost of cotton used in the manufacture of its products.
These contracts are not used for trading purposes, and are not considered to be
financial instruments that would need to be accounted for at fair value in the
Companys consolidated financial statements. Without taking into account the
impact of fixed price contracts, a change of $0.01 per pound in cotton prices
would affect the Companys annual raw material costs by approximately $4
million, based on estimated production levels for fiscal 2013.

The Company has the ability to enter into derivative financial
instruments, including market-traded cotton futures and option contracts, to
manage its exposure to movements in commodity prices. Such contracts would be
accounted for at fair value in the consolidated financial statements in
accordance with the accounting standards applicable to financial instruments. At
the end of fiscal 2012 and 2011, the Company had no significant cotton related
derivative financial instruments outstanding.

GILDAN 2012 REPORT TO SHAREHOLDERS P.26

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

INTEREST RATE RISK

The Companys interest rate risk is primarily related to the
Companys revolving long-term credit facility, for which amounts drawn are
primarily subject to LIBOR rates in effect at the time of borrowing, plus a
margin. Although LIBOR-based borrowings under the credit facility can be fixed
for periods of up to six months, the Company generally fixes rates for periods
of one to three months. The interest rates on amounts drawn on this facility and
on any future borrowings will vary and are unpredictable. Increases in short
term interest rates and increases in interest rates on new debt issues may
result in a material increase in interest charges.

The Company has the ability to enter into derivative financial
instruments that would effectively fix its cost of current and future borrowings
for an extended period of time. As at September 30, 2012, the Company had
interest rate swap contracts outstanding to fix the variable interest rates on
the designated interest payments of a portion of the borrowings under the
revolving long-term credit facility, which were designated as cash flows hedges
and qualified for hedge accounting. We refer the reader to note 16 to the 2012
audited annual consolidated financial statements for details of the interest
rate swap contracts and the impact of applying hedge accounting.

Based on the value of interest-bearing financial instruments
during the year ended September 30, 2012, an assumed 0.5 percentage point
increase in interest rates during such period would have increased (decreased)
net earnings and other comprehensive income as follows:

|(in $ millions)                                                |  | For the year ended September 30,
      2012 |  
|-------------------------------------------------------------- |  | ------------------------------------------- | -
|Impact on net earnings before income taxes                     |  | (1.1                                        | )
|Impact on other
      comprehensive income before income taxes |  | 2.2                                         |  

An assumed 0.5 percentage point decrease in interest rates
would have had an equal but opposite effect on net earnings and other
comprehensive income to the amounts shown above.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Our significant accounting policies are described in note 3 to
our 2012 audited annual consolidated financial statements. The preparation of
financial statements in conformity with IFRS requires management to make
estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the period in which
the estimates are revised and in any future periods affected. We have not made
any significant changes to our estimates in the past two years.

CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES

The following are critical judgements that management has made
in the process of applying accounting policies and that have the most
significant effect on the amounts recognized in the consolidated financial
statements:

Determination of cash-generating units (CGUs)The
identification of CGUs and grouping of assets into the respective CGUs is based
on currently available information about actual utilization experience and
expected future business plans. Management has taken into consideration various
factors in identifying its CGUs including how the Company manages and monitors
its operations, which is essentially based on operating segments that are
organized by the major customer markets they serve. As such, the Company has
identified its CGUs for purposes of testing the

GILDAN 2012 REPORT TO SHAREHOLDERS P.27

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

recoverability and impairment of non-financial assets to be the
same as the segments used for financial reporting purposes, which are the
Printwear and Branded Apparel operating segments.

Income taxesThe Companys income tax provisions and
income tax assets and liabilities are based on interpretations of applicable tax
laws, including income tax treaties between various countries in which the
Company operates as well as underlying rules and regulations with respect to
transfer pricing. These interpretations involve judgments and estimates and may
be challenged through government taxation audits that the Company is regularly
subject to. New information may become available that causes the Company to
change its judgment regarding the adequacy of existing income tax assets and
liabilities; such changes will impact net earnings in the period that such a
determination is made.

KEY SOURCES OF ESTIMATION UNCERTAINTY

Key sources of estimation uncertainty that have a significant
risk of resulting in a material adjustment to the carrying amount of assets and
liabilities within the next financial year are as follows:

Allowance for doubtful accountsThe Company makes an
assessment of whether accounts receivable are collectable, which takes into
account the credit-worthiness of each customer in order to estimate an
appropriate allowance for doubtful accounts. Furthermore, these estimates must
be continuously evaluated and updated. The Company is not able to predict
changes in the financial condition of its customers, and if circumstances
related to its customers financial condition deteriorate, the estimates of the
recoverability of trade accounts receivable could be materially affected and the
Company may be required to record additional allowances. Alternatively, if the
Company provides more allowances than needed, a reversal of a portion of such
allowances in future periods may be required based on actual collection
experience.

Inventory valuationThe Company regularly reviews
inventory quantities on hand and records a provision for those inventories no
longer deemed to be fully recoverable. The cost of inventories may no longer be
recoverable if those inventories are slow moving, damaged, if they have become
obsolete, or if their selling prices or estimated forecast of product demand
decline. If actual market conditions are less favorable than previously
projected, or if liquidation of the inventory no longer deemed to be fully
recoverable is more difficult than anticipated, additional provisions may be
required.

Business combinationsBusiness combinations are
accounted for in accordance with the acquisition method. On the date that
control is obtained, the identifiable assets, liabilities and contingent
liabilities of the acquired company are measured at their fair value. Depending
on the complexity of determining these valuations, the Company uses appropriate
valuation techniques which are generally based on a forecast of the total
expected future net discounted cash flows. These valuations are linked closely
to the assumptions made by management regarding the future performance of the
related assets and the discount rate applied.

Recoverability and impairment of non-financial
assetsThe calculation of value in use for purposes of measuring the
recoverable amount of non-financial asset involves the use of significant
assumptions and estimates with respect to a variety of factors, including
expected sales, gross margins, SG&A expenses, capital expenditures, cash
flows and the selection of an appropriate discount rate, all of which are
subject to inherent uncertainties and subjectivity. The assumptions are based on
annual business plans and other forecasted results as well as discount rates
which are used to reflect market based estimates of the risks associated with
the projected cash flows, based on the best information available as of the date
of the impairment test. Changes in circumstances, such as technological
advances, adverse changes in third party licensing arrangements, changes to the
Companys business strategy, and changes in economic conditions can result in
actual useful lives and future cash flows differing significantly from estimates
and could result in increased charges for amortization or impairment. Revisions
to the estimated useful lives of finite life non-financial assets or

GILDAN 2012 REPORT TO SHAREHOLDERS P.28

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

future cash flows constitute a
change in accounting estimate and are applied prospectively. There can be no
assurance that the estimates and assumptions used in the impairment tests will
prove to be accurate predictions of the future. If the future adversely differs
from managements best estimate of key economic assumptions, and if associated
cash flows materially decrease, the Company may be required to record material
impairment charges related to its non-financial assets.

Measurement of the estimate of expected expenditures for
decommissioning and site restoration costsThe measurement of the
provision for decommissioning and site restoration costs requires assumptions to
be made including expected timing of the event which would result in the outflow
of resources, the range of possible methods of decommissioning and site
restoration, and the expected costs that would be incurred to settle any
decommissioning and site restoration liabilities. The Company has measured the
provision using the present value of the expected expenditures which requires
assumptions on the discount rate to use. Revisions to any of the assumptions and
estimates used by management may result in changes to the expected expenditures
to settle the liability which would require adjustments to the provision which
may have an impact on the operating results of the Company in the period the
change occurs.

Income taxesThe Company recognizes deferred income
tax assets for unused tax losses, and deductible temporary differences only to
the extent that, in managements opinion, it is probable that future taxable
profit will be available against which available tax losses and temporary
differences can be utilized. The Companys projections of future taxable profit
involve the use of significant assumptions and estimates with respect to a
variety of factors, including future sales and operating expenses. There can be
no assurance that the estimates and assumptions used in our projections of
future taxable income will prove to be accurate predictions of the future, and
in the event that our assessment of the recoverability of these deferred tax
assets changes in the future, a material reduction in the carrying value of
these deferred tax assets could be required, with a corresponding charge to net
earnings.

ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS NOT YET
APPLIED

ACCOUNTING POLICIES

For periods beginning on or after October 2, 2011, the Company
has adopted IFRS as issued by the International Accounting Standards Board
(IASB) for the preparation of its consolidated financial statements. The
comparative figures for the fiscal year ended October 2, 2011 have been recast
to comply with IFRS. See note 29 to the 2012 audited consolidated financial
statements for details on the reconciliations of the Companys financial
statements from previous Canadian GAAP to IFRS. The Company applied the
accounting policies described in note 3 to the 2012 audited consolidated
financial statements.

NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET
APPLIED

A number of new accounting standards, and amendments to
accounting standards and interpretations, are not yet effective for the year
ending September 30, 2012, and have not been applied in preparing the audited
annual consolidated financial statements. These include:

Financial instrumentsIn October 2010, the IASB
released IFRS 9, Financial Instruments, which is the first part of a three-part
project to replace IAS 39, Financial Instruments: Recognition and Measurement.
This first part only covers classification and measurement of financial assets
and financial liabilities, with impairment of financial assets and hedge
accounting being addressed in the other two parts.

IFRS 9 uses a single approach to determine whether a financial
asset is measured at amortized cost or fair value, replacing the multiple rules
in IAS 39. The approach in IFRS 9 is based on how an entity manages

GILDAN 2012 REPORT TO SHAREHOLDERS P.29

---

| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

its
financial instruments and the contractual cash flow characteristics of the
financial assets. Most of the requirements in IAS 39 for classification and
measurement of financial liabilities were carried forward in IFRS 9. However,
requirements for measuring a financial liability at fair value have changed, as
the portion of the changes in fair value related to the entitys own credit risk
must be presented in other comprehensive income rather than in net earnings.
IFRS 9 will be effective for the Companys fiscal year beginning on October 5,
2015, with earlier application permitted. The Company has not yet assessed the
impact of the adoption of this standard on its consolidated financial
statements.

ConsolidationIn May 2011, the IASB released IFRS 10,
Consolidated Financial Statements, which replaces SIC-12, Consolidation -
Special Purpose Entities, and parts of IAS 27, Consolidated and Separate
Financial Statements. The new standard builds on existing principles by
identifying the concept of control as the determining factor in whether an
entity should be included in a companys consolidated financial statements. The
standard provides additional guidance to assist in the determination of control
where it is difficult to assess. IFRS 10 will be effective for the Companys
fiscal year beginning on September 30, 2013, with earlier application permitted.
The Company has not yet assessed the impact of the adoption of this standard on
its consolidated financial statements.

Joint arrangementsIn May 2011, the IASB released
IFRS 11, Joint Arrangements, which supersedes IAS 31, Interests in Joint
Ventures, and SIC-13, Jointly Controlled Entities - Non-monetary Contributions
by Venturers. IFRS 11 focuses on the rights and obligations of a joint
arrangement, rather than its legal form as is currently the case under IAS 31.
The standard addresses inconsistencies in the reporting of joint arrangements by
requiring the equity method to account for interests in joint ventures. IFRS 11
will be effective for the Companys fiscal year beginning on September 30, 2013,
with earlier application permitted. The Company has not yet assessed the impact
of the adoption of this standard on its consolidated financial statements.

Disclosure of interests in other entitiesIn May
2011, the IASB released IFRS 12, Disclosure of Interests in Other Entities. IFRS
12 is a new and comprehensive standard on disclosure requirements for all forms
of interests in other entities, including subsidiaries, joint arrangements,
associates, and unconsolidated structured entities. The standard requires an
entity to disclose information regarding the nature and risks associated with
its interests in other entities and the effects of those interests on its
financial position, financial performance and cash flows. IFRS 12 will be
effective for the Companys fiscal year beginning on September 30, 2013, with
earlier application permitted. The Company has not yet assessed the impact of
the adoption of this standard on its consolidated financial statements.

Fair value measurementIn May 2011, the IASB released
IFRS 13, Fair value measurement. IFRS 13 will improve consistency and reduce
complexity by providing a precise definition of fair value and a single source
of fair value measurement and disclosure requirements for use across IFRS. The
standard will be effective for the Companys fiscal year beginning on September
30, 2013, with earlier application permitted. The Company has not yet assessed
the impact of the adoption of this standard on its consolidated financial
statements.

Financial statement presentationIn June 2011, the
IASB amended IAS 1, Presentation of Financial Statements. The principal change
resulting from the amendments to IAS 1 is a requirement to group together items
within other comprehensive income that may be reclassified to the statement of
income. The amendments also reaffirm existing requirements that items in other
comprehensive income and net income should be presented as either a single
statement or two consecutive statements. The amendments to IAS 1 will be
effective for the Companys fiscal year beginning on October 1, 2012. As the
amendments only require changes in the presentation of items in other
comprehensive income, the Company does not expect the amendments to the standard
to have a material impact on its consolidated financial statements.

GILDAN 2012 REPORT TO SHAREHOLDERS P.30

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Employee benefits

In June 2011, the IASB amended IAS
19, Employee Benefits. Amongst other changes, the amendments require entities to
compute the financing cost component of defined benefit plans by applying the
discount rate used to measure post-employment benefit obligations to the net
post-employment benefit obligations (usually, the present value of defined
benefit obligations less the fair value of plan assets). Furthermore, the
amendments to IAS 19 enhance the disclosure requirements for defined benefit
plans, providing additional information about the characteristics of defined
benefit plans and the risks that entities are exposed to through participation
in those plans. The amendment to IAS 19 will be effective for the Companys
fiscal years beginning on September 30, 2013, with earlier application
permitted. The Company has not yet assessed the impact of the adoption of the
amendments on its consolidated financial statements.

RELATED PARTY TRANSACTIONS

We purchase a portion of our yarn requirements from our yarn
spinning joint venture, CanAm, which as at September 30, 2012 was a
jointly-controlled entity over which the Company exercises joint control. The
purchase of yarn from CanAm is in the normal course of operations and is
measured at the exchange amounts, which is the amount of consideration
established and agreed to by the related parties. For fiscal 2012, total
purchases of yarn from CanAm were $126.1 million compared to $142.6 million in
fiscal 2011. As at September 30, 2012, the Company had an outstanding payable to
CanAm of $2.0 million compared to $3.3 million as of October 2, 2011. The
Company also had a note receivable from CanAm of $3.9 million which was fully
reimbursed during the third quarter of fiscal 2012. During the first quarter of
fiscal 2013, we completed the acquisition of the remaining 50% of CanAm. We also
lease warehouse and office space from an officer of a subsidiary of the Company
under operating leases. The payments made on these leases are in accordance with
the terms of the lease agreements established and agreed to by the related
parties, which amounted to $0.9 million for fiscal 2012, compared to $0.6
million for fiscal 2011. There were no amounts owing as at September 30, 2012
and October 2, 2011.

DISCLOSURE CONTROLS AND PROCEDURES

As stated in the Canadian Securities Administrators National
Instrument 52-109, Certification of Disclosure in Issuers Annual and Interim
Filings, disclosure controls and procedures means controls and other
procedures of an issuer that are designed to provide reasonable assurance that
information required to be disclosed by the issuer in its annual filings,
interim filings or other reports filed or submitted by it under securities
legislation is recorded, processed, summarized and reported within the time
periods specified in the securities legislation and include controls and
procedures designed to ensure that information required to be disclosed by an
issuer in its annual filings, interim filings or other reports filed or
submitted under securities legislation is accumulated and communicated to the
issuers management, including its certifying officers, as appropriate to allow
timely decisions regarding required disclosure.

An evaluation was carried out under the supervision of, and
with the participation of, our management, including our Chief Executive Officer
and our Chief Financial Officer, of the effectiveness of our disclosure controls
and procedures as at September 30, 2012. For the year ended September 30, 2012,
managements evaluation of the effectiveness of its disclosure controls and
procedures excluded the disclosure controls and procedures of Anvil, a
subsidiary acquired by the Company in an acquisition consummated on May 9, 2012,
the results of which are included in the audited annual consolidated financial
statements of the Company for the year ended September 30, 2012, to the extent
Anvils disclosure controls and procedures are subsumed by internal control over
financial reporting. The consolidated results of the Company for the year ended
September 30, 2012 include net sales of $86.1 million and net earnings of $2.1
million relating to Anvils results of operations since the date of acquisition.
Anvil accounted for approximately $96.4 million of current assets, $26.1 million
of non-current assets, $34.6 million of current liabilities and $5.1 million of
non-current liabilities, in the Companys audited consolidated statement of
financial position as at September 30, 2012. Based on that evaluation, which excluded Anvils disclosure controls and procedures, our Chief
Executive Officer and our Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of the end of such period.

GILDAN 2012 REPORT TO SHAREHOLDERS P.31

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Canadian and U.S. securities regulations and related
interpretations allow issuers to limit the scope of the design and evaluation of
disclosure controls and procedures of a business that an issuer acquired not
more than 365 days before the last day of the period covered by the Companys
filings.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Managements annual report on internal control over
financial reportingOur management is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is
defined in Rules 13(a)-15(f) and 15(d)-15(f) under the U.S. Securities Exchange
Act of 1934.

Our internal control over financial reporting includes those
policies and procedures that: (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorization of our
management and directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on the financial statements.

Under the supervision and with the participation of our Chief
Executive Officer and our Chief Financial Officer, management conducted an
evaluation of the effectiveness of our internal control over financial
reporting, as at September 30, 2012, based on the framework set forth in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). For the year ended
September 30, 2012, managements evaluation of internal control over financial
reporting excluded the internal control over financial reporting of Anvil, a
subsidiary acquired by the Company in an acquisition consummated on May 9, 2012,
the results of which are included in the audited annual consolidated financial
statements of the Company for the year ended September 30, 2012. Based on that
evaluation, which excluded Anvils internal control over financial reporting,
our Chief Executive Officer and our Chief Financial Officer concluded that our
internal control over financial reporting was effective as of that date.

Canadian and U.S. securities regulations and related
interpretations allow issuers to limit the evaluation of internal control over
financial reporting of a business that an issuer acquired not more than 365 days
before the last day of the period covered by the Companys filings.

Attestation report of independent registered public
accounting firmKPMG LLP, an independent registered public accounting
firm, which audited and reported on our financial statements in this Report to
Shareholders, has issued an unqualified attestation report on the effectiveness
of our internal control over financial reporting as at September 30, 2012.

Changes in internal control over financial
reportingThere have been no changes during fiscal 2012 in our internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

The design of any system of controls and procedures is based in
part upon certain assumptions about the likelihood of certain events. There can
be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions, regardless of how remote.

GILDAN 2012 REPORT TO SHAREHOLDERS P.32

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RISKS AND UNCERTAINTIES

In addition to the risks previously described under the
sections Financial Risk Management, Critical Accounting Estimates and
Judgments, and those described elsewhere in this annual MD&A, this section
describes the principal risks that could have a material and adverse effect on
our financial condition, results of operations or business, cash flows or the
trading price of our common shares, as well as cause actual results to differ
materially from our expectations expressed in or implied by our forward-looking
statements. The risks listed below are not the only risks that could affect the
Company. Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial may also materially and adversely affect our
financial condition, results of operations, cash flows or business.

Our ability to implement our strategies and plansThe growth of our business depends on the successful execution of our
key strategic initiatives, specifically to maximize market share penetration in
printwear markets, leverage our successful business model to further penetrate
the mass-market retail channel, continue to generate manufacturing and
distribution cost reductions, and continue to evaluate opportunities to reinvest
cash flows. We may not be able to successfully implement our growth strategy in
the future, including growing our market share in the U.S., where we currently
have the majority of our sales, and in further penetrating international
printwear markets. Success factors may be different and economic returns may be
lower in new market channels and new geographical markets which the Company
enters. In addition, we may not be successful in further developing our
company-owned brands and obtaining and successfully introducing new programs in
the U.S. retail channel, including increasing our sales of underwear and
activewear to retailers, or achieving targeted levels of profitability in our
Branded Apparel segment. Failure to develop new business in new market channels
or new geographical markets will limit our opportunities for growth. Also, there
can be no assurance that we do not encounter operational issues that may affect
or disrupt our production or supply chain or that we will be successful in
optimizing our manufacturing and distribution cost reduction initiatives. In
addition, our ability to generate cash flows from operations will depend on the
success we have in executing our key strategic initiatives, which in turn will
ultimately impact our ability to reinvest cash flows or distribute cash flows to
our shareholders. We may be unable to identify acquisition targets, successfully
integrate a newly acquired business, or achieve expected synergies from such
integration.

Our ability to compete effectivelyThe markets for
our products are highly competitive. Competition is generally based upon price,
with reliable quality and service also being critical requirements for success.
Our competitive strengths include our expertise in building and operating
large-scale, vertically-integrated, strategically-located manufacturing hubs
which has allowed us to operate efficiently and reduce costs, offer competitive
pricing, and a reliable supply chain. There can be no assurance that we will be
able to maintain our low cost manufacturing and distribution structure, and
remain competitive in the areas of price, quality, service, and marketing. In
addition, there can be no assurance that the level and intensity of competition
will not increase, or that competitors will not improve their competitive
position relative to Gildans. Any changes in our ability to compete effectively
in the future may result in the loss of customers to competitors, reduction in
customer orders or shelf space, lower prices, the need for customer price
incentives and other forms of marketing support to our customers, all of which
could have an adverse effect on our profitability if we are unable to offset
such negative impact with new business or cost reductions.

Our ability to integrate acquisitionsThe Companys
strategic opportunities include the potential reinvestment of cash into
complementary acquisitions that could support, strengthen or expand our
business. The integration of newly acquired businesses may prove to be more
challenging, take more time than originally anticipated and result in
significant additional costs and/or operational issues, all of which could
adversely affect our financial condition and results of operations. In addition,
we may not be able to fully realize expected synergies and other benefits.

GILDAN 2012 REPORT TO SHAREHOLDERS P.33

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Adverse changes in general economic
conditionsAlthough we manufacture basic, non-fashion, continuous
replenishment products used by consumers in a wide variety of applications,
general economic and financial conditions, globally or in one or more of the
markets we serve, may adversely affect our business. If there is a decline in
economic growth and in consumer and commercial activity, and/or if adverse
financial conditions exist in the credit markets, as in the case of the global
credit crisis in 2008 and 2009, this may lead to lower demand for our products
resulting in sales volume reductions and lower selling prices, and may cause us
to operate at levels below our optimal production capacity, which would result
in higher unit production costs, all of which could adversely affect our
profitability and reduce cash flows from operations. Weak economic and financial
conditions could also negatively affect the financial condition of our
customers, which could result in lower sales volumes and increased credit risk.
The nature and extent of the Companys credit risks are described under the
section Financial Risk Management.

Our reliance on a small number of significant
customersWe rely on a small number of customers for a significant
portion of our total sales. In fiscal 2012 our largest and second largest
customers accounted for 14.8% and 12.0% (2011  19.4% and 12.1%) of total sales
respectively, and our top ten customers accounted for 58.1% (2011  63.5%) of
total sales. We expect that these customers will continue to represent a
significant portion of our sales in the future.

Future sales volumes and profitability could be adversely
affected should one or more of the following events occur:

- a significant customer substantially reduces its purchases or ceases to
  buy from us, or Gildan elects to reduce its volume of business with or cease
  to sell to a significant customer, and we cannot replace that business with
  sales to other customers on similar terms;
- a large customer exercises its purchasing power to negotiate lower prices
  or to require Gildan to incur additional service and other costs;
- further industry consolidation leads to greater customer concentration and
  competition; and
- a large customer encounters financial difficulties and is unable to meet
  its financial obligations.

Our customers do not commit to purchase minimum quantitiesOur contracts with our customers do not require them to purchase a
minimum quantity of our products or commit to minimum shelf space allocation for
our products. If any of our customers experience a significant business downturn
or fail to remain committed to our products, they may reduce or discontinue
purchases from us. Although we have maintained long-term relationships with many
of our wholesale distributor and retail customers, there can be no assurance
that historic levels of business from any of our customers will continue in the
future.

Our ability to anticipate evolving consumer preferences and
trendsWhile we currently focus on basic, non-fashion products, the
apparel industry, particularly within the retail channel, is subject to evolving
consumer preferences and trends. Our success may be negatively impacted by
changes in consumer preferences which do not fit with Gildans core competency
of marketing and large-scale manufacturing of basic, non-fashion apparel
products. If we are unable to successfully anticipate, identify or react to
changing styles or trends or misjudge the market for our products, our sales
could be negatively impacted and we may be faced with unsold inventory which
could adversely impact our profitability.

Our ability to manage production and inventory levels
effectively in relation to changes in customer demandDemand for our
products may vary from year to year. We aim to appropriately balance our
production and inventory with our ability to meet market demand. Based on
discussions with our customers and internally generated projections reflecting
our analysis of factors impacting industry demand, we produce and carry finished
goods inventory to meet the expected demand for delivery of specific product
categories. If, after producing and carrying inventory in anticipation of
deliveries, demand is significantly less than expected, we may have to carry
inventory for extended periods of time, or sell excess inventory at reduced
prices.

GILDAN 2012 REPORT TO SHAREHOLDERS P.34

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In either case, our profits would be reduced. Excess inventory
could also result in lower production levels, resulting in lower plant and
equipment utilization and lower absorption of fixed operating costs.
Alternatively, we are also exposed to loss of sales opportunities and market
share, if we produce insufficient inventory to satisfy our customers demand for
specific product categories as a result of underestimating market demand or not
meeting production targets, in which case our customers could seek to fulfill
their product needs from competitors and reduce the amount of business they do
with us.

Fluctuations and volatility in the price of raw materials
used to manufacture our productsCotton and polyester fibers are the
primary raw materials used in the manufacture of our products. We also use
chemicals, dyestuffs and trims which we purchase from a variety of suppliers.
The price of cotton fluctuates and is affected by weather, consumer demand,
speculation in the commodities market, the relative valuations and fluctuations
of the currencies of producer versus consumer countries and other factors that
are generally unpredictable and beyond our control. In addition, fluctuations in
crude oil or petroleum prices affect our energy consumption costs and can also
influence transportation costs and the cost of related items used in our
business, such as polyester fibers, chemicals, dyestuffs and trims. As discussed
under the heading entitled Commodity Risk in the Financial Risk Management
section of this annual MD&A, the Company purchases cotton and polyester
fibers through its yarn-spinning facilities, and also purchases processed cotton
yarn and blended yarn from outside vendors, at prices that are correlated with
the price of cotton and polyester fibers. The Company may enter into contracts
up to eighteen months in advance of future delivery dates to establish fixed
prices for cotton and cotton yarn purchases and reduce the effect of price
fluctuations in the cost of cotton used in the manufacture of its products. For
future delivery periods where such fixed price contracts have been entered into,
the Company will be protected against cotton price increases but would not be
able to benefit from cotton price decreases. Conversely, in the event that we
have not entered into sufficient fixed priced contracts for cotton or have not
made other arrangements to lock in the price of cotton yarn in advance of
delivery, we will not be protected against cotton price increases, but will be
in a position to benefit from any cotton price decreases. A significant increase
in raw material costs, particularly cotton costs, could have a material adverse
effect on our business, results of operations and financial condition, if the
increase or part of the increase is not mitigated through additional
manufacturing and distribution cost reductions and/or higher selling prices, or
if resulting selling price increases adversely impact demand for the Companys
products. In addition, when the Company fixes its cotton costs for future
delivery periods and the cost of cotton subsequently decreases significantly for
that delivery period, the Company may need to reduce selling prices, which could
adversely impact the Companys results of operations.

Our dependence on key suppliersOur ability to meet
our customers needs depends on our ability to maintain an uninterrupted supply
of raw materials and finished goods from third party suppliers. More
specifically, we source cotton and polycotton yarns primarily from the United
States  and from a limited number of outside suppliers. In
addition, the  majority of the products sold by our recently acquired Gold
Toe Moretz subsidiary are purchased from a number of third party suppliers in
Asia. Our business, financial condition or results of operations could be
adversely affected if there is a significant change in our relationship with any
of our principal suppliers of yarn or finished goods, or if any of these key
suppliers have difficulty sourcing cotton fibers and other raw materials,
experience production disruptions, fail to maintain production quality,
experience transportation disruptions or encounter financial difficulties. These
events can result in lost sales, cancellation charges or excessive markdowns,
all of which can adversely affect our business, financial condition or results
of operations.

Climate, political, social and economic risks in the
countries in which we operate or from which we source productionThe
majority of our products are manufactured in Central America, primarily in
Honduras and the Caribbean Basin, and to a lesser extent in Bangladesh, as
described in the section entitled Our Operations. As a result of the
acquisition of Gold Toe Moretz we are now purchasing significant volumes of
finished goods from third party suppliers in Asia. Some of the countries in
which we operate or source from have experienced political, social and economic
instability in the past, and we cannot be certain of their future stability. In
addition, most of our facilities are located in geographic regions that are
exposed to

GILDAN 2012 REPORT TO SHAREHOLDERS P.35

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the risk of, and have experienced in the past, hurricanes,
floods and earthquakes, and any such events in the future could have a material
adverse impact on our business.

The following conditions or events could disrupt our supply
chain, interrupt production at our facilities or those of our suppliers,
materially increase our cost of sales and other operating expenses, result in
material asset losses, or require additional capital expenditures to be
incurred:

- fires, pandemics, extraordinary weather conditions or natural disasters,
  such as hurricanes, tornadoes, floods, tsunamis and earthquakes;
- political instability, labour unrest, war or terrorism;
- disruptions in shipping and freight forwarding services;
- interruptions in the availability of basic services and infrastructure,
  including power and water shortages.

We rely on certain international trade agreements and
preference programs and are subject to evolving international trade regulationsAs a multinational corporation, we are affected by international trade
legislation, bilateral and multilateral trade agreements and trade preference
programs in the countries in which we operate, source and sell products. In
order to remain globally competitive, we have strategically positioned our
manufacturing facilities to take advantage of a number of trade liberalization
measures, providing us duty free access to many of our markets. Such measures
are advantageous because of the otherwise generally high duty rates that apply
to apparel products in many countries. The Company relies on a number of
preferential trade programs which provide duty free access to the U.S. market,
including the Caribbean Basin Trade Partnership Act and the Dominican Republic 
Central America  United States Free Trade Agreement. The Company relies on
similar arrangements to access the European Union, Canada and other markets.
Changes to trade agreements or trade preference programs that the Company
currently relies on may negatively impact our global competitive position. The
likelihood that the agreements and preference programs around which we have
built our manufacturing supply chain will be modified, repealed, or allowed to
expire, and the extent of the impact of such changes on our business, cannot be
determined with certainty.

Most trade agreements provide for the application of safeguards
in the form of reinstatement of normal duties if increased imports cause or
threaten to cause substantial injury to a domestic industry. The likelihood that
a safeguard will be adopted and the extent of its impact on our business cannot
be determined with certainty.

In 2012, the United States implemented free trade agreements
with South Korea, Colombia and Panama and has also continued free trade
negotiations with a group of countries under the umbrella of the TransPacific
Partnership ("TPP"). Countries participating in the TPP negotiations at
this time are Australia, Brunei, Canada, Chile, Mexico, Malaysia, New Zealand,
Peru, Singapore and Vietnam. The United States entry into new free trade
agreements may negatively affect our competitive position in the United States.
Overall, new agreements or arrangements that further liberalize access to our
key developed country markets could potentially impact our competiveness in
those markets negatively. The likelihood that any such agreements, measures or
programs will be adopted, modified, repealed, or allowed to expire, and the
extent of the impact of such changes on our business, cannot be determined with
certainty.

In addition, the Company is subject to customs audits and
origin verifications in the various countries in which it operates. Although we
believe that our customs compliance programs are effective, we cannot predict
the outcome of any governmental audit.

In recent years, governmental bodies have responded to the
increased threat of terrorist activity by requiring greater levels of inspection
of imported goods and imposing security requirements on importers, carriers and
others in the global supply chain. These added requirements can sometimes cause
delays and increase costs in bringing imported goods to market. We believe we
have effectively addressed these requirements in order to maximize velocity in
our supply chain, but changes in security requirements or tightening of security
procedures, for example, in the aftermath of a terrorist incident, could cause
delays in our goods reaching the markets in which we distribute our products.

GILDAN 2012 REPORT TO SHAREHOLDERS P.36

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Factors or circumstances that could increase our effective
income tax rateThe Company benefits from a low overall effective
corporate tax rate as the majority of its profits are earned and the majority of
its sales, marketing and manufacturing operations are carried out in low tax
rate jurisdictions in Central America and the Caribbean Basin. The Companys
income tax filing positions and income tax provisions are based on
interpretations of applicable tax laws, including income tax treaties between
various countries in which the Company operates as well as underlying rules and
regulations with respect to transfer pricing. These interpretations involve
judgments and estimates and may be challenged through government taxation audits
that the Company is regularly subject to. Although the Company believes its tax
filing positions are sustainable, we cannot predict with certainty the outcome
of any audit undertaken by taxation authorities in any jurisdictions in which we
operate, and the final result may vary compared to the estimates and assumptions
used by management in determining the Companys consolidated income tax
provision and in valuing its income tax assets and liabilities. Depending on the
ultimate outcome of any such audit, there may be a material adverse impact on
the Companys financial condition, results of operations and cash flows. In
addition, if the Company were to receive a tax reassessment by a taxation
authority prior to the ultimate resolution of an audit, the Company could be
required to submit an advance deposit on the amount reassessed.

The Companys overall effective income tax rate may also be
adversely affected by the following: unanticipated changes to current domestic
laws in the countries in which the Company operates; changes to the income tax
treaties the Company currently relies on; an increase in income and
withholding tax rates; changes to free trade and export processing zone
rules in certain countries where the Company is currently not subject to income
tax; and, a higher proportion of the Companys overall profits being earned in higher tax rate jurisdictions due to changes in the locations of the Companys operations, changes in the mix of profits between operating segments or other factors.

We have not recognized a deferred income tax liability for the
undistributed profits of our subsidiaries, as we currently have no intention to
repatriate these profits. If our expectations or intentions change in the
future, we could be required to recognize a charge to earnings for the tax
liability relating to the undistributed profits of our subsidiaries, which could
also result in a corresponding cash outflow in the years in which the earnings
would be repatriated. As at September 30, 2012, the estimated  income
taxes payable that would result in the event of a full repatriation of these
undistributed profits is approximately $28 million.

Compliance with environmental, health and safety
regulationsWe are subject to various federal, state and local
environmental  laws and regulations in the
jurisdictions in which we operate concerning, among other things, wastewater
discharges, storm water flows, and solid waste disposal. Our manufacturing
plants generate small quantities of hazardous waste, which are either recycled
or disposed of by licensed waste management companies. Through our Corporate
Environmental Policy, Environmental Code of Practice and Environmental
Management System, we seek not only to comply with applicable laws and
regulations, but also to reduce our environmental footprint through waste
prevention, recovery and treatment. Although we believe that we are in
compliance in all material respects with the regulatory requirements of those
jurisdictions in which our facilities are located, the extent of our liability,
if any, for past failures to comply with laws, regulations and permits
applicable to our operations cannot be reasonably determined.

In line with our commitment to the environment, as well as to
the health and safety of our employees, we incur capital and other expenditures
each year that are aimed at achieving compliance with current environmental
standards and applicable occupational health and safety laws and regulations. For fiscal 2012, the environmental protection requirements with
regard to the Companys operations did not have a significant financial or
operational impact on the Company's capital expenditures, earnings and
competitive position. Although we do not expect that the amount of these
expenditures in the future will have a material adverse effect on our
operations, financial condition or liquidity, future changes in federal, state,
or local regulations, interpretations of existing regulations or the discovery
of currently unknown problems or conditions may result in substantial additional
environmental remediation expenditures, negative publicity which could harm our
reputation, or a disruption to our supply chain, which could have a material
adverse effect on our business.

GILDAN 2012 REPORT TO SHAREHOLDERS P.37

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Our significant reliance on our information systems for our
business operationsWe place significant reliance on our information
systems, including our JD Edwards Enterprise Resource Planning (ERP) system. We
are in the process of upgrading our ERP system to the current release. We depend
on our information systems to purchase raw materials and supplies, schedule and
manage production, process transactions, summarize results, respond to customer
inquiries, manage inventories and ship goods on a timely basis to our customers.
There can be no assurance that we will not experience operational problems with
our information systems as a result of system failures, viruses, security
breaches, disasters or other causes, or in connection with the implementation of
the upgrade to our ERP system. In addition, there can be no assurance that we
will be able to timely modify or adapt our systems to meet evolving requirements
for our business. Any material disruption or slowdown of our systems could cause
operational delays and other impacts that could have a material adverse effect
on our business.

Adverse changes in third party licensing arrangements and
licensed brandsA number of products are designed, manufactured, sourced
and sold under trademarks that we license from third parties, under contractual
licensing relationships that are subject to periodic renewal, such as Under
Armour® and New Balance® branded socks. Because we do not control the brands
licensed to us, our licensors could make changes to their brands or business
models that could result in a significant downturn in a brands business,
adversely affecting our sales and results of operations. If any licensor fails
to adequately maintain or protect their trademarks, engages in behaviour with
respect to the licensed marks that would cause us reputational harm, or if any
of the brands licensed to us violates the trademark rights of a third party or
are deemed to be invalid or unenforceable, we could experience a significant
downturn in that brands business, adversely affecting our sales and results of
operations, and we may be required to expend significant amounts on public
relations, advertising, legal and other termination costs. In addition, if any
of these licensors chooses to cease licensing these brands to us in the future,
our sales and results of operations would be adversely affected.

Our ability to protect our intellectual property
rightsOur trademarks are important to our marketing efforts and have
substantial value. We aggressively protect these trademarks from infringement
and dilution through appropriate measures, including court actions and
administrative proceedings; however, the actions we have taken to establish and
protect our trademarks and other intellectual property may not be adequate. We
cannot be certain that others will not imitate our products or infringe our
intellectual property rights. Infringement or counterfeiting of our products
could diminish the value of our brands or otherwise adversely affect our
business. In addition, unilateral actions in the United States or other
countries, such as changes to or the repeal of laws recognizing trademark or
other intellectual property rights, could have an impact on our ability to
enforce those rights.

From time to time we are involved in opposition and
cancellation proceedings with respect to our intellectual property, which could
affect its validity, enforceability and use. The value of our intellectual
property could diminish if others assert rights in, or ownership of, or oppose
our applications to register, our trademarks and other intellectual property
rights. In some cases, there may be trademark owners who have prior rights to
our trademarks or to similar trademarks, which could harm our ability to sell
products under or register such trademarks. In addition, we have registered
trademarks in certain foreign jurisdictions and the laws of foreign countries
may not protect our intellectual property rights to the same extent as do the
laws of the United States. We do not own trademark rights to all of our brands
in all jurisdictions, which may limit the future sales growth of certain branded
products in such jurisdictions. Furthermore, actions we have taken to protect
our intellectual property rights may not be adequate to prevent others from
seeking to invalidate our trademarks or block sales of our products as a
violation of the trademarks and intellectual property rights of others.

In some cases, litigation may be necessary to protect our
trademarks and other intellectual property rights, to enforce our rights or
defend against claims by third parties alleging that we infringe, dilute,
misappropriate or otherwise violate third party trademark or other intellectual
property rights. Any litigation or claims brought by or against us, whether with
or without merit, and whether successful or not, could result in substantial
costs and diversion of our resources, which could adversely affect our business,
financial condition, results of operation and cash flows. Any intellectual
property litigation claims against us

GILDAN 2012 REPORT TO SHAREHOLDERS P.38

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

could result in the loss or compromise of our intellectual
property rights, could subject us to significant liabilities, require us to seek
licenses on unfavorable terms, if available at all, and/or require us to rebrand
our products and services, any of which could adversely affect our business,
financial condition, results of operations and cash flows.

Changes in our relationship with our employees or changes to
domestic and foreign employment regulationsWe employ approximately
30,000 employees worldwide. As a result, changes in domestic and foreign laws
governing our relationships with our employees, including wage and human
resources laws and regulations, fair labour standards, overtime pay,
unemployment tax rates, workers compensation rates and payroll taxes, would
likely have a direct impact on our operating costs. The vast majority of our
employees are employed outside of Canada and the United States. A significant
increase in wage rates in the countries in which we operate could have a
material impact on our operating costs.

The Company has historically been able to operate in a
productive manner in all of its manufacturing facilities without experiencing
significant labour disruptions, such as strikes or work stoppages. Some of our
employees are members of labour organizations and, with the acquisition of Anvil
on May 9, 2012, we are now a party to collective bargaining agreements at our
Anvil sewing facilities in Honduras and Nicaragua. In connection with its
textile operations in the Dominican Republic, the Company was previously a party
to a collective bargaining agreement with a union registered with the Dominican
Ministry of Labor, covering approximately 900 employees. The collective
bargaining agreement was terminated in February 2011 upon the mutual consent of
the Company and the union, although the union is still claiming to represent a
majority of the factory workers. A second union is also claiming that it
represents the majority of the workers at the plant and the matter is now before
the Dominican Republic Labour Court. Notwithstanding the termination of the
agreement, the Company is continuing to provide all of the benefits to the
employees covered by the original agreement. If labour relations were to change
or deteriorate at any of our facilities or any of our third-party contractors
facilities, this could adversely affect the productivity and cost structure of
the Companys manufacturing operations.

Negative publicity as a result of violation in local labour
laws or international labour standards, unethical labour and other business
practicesWe are committed to ensuring that all of our operations comply
with our strict internal Code of Conduct, local and international laws, and the
codes and principles to which we subscribe, including those of Worldwide
Responsible Accredited Production (WRAP) and the Fair Labor Association (FLA).
While the majority of our manufacturing operations are conducted through
company-owned facilities, we also utilize third-party contractors, which we do
not control, to complement our vertically-integrated production. If one of our
own manufacturing operations or one of our third-party contractors or
sub-contractors violates or is accused of violating local or international
labour laws or other applicable regulations, or engages in labour or other
practices that would be viewed, in any market in which our products are sold, as
unethical, we could suffer negative publicity which could harm our reputation
and result in a loss of sales.

Our dependence on key management and our ability to attract
and/or retain key personnelOur success depends upon the continued
contributions of our key management, some of whom have unique talents and
experience and would be difficult to replace in short order. The loss or
interruption of the services of a key executive could have a material adverse
effect on our business during the transitional period that would be required to
restructure the organization or for a successor to assume the responsibilities
of the key management position. Our future success will also depend on our
ability to attract and retain key managers, sales people and other personnel. We
may not be able to attract or retain these employees, which could adversely
affect our business.

Product safety regulationWe are subject to consumer
product safety laws and regulations that could affect our business. In the
United States, we are subject to the Consumer Product Safety Act, as
amended by the Consumer Product Safety Improvement Actof 2008, to the
Federal Hazardous Substances Act, to the Flammable Fabrics Act,

GILDAN 2012 REPORT TO SHAREHOLDERS P.39

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

and to the rules and regulations promulgated pursuant to such
statutes. Such laws provide for substantial penalties for non-compliance. These
statutes and regulations include requirements for testing and certification for
flammability of wearing apparel, for lead content and lead in surface coatings
in childrens products, and for phthalate content in child care articles,
including plasticized components of childrens sleepwear. As of December 31,
2011, the Consumer Product Safety Commission (the CPSC) lifted its stay
of enforcement with respect to phthalate testing and certification, and is
actively enforcing all of the requirements listed above. In addition, we are
also subject to similar laws and regulations in the various individual states in
which our products are sold.

In Canada, we are subject to similar laws and regulations, the
most significant of which are the Hazardous Products Act(the
HPA) and the Canada Consumer Product Safety Act(the
CCPSA). The CCPSA came into force on June 20, 2011. It is aimed at
emphasizing industry's responsibility to provide safe products, strengthening
enforcement authorities, providing more and better information for the public,
improving the safety of imported products, ensuring better record keeping, and
instituting mandatory reporting. Regulations currently in place under the HPA
will be incorporated into the CCPSA or, where necessary because of structural
differences between the two statutes, replaced by new CCPSA regulations. For
example, the CCPSAs Childrens Sleepwear Regulationsreplaced the HPAs
Hazardous Products (Children's Sleepwear) Regulations. The CCPSA also
provides for new regulations, such as the textile flammability regulations. As
under U.S. laws, surface coatings and phthalates are also regulated under the
CCPSA.

In the European Union, we are also subject to product safety
regulations, the most significant of which are imposed pursuant to the
General Product Safety Directive. We are also subject to similar laws and
regulations in the other jurisdictions in which our products are sold.

Compliance with existing and future product safety laws and
regulations and enforcement policies may require that we incur capital and other
costs, which may be significant. Non-compliance with applicable product safety
laws and regulations may result in substantial fines and penalties, costs
related to the recall, replacement and disposal of non-compliant products, as
well as negative publicity which could harm our reputation and result in a loss
of sales. Our customers may also require us to meet existing and additional
consumer safety requirements, which may result in our inability to provide the
products in the manner required. Although we believe that we are in compliance
in all material respects with applicable product safety laws and regulations in
the jurisdictions in which we operate, the extent of our liability, if any, for
past failure to comply with laws, regulations and permits applicable to our
operations cannot be reasonably determined.

Litigation and/or regulatory actionsOur business

involves the risk of legal and regulatory actions regarding such
matters as product liability, employment practices, trademark infringement,
bankruptcies and other claims. Due to the inherent uncertainties of litigation
or regulatory actions in both domestic and foreign jurisdictions, we cannot
accurately predict the ultimate outcome of any such proceedings. These
proceedings could cause us to incur costs and may require us to devote resources
to defend against these claims and could ultimately result in a loss against
these claims or other remedies such as product recalls, which could adversely
affect our financial condition and results of operations.

As part of the regulatory and legal environments in which we
operate, Gildan is subject to anti-bribery laws that prohibit improper payments
directly or indirectly to government officials, authorities or persons defined
in those anti-bribery laws in order to obtain business or other improper
advantages in the conduct of business. Failure by our employees, subcontractors,
suppliers, agents and/or partners to comply with anti-bribery laws could impact
Gildan in various ways that include, but are not limited to, criminal, civil and
administrative legal sanctions, negative publicity, and could have a significant adverse impact on Gildans results.

Data security and privacy breachesOur business
involves the regular collection and use of sensitive and confidential
information regarding customers and employees. These activities are highly
regulated and privacy and information security laws are complex and constantly
changing. Non-compliance with these laws and regulations can lead to legal

GILDAN 2012 REPORT TO SHAREHOLDERS P.40

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

liability. Furthermore, despite the security measures we have
in place, any actual or perceived information security breach, whether due to
"cyber attack", computer viruses or human error, could lead to damage to our
reputation and a resulting material adverse effect on our financial condition
and results of operations.

DEFINITION AND RECONCILIATION OF NON-GAAP MEASURES

We use non-GAAP measures to assess our operating performance
and financial condition. The terms and definitions of the non-GAAP measures used
in this report and a reconciliation of each non-GAAP measure to the most
directly comparable GAAP measure are provided below. The non-GAAP measures are
presented on a consistent basis for all periods presented in this annual
MD&A. These non-GAAP measures do not have any standardized meanings
prescribed by IFRS and are therefore unlikely to be comparable to similar
measures presented by other companies. Accordingly, they should not be
considered in isolation.

Adjusted net earnings and adjusted diluted EPSTo
measure our performance from one period to the next, without the variations
caused by the impacts of restructuring and acquisition-related costs, net of
related income tax recoveries, management uses adjusted net earnings and
adjusted diluted earnings per share, which are calculated as net earnings and
diluted earnings per share excluding these items. We exclude these items because
they affect the comparability of our financial results and could potentially
distort the analysis of trends in our business performance. Excluding these
items does not imply they are necessarily non-recurring.

|(in $ millions, except per share amounts)                                                 |  | 2012  |   |  | 2011  |  
|----------------------------------------------------------------------------------------- |  | ----- | - |  | ----- | -
|Net earnings                                                                              |  | 148.5 |   |  | 234.2 |  
|Adjustments for:                                                                          |  |       |   |  |       |  
|Restructuring and acquisition-related
      costs                                         |  | 15.0  |   |  | 18.2  |  
|Income tax
      recovery on restructuring and acquisition-related costs                  |  | (6.2  | ) |  | (5.5  | )
|Adjusted net earnings                                                                     |  | 157.3 |   |  | 246.9 |  
|                                                                                          |  |       |   |  |       |  
|Basic EPS                                                                                 |  | 1.22  |   |  | 1.93  |  
|Diluted EPS                                                                               |  | 1.22  |   |  | 1.91  |  
|Adjusted diluted EPS                                                                      |  | 1.29  |   |  | 2.02  |  
|Certain minor rounding variances exist between the financial
statements and this summary. | 

EBITDAEBITDA is calculated as earnings before
financial expenses, income taxes and depreciation and amortization and excludes
the impact of restructuring and acquisition-related costs as well as the equity
earnings in investment in joint venture. We use EBITDA, among other measures, to
assess the operating performance of our business. We also believe this measure
is commonly used by investors and analysts to measure a companys ability to
service debt and to meet other payment obligations, or as a common valuation
measurement. We exclude depreciation and amortization expenses, which are
non-cash in nature and can vary significantly depending upon accounting methods
or non-operating factors such as historical cost. Excluding these items does not
imply they are necessarily non-recurring.

GILDAN 2012 REPORT TO SHAREHOLDERS P.41

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

|(in $ millions)                                                                           |  | 2012  |   |  | 2011  |  
|----------------------------------------------------------------------------------------- |  | ----- | - |  | ----- | -
|Net earnings                                                                              |  | 148.5 |   |  | 234.2 |  
|Restructuring and acquisition-related costs                                               |  | 15.0  |   |  | 18.2  |  
|Depreciation and amortization                                                             |  | 94.6  |   |  | 74.1  |  
|Financial expenses, net                                                                   |  | 11.6  |   |  | 6.1   |  
|Income tax recovery                                                                       |  | (4.3  | ) |  | (19.2 | )
|Equity earnings in
      investment in joint venture                                      |  | (0.6  | ) |  | (0.5  | )
|EBITDA                                                                                    |  | 264.8 |   |  | 312.9 |  
|Certain minor rounding variances exist between the financial
statements and this summary. | 

Free cash flowFree cash flow is defined as cash from
operating activities including net changes in non-cash working capital balances,
less cash flow used in investing activities excluding business acquisitions. We
consider free cash flow to be an important indicator of the financial strength
and performance of our business, because it shows how much cash is available
after capital expenditures to repay debt and to reinvest in our business, and/or
to redistribute to our shareholders. We believe this measure is commonly used by
investors and analysts when valuing a business and its underlying assets.

|(in $ millions)                                                                           |  | 2012   |   |  | 2011   |  
|----------------------------------------------------------------------------------------- |  | ------ | - |  | ------ | -
|Cash flows from operating activities                                                      |  | 219.6  |   |  | 163.6  |  
|Cash flows used in investing activities                                                   |  | (162.0 | ) |  | (488.0 | )
|Adjustment for:                                                                           |  |        |   |  |        |  
|Business
      acquisitions                                                               |  | 87.4   |   |  | 342.4  |  
|Free cash flow                                                                            |  | 145.0  |   |  | 18.0   |  
|Certain minor rounding variances exist between the financial
statements and this summary. | 

Total indebtedness and net indebtednessTotal
indebtedness is comprised of bank indebtedness and long-term debt (including any
current portion), and net indebtedness is calculated as total indebtedness net
of cash and cash equivalents. We consider total indebtedness and net
indebtedness to be important indicators of the financial leverage of the
Company.

|(in $ millions)                                                                           |  | September 30, 2012 |   |  | October 2, 2011 |  
|----------------------------------------------------------------------------------------- |  | ------------------ | - |  | --------------- | -
|Long-term debt and total indebtedness                                                     |  | 181.0              |   |  | 209.0           |  
|Cash and cash
      equivalents                                                           |  | (70.4              | ) |  | (82.0           | )
|Net indebtedness                                                                          |  | 110.6              |   |  | 127.0           |  
|Certain minor rounding variances exist between the financial
statements and this summary. | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.42

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
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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 1995and 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. 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 and Risks and
Uncertainties sections of this MD&A, and the risks described under the
Critical Accounting Estimates and Judgments section of this 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:

- our ability to implement our growth strategies and plans, including
  achieving market share gains, obtaining and successfully introducing new sales
  programs, implementing cost reduction initiatives and completing and
  successfully integrating acquisitions;
- the intensity of competitive activity and our ability to compete
  effectively;
- adverse changes in general economic and financial conditions globally or
  in one or more of the markets we serve;
- our reliance on a small number of significant customers;
- the fact that our customers do not commit contractually to minimum
  quantity purchases;
- our ability to anticipate 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 and polyester fibres;
- our dependence 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 in the
  countries in which we operate 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 disruptions, political or social instability, bad weather,
  natural disasters, pandemics and other unforeseen adverse events;
- changes to international trade legislation 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;
- compliance with applicable environmental, tax, trade, employment, health
  and safety, anti- corruption, privacy and other laws and regulations in the
  jurisdictions in which we operate;
- our significant reliance on computerized information systems for our
  business operations, including our JD Edwards Enterprise Resource Planning
  (ERP) system which is currently being upgraded to the latest system release,
  Enterprise One;
- changes in our relationship with our employees or changes to domestic and
  foreign employment laws and regulations;

GILDAN 2012 REPORT TO SHAREHOLDERS P.43

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| | MANAGEMENTS DISCUSSION AND ANALYSIS
| | ------------------------------------

- negative publicity as a result of violation of local labour laws or
  international labour standards, or unethical labour or other business
  practices by the Company or one of its third-party contractors;
- our dependence on key management and our ability to attract and/or retain
  key personnel;
- changes to and failure to comply with consumer product safety laws and
  regulations;
- adverse changes in third party licensing arrangements and licensed brands;
- our ability to protect our intellectual property rights;
- changes in accounting policies and estimates;
- exposure to risks arising from financial instruments, including credit
  risk, liquidity risk, foreign currency risk and interest rate risk, as well as
  risks arising from commodity prices; and
- the adverse impact of any current or future legal and regulatory actions.

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.

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.

December 7, 2012

GILDAN 2012 REPORT TO SHAREHOLDERS P.44

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