We recently compiled a list of the 10 Best Clothing Stocks To Buy Now. In this article, we are going to take a look at where Gildan Activewear Inc. (NYSE:GIL) stands against the other clothing stocks.
Trends in the Clothing Sector
The internet has changed the way people shop for clothes. Social media platforms and influencers have popularized the “haul culture,” where people order a big box of low-priced clothes online and sift through them. Also colloquially known as the “Shein effect,” people are turning towards fast fashion, ordering clothing that offers an element of surprise upon receiving. Although Shein’s primary suppliers are in China, its customers are majorly US-based. Its global sales reached around $30 billion last year, almost touching the $39 billion in global sales made by Inditex, the old-school fast fashion leader and owner of Zara.
Fashion and apparel rank among some of the most significant industries in the world, creating key value for global economy. According to McKinsey, it would rank as the seventh largest economy in the world if placed alongside the GDPs of individual countries. The industry, however, faced several challenges in 2023, with the United States and Europe experiencing slow regional growth throughout the year. While China started the year with a strong performance, it gradually waned, slowing down in the second half. Even the luxury segment experienced uneven performance and slower sales. The fashion industry in 2024 can thus be described with one word: uncertainty. Weaker economic growth, dwindling consumer confidence, and rising inflation are making it hard for companies to devise suitable performance drivers. A report by Reuters showed that consumers are becoming increasingly picky about the clothes they buy, and are shopping around more. This has resulted in a “patchwork of winners and losers.”
Fashion forecasts by McKinsey show that the industry is expected to grow by 2-4% in 2024, with growth variations across countries and regions. The luxury segment is anticipated to generate the largest economic profit, but that does not mean companies in this sector won’t experience tough economic environments. Global growth forecast for the industry is lower in 2024 compared to 2023, going from 5%-7% in 2023 to 3%-5% as post-pandemic shopping sprees halt. Growth in China and Europe is expected to slow, but the US market shows a completely different outlook. North America’s growth is expected to pace in 2024 after a sluggish 2023, reflecting the region’s more optimistic outlook.
In addition, the current political unrest in Bangladesh is expected to affect the global clothing industry, disrupting the functioning of global apparel retailers ranging from H&M to Zara. With these clothing giants heading into key holiday season, the disruptions might incur heavy losses to US retailers and Bangladesh itself, which is the third largest exporter of clothing in the world as of 2023. Overall, consumer spending patterns have slowed down in the US, with people making do with what’s in their closets before the season changes. The Federal Reserve is also expected to cut interest rates in September. A report by Reuters showed that investors previously bet that the Fed would slash rates by half a percentage point, and are now estimating an approximately 75% probability of a quarter-percentage-point cut in its September meeting. This is expected to drive consumer confidence and ease spending patterns. With that, let’s look at the 10 best clothing stocks to buy.
Our Methodology
For this article, we used the Finviz stock screener to identify over 20 clothing stocks then narrowed our list to 10 stocks with the most positive upside from current levels, and listed the stocks in ascending order of upside potential, as of August 19. We only chose stocks that had a market cap of over 2 billion.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A closeup of a woman in a fashionable activewear outfit, grinning confidently.
Gildan Activewear Inc. (NYSE:GIL)
Upside from Current Levels: 17.68%
Gildan Activewear Inc. (NYSE:GIL) manufactures and sells activewear, socks, underwear, hosiery, and legwear under its significant brand portfolio, including Gildan, Alstyle, Comfort Colors, American Apparel, Anvil, GOLD TOE, Secret, Peds, and Silks. Formerly known as Textiles Gildan Inc., the company transitioned to Gildan Activewear Inc. in 1995 after deciding to excel in the activewear apparel sector.
The company is known for its blend of affordability and quality, and its 100% cotton t-shirts make it a prominent name in the US print wear industry. It holds a competitive advantage by functioning as a low-cost, vertically integrated manufacturer with capacity-driven growth. Shareholders and investors expressed uncertainty about the company when its 20-year CEO and co-founder Glenn Chamandy was dismissed from his position over serious disagreements about succession and strategy with the board. However, he regained his position after a months-long proxy war after the entire board of directors resigned, causing the new CEO, Vince Tyra, to step down.
Since Gildan (NYSE:GIL) is Chamandy’s family company, his re-entry into management with his substantial experience has somewhat comforted skeptical onlookers. The stock sports a consensus Buy rating, with its median price target of $39.39 presenting an upside of 17.68% from current levels. Gildan Activewear Inc. (NYSE:GIL) is trading at a P/E ratio of 13.32, at a 13% discount to its sector.
Investors are bullish on the stock, with Canaccord Genuity and Citigroup maintaining a Buy rating. Canaccord Genuity also upped their price target to $43 from $42 on 2nd May. The change in management sheds a positive light on the company, which has the potential to grow under its previous operating model. 22 hedge funds held Gildan Activewear Inc. (NYSE:GIL) as of Q2 2024.
Overall GIL ranks 7th on our list of the best clothing stocks to buy. While we acknowledge the potential of GIL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GIL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.
