Gildan The Price Leader In Fashion Basics, Says Bullish BofA

Several catalysts in 2019 are keeping Bank of America Merrill Lynch bullish on Gildan Activewear Inc GIL.

The Analyst

Analyst Heather Balsky maintained a Buy rating on Gildan with a $47 price target.

The Thesis

After meeting with customers, reps from Gildan and CFO Rhodri Harries at the Imprinted Sportswear Show in Long Beach, Balsky said in a Wednesday note that the tone at the conference was positive for 2019.

“We estimate that printwear industry volumes are growing at a low-single digit pace driven by fashion basics, partly offset by mid-single digit declines in traditional basics,” the analyst said. 

Gildan’s price increases and a mix shift to higher-priced fashion items are also boosting sales, Balsky said. The apparel maker is taking a 6.5-percent price increase in mid-2019, which should raise this year’s printwear sales by 3-4 percent, she said. 

Gildan is also preparing to release a new polo brand, Prim + Preux — a collection of polos for professionals set to start shipping in March. The Prim + Preux line’s pricing is at a 20-90-percent premium to standard Gildan-brand polos, Balsky said. 

“Printwear is an industry where availability matters, and we think Prim + Preux’s broader distribution will be a competitive advantage." 

Although competition in fashion is heavy, GIldan is the price leader in fashion basics and is well-positioned to drive growth in printwear from its investments in fashion basics, the analyst said, adding that Gildan has an opportunity to accelerate share gains with marketing or price investments over time.

Price Action

Gildan shares were up 1.62 percent at $33.19 at the time of publication Wednesday. 

Related Links:

Desjardins Downgrades Gildan On Valuation, But Says Apparel Brand Is Making Impressive Progress

Vans Momentum Isn't Slowing Down For VF Corp, According To Cowen