Gildan Activewear Stock Gains 44.8% in a Year: Time to Hold or Avoid?

Gildan Activewear Inc. GIL has shown an outstanding 44.8% surge in its stock price over the past year. The stock has outperformed the broader Consumer Discretionary sector and the S&P 500, which posted increases of 12.6% and 9.7%, respectively. Meanwhile, the Zacks Textile - Apparel industry, in which the company operates, has fallen 15.4% in the same time frame.

The company is benefiting from its Sustainable Growth strategy, which aims at delivering organic top and bottom-line growth via capacity expansion, innovation and ESG. Strength in its Activewear segment also acts as a tailwind. Much of the stock’s upside is also due to GIL’s robust first-quarter 2025 results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate and grew year over year.

Closing the current trading session at $46.94, GIL stock is now 15.3% below its 52-week high of $55.39, reached on Feb. 21. However, it is trading at a 45.2% premium to its 52-week low mark.

Gildan Activewear has also outperformed its key competitors, such as Duluth Holdings DLTH, GIII Apparel Group GIII and Crocs CROX. In a year, DLTH, GIII and CROX have registered declines of 58.8%, 10.3% and 27.6%, respectively.

GIL Price Performance

Image Source: Zacks Investment Research

GIL Drives Growth Via Its Sustainable Growth & Other Plans

The company is among the world’s leading vertically integrated manufacturers of apparel. The vertical integration structure offers it unmatched control and visibility across its value chain. Expertise in developing large-scale and vertically integrated manufacturing hubs helps GIL to operate efficiently and offer an edge over its competitors.

Successful execution of the company’s strategic initiatives, including Sustainable Growth action, has been yielding results. It aims at expanding its global production capacity and enhancing its cost structure, innovation and product-development processes. Its strategic opportunities include potential acquisitions supporting and expanding its business. Gildan Activewear targets acquiring leadership in innovation in all the areas of operations so that it can offer top-quality and value-driven products.

GIL strictly focuses on basic products, the apparel industry, mainly within the retail channel, in order to resonate well with the evolving consumer trends, with potential shifts in their preferences. The company has been gaining on its unwavering focus on offering exceptional value and a distinctive shopping experience to customers.

Gildan Activewear is leveraging its competitive advantage as a low-cost, vertically integrated manufacturer, with robust capacity-expansion efforts, innovative products and solid ESG practices. This will poise the company well to boost revenue growth, profitability and asset utilization, all of which aid in delivering in attractive shareholder value creation.

For 2025, management expects net sales to grow to increase year over year in the mid-single digits. The adjusted operating margin is projected to improve 50 basis points. Adjusted earnings are envisioned between $3.38 and $3.58 per share, indicating a year-over-year increase of 13-19%. The free cash flow is anticipated to exceed $450 million. For the second quarter of 2025, net sales are expected to increase year over year in the mid-single digits.

GIL Trades at a Premium Valuation

The stock’s forward 12-month price-to-earnings (P/E) multiple of 13.03X is higher than the industry average of 11.01X. The stock is trading below its median level of 13.87 and the high level of 15.94.

Image Source: Zacks Investment Research

GIL Might Encounter Key Challenges Ahead

GIL’s performance might be adversely affected by changes in consumer preferences, which do not fit well with its core competency of marketing and large-scale manufacturing of basic apparel products. Failure to keep up with the evolving market trends, with intensifying competition from private label brands and e-commerce, might negatively weigh on its profits.

In addition, Gildan Activewear has been witnessing a tough operating landscape, including inflationary pressures and other consumer spending-related woes. Foreign currency translations have been acting as headwinds for a while now. The company has been witnessing increased variable compensation expenses and distribution costs for a while. Also, higher costs with respect to introducing products may hamper profits.

How to Play GIL Stock?

Gildan Activewear stock has performed well over the past year, supported by solid fundamentals, innovations, effective operations and solid strategic execution. However, near-term challenges like rising costs and currency fluctuations could squeeze margins. With a Zacks Rank #3 (Hold) at present, investors may consider retaining the stock as of now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research