Gildan Activewear benefits from lower tariffs due to Honduras manufacturing
- Gildan Activewear primarily manufactures its clothing products in Honduras, which subjects them only to a 10% baseline tariff.
- This positions the company advantageously compared to competitors who rely on more heavily taxed Asian sourcing amid the ongoing U.S. trade war.
- Analysts suggest that Gildan may benefit from increased market share and a potential stock price rebound due to better earnings expectations.
On April 23, 2025, Gildan Activewear, a clothing manufacturer, received positive remarks from Citi analyst Paul Lejuez regarding its position amidst ongoing tariff concerns driven by U.S. trade policies. The company sources most of its products from Honduras, which is subject to a baseline 10% tariff, significantly lower than the higher reciprocal tariffs imposed on imports from China and other Asian countries. This strategic advantage allows Gildan to remain competitive in a market shaken by the escalating trade war initiated by President Donald Trump. In recent months, the retail and stock markets have been affected by Trump's tariffs, particularly the 145% duty on China, which has caused widespread worry among investors. With many competitors relying on sourcing from Asia where tariffs are higher, Gildan is looking to capture a larger market share of consumers seeking alternatives to Chinese manufacturing. Additionally, the company has a domestic supply chain that includes sourcing materials like cotton from the U.S. and operating yarn-spinning facilities, which may exempt some of its products from the total 10% tariff. The investor sentiment regarding Gildan remained cautious, with shares down 24% from their February high as of the date of the publication. However, Citi highlighted that there might have been an overselling of Gildan stock due to prevalent market fears about tariffs. In light of these factors, the analyst also anticipated better-than-expected earnings in the upcoming report scheduled for release on April 29, further indicating a potential rebound for the stock. Citi has maintained a buy rating on Gildan while slightly adjusting its stock price target to $60 from $62, suggesting a 43% upside from the previous closing price of $41.85. This news comes amidst wider market fluctuations and heightened scrutiny of companies that are affected by the trade war environment. The ongoing uncertainty surrounding tariffs implies that retail stocks, such as Gildan Activewear, could experience volatility as the market responds to changes in trade policy. A growing number of investors may be seeking companies like Gildan that have positioned themselves advantageously amid these conditions. With stronger-than-expected earnings, Gildan may emerge as a key player benefiting from market shifts aiming to retreat from high-tariff sourcing regions.