No-Moat Gildan Is Investing in Operations Amid Volatile Demand for Its Imprintables

We think Gildan Activewear lacks a moat, which has put it in a difficult position as it navigates a choppy demand environment for its core imprintables. Although Gildan has leading share in the U.S. printwear channel, this is a market characterized by limited branding and product differentiation, no switching costs, and low prices. In its smaller hosiery and underwear segment, the company has had a private-label men’s underwear contract with wide-moat Walmart since 2019 and rolled out some new offerings in 2023. However, we believe this product has largely replaced Gildan’s branded basics. We think narrow-moat Hanesbrands and Fruit of the Loom have stronger innerwear brands, allowing them to hold significant shelf space at Walmart, no-moat Target, and other key retailers for these products. Indeed, Gildan no longer reports branded apparel as a separate business segment and recorded an impairment to goodwill related to its hosiery in 2020. It acknowledges market share losses to private-label brands, especially in socks, and its hosiery and underwear sales were only 15% of its total sales in 2022, down from 26% in 2017.