Stay away from apparel stocks in light of this trade war, right?
Well, let’s try looking at three stocks that could have an advantage over other apparel companies, if the trade war escalates.
Before we break down those stocks, know this:
PVH Corp. (PVH – Get Report) , TheStreet’s premium publication Real Money’s stock of the day, fell 14.77% to $84.64 a share Thursday after issuing disappointing guidance. Management said weak Chinese consumer sentiment related to the trade war hurt its China sales. Plus, PVH has 18% of production sourced from China, a huge negative for its cost of revenue.
This $7.5 billion market cap casual-wear maker is a good “tariff hedge,” CFRA analysts wrote in a note Thursday. Gildan (GIL – Get Report) manufactures out of Central America, the Caribbean Basin, North America and Bangladesh, according to its website, so there’s no tariff pressure on its cost of goods sold. On the sales side, 90% of its sales have been in North America, with just 4% in the Asia Pacific region, according to FactSet.
The stock is down 3% since May 3, just before President Trump said he would put more tariffs on Chinese goods, and it’s possible that 3% is not very justified.
Delta Apparel (DLA – Get Report) is a $150 million maker of casual sportswear for kids. It’s gotten 99% of its revenue from North America. It manufactures in the U.S. and Central America.
The stock is down 9% since May 3. It’s forward price-to-earnings ratio is 13.99, relatively attractive against several of its peers, although one must discern whether that is justified.
VF Corp. (VFC) , a well-known and sizable company, has 60% North America revenue exposure and 40% Europe. Still, VF carries more trade war risk than the smaller stocks mentioned above, as it sources 17% of its goods from manufacturing plants in China.