UBS says one retail stock may benefit from China tariffs and could rise as much as 80% as a result

UBS reiterated a buy rating on Gildan Activewear with a $56 price target, citing the company's potential to gain market share if tariffs on Chinese goods remain elevated. The firm believes Gildan's vertically-integrated manufacturing in Central America, where tariffs are lower, positions it favorably compared to competitors sourcing from China, potentially leading companies to partner with Gildan to mitigate tariff expenses. UBS' upside case for Gildan stock calls for a return of more than 80%.

Analysis

UBS reiterates a bullish outlook on Gildan Activewear (GIL), assigning a buy rating and a $56 price target, which suggests approximately 14% upside from its recent $47.86 closing price, with an optimistic scenario projecting returns exceeding 80%. The core of this thesis rests on Gildan's unique positioning to benefit from potential U.S. tariffs on Chinese imports, specifically a mooted 55% tariff. Unlike most softline companies negatively impacted by such tariffs, Gildan's vertically-integrated manufacturing primarily located in Central America, where tariffs are materially lower (potentially less than 10% on U.S. imports), offers a significant competitive advantage. This could drive companies currently sourcing from China to partner with Gildan to mitigate tariff expenses, thereby enabling Gildan to capture market share. UBS analysts believe this market share gain potential, which Gildan itself alluded to on its last earnings call, is not currently reflected in the stock's price, despite shares having pulled back approximately 4% in 2025 amidst trade talk uncertainties. This view is supported by Citi analyst Paul Lejuez, who previously highlighted Gildan's advantageous South American production capabilities.

Key Decisions for Investors

• Investors should consider Gildan Activewear's potential as a defensive play against, and beneficiary of, escalating U.S.-China trade tensions, given its advantageous Central American manufacturing base.
• Evaluate Gildan's valuation in light of UBS's $56 price target and the prospect of significant market share gains that are reportedly not yet priced into the stock, particularly if conviction aligns with UBS's view on tariff impacts.
• Closely monitor U.S. trade policy developments concerning China and evidence of sourcing shifts within the apparel industry, as these will be critical catalysts for realizing the projected upside.