Better Buy: Lululemon Stock vs. Gildan Activewear

Lululemon (NASDAQ:LULU) and another clothing play may be worth a shot in 2024.

| More on:
data analyze research

Image source: Getty Images

Canada’s apparel scene has been an incredible place to invest over the past decade, with the likes of Vancouver-based athleisure and yoga wear king Lululemon (NASDAQ:LULU) continuing to gain for investors. Meanwhile, there have been other intriguing clothing plays rich with value and long-term potential. Gildan Activewear (TSX:GIL) may be less growthy and exciting than Lululemon, but if you’re a value investor, I view the play as nothing short of a bargain at current levels.

So, whether you’re looking for a deeper value play or seek a robust brand alongside a promising growth narrative, look no further than the following plays going into the Spring of 2024. As the Canadian and U.S. economies test (and hopefully avoid) an economic recession, there’s no telling how much the following clothing plays could bounce. Either way, I view both as worthy of a watchlist as they look to build some strength in this new year.

Lululemon

Lululemon is a Canadian company that, unfortunately, doesn’t trade on the TSX Index. To gain exposure to the Vancouver-based yoga wear maker, you’ll need to venture south of the border and buy off the Nasdaq exchange. Though the currency conversion may be less than ideal, I think it’s worthwhile to make the swap as Lululemon looks to add to the gains it posted in 2023.

The company is an anomaly in that it was able to surge higher last year as other apparel plays sunk in the face of bruised consumers. Undoubtedly, yoga wear is not a must-buy when the going gets tough. Still, you wouldn’t be able to tell the consumer is challenged by having a glance at shares of Lululemon, which made new all-time highs above $500 per share before recently pulling back to around $474 and change.

I think the pullback is a great buying opportunity for investors who love the brand and think it can add to its strengths once the consumer becomes even more willing to loosen the purse strings. If Lululemon can post impressive sales in a turbulent economy, just think of what it’ll be able to do when the bull market (and consumer sentiment) gets running at full speed.

Is LULU still an expensive stock? At 60.3 times trailing price to earnings (P/E), it’s no bargain. However, you’ve got to pay a premium for a leading brand that’s demonstrated resilience amid even the most turbulent of macro environments. I’d argue that Lululemon is a wonderful company worth paying up for, especially in a mixed environment.

Gildan Activewear

If value is what you seek, perhaps Gildan Activewear is the better buy right here. At $43.50 per share, the stock trades at just 12.3 times trailing P/E to go with a 2.3% dividend yield. The company makes essential clothing products that really never go out of style! The firm recently made headlines for activist investor involvement. Indeed, there’s a bit of drama in the boardroom over at Gildan.

After dragging its feet for the past five years (shares down 1% over the span), I’d argue activism may just be able to help spark renewed interest in the long-time value play.

Personally, I view shares as deeply undervalued but rather untimely. So, unless you’re committed for the long haul, shares may not be your cup of tea, at least compared to the likes of Lululemon.

Better buy: LULU stock vs. GIL shares

As it stands, I like LULU stock more for 2024 and beyond. It has to be one of my top picks in the apparel scene after last year’s impressive results.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Gildan Activewear and Lululemon Athletica. The Motley Fool has a disclosure policy.

More on Investing

An airplane on a runway
Investing

Air Canada Stock: Too Much Turbulence or Time to Buy?

Air Canada stock is a high-risk stock that might be too volatile to consider investing in right now.

Read more »

question marks written reminders tickets
Stocks for Beginners

Where Will Aritzia Stock Be in 3 Years?

Aritzia (TSX:ATZ) stock may have come down from all-time highs, but a new CEO and renewed U.S. focus makes it…

Read more »

edit Sale sign, value, discount
Investing

The Market Is Being Too Hard on These Growth Stocks Going for a Discount

These three growth stocks look like excellent buys, given their higher growth prospects and discounted stock prices.

Read more »

Retirement plan
Investing

3 Stocks I’m Adding to my Retirement Account in March

Well Health Technologies, Cineplex, and Fortis each have their own strengths that make them good buys for retirement planning.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Investing

Worried About a Market Collapse? Here Are 2 Stocks That Could Beat a Bear Market

Stocks have risen at a fast rate in 2024. Are you worried about a sudden market collapse? Here are two…

Read more »

stock research, analyze data
Dividend Stocks

Is it Too Late to Buy Dollarama Stock?

Dollarama (TSX:DOL) stock is up almost 200% from its 2020 lows. Is it still a buy?

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

Down by 25%: Is Canadian Tire Stock a Buy in February 2024?

Take a closer look at this Canadian retail stock if you are looking for low-cost additions to your self-directed portfolio…

Read more »

Golden crown on a red velvet background
Dividend Stocks

Cash Kings: The Top 2 Canadian Stocks That Pay Monthly

Two Canadian stocks are cash kings to income investors for their generous dividends and monthly payouts.

Read more »