Q3 2024 Review

Dec 5, 2024

The apparel industry is strutting down the runway of a temporary economic slowdown—but as we’ve said time and time again, there really is no need to panic; it’s just a wardrobe malfunction, not a full-blown disaster. Lower raw material costs have sewn up some impressive earnings for many companies, giving them a stylish edge despite the hiccups. Meanwhile, China seems to be having a bit of a “does-this-fit-my-economy?” moment, with most reports highlighting its struggles.

But fear not! The U.S. market is still striding forward, looking sharp and confident, proving that a little slowdown is just a chance to pause before hitting the next trendsetting stride.

Key Points

Reduced Raw Material Costs Boost Earnings: Many companies are seeing a lift in their bottom lines thanks to lower raw material costs, which are helping offset other challenges.
Tariffs, Friend or Foe?: The ongoing tariffs continue to present hurdles for the industry, but companies like Gildan are adapting by factoring these costs into their pricing structures and shifting to nearshore sourcing.
On-Demand and Digital Production Rising: Brands are increasingly embracing on-demand, digital production methods. Looks like faster, smarter, and greener printing is the way to go.
Activewear Gains Momentum: Activewear remains a hot category, with brands like Lululemon, Gildan, and Hanesbrands highlighting its growth. Bonus point! This means Direct-to-Film (DTF) printing might just go from benchwarmer to MVP.
Out with the Old, in with the Gold: Holiday season is here, and companies like Gap and DICK’s Sporting Goods are stepping up their inventory game. If you plan to clear out annual inventory, now is the time.

In the Printing World

Cotton has come down a little bit since last year, but there's still inflation in the system, right? So if you look at labor, transportation, energy, these things are all up. So I would say that whatever benefit there was of slightly lower cost of cotton, I think, offset by other inflationary items in people's overall cost structure. So our view is that pricing will be somewhat flat because of that.

Glenn Chamandy, CEO of GIldan

Raw material costs have been a breath of fresh air for Gildan, with profit margins getting a cozy boost—gross margin climbed to 31.2%, up from 27.5% last year. While many companies are tossing around buzzwords like "innovation”, even from last quarter’s report, Gildan is walking the talk, rolling out new tech like plasma technology for digital printing. This game-changer is set to lower costs for screen printers and refine digital printing—just a sneak peek of what’s coming in 2025. Add to that their "soft cotton revolution," which is not only making their fleece softer but also more print-friendly, thanks to tweaks in yarn-making and production capacity. Gildan isn’t just optimizing—they’re leveling up the game for garment printing.

While we’re on the topic of printing…

Kornit’s Apollo system and its "All-Inclusive Click" model are making waves, proving that digital printing is becoming more accessible—or, downright transformative. On-demand and digital production methods, which we highlighted in our last report, continue to gain traction for their sustainability and speed. Brands are increasingly leaning toward these methods to reduce waste and improve speed-to-market, aligning perfectly with Kornit’s growth strategy. As CEO Ronen Samuel puts it,

"I’m super, super confident this market needs a change and is moving to on-demand."

It’s not an overnight revolution, but the direction is clear. Brother Industries is riding this wave too, with their Printing & Solutions (P&S) segment leading the charge. Growth in hardware and consumables, coupled with stable inventory and favorable currency rates, has kept Brother thriving. The market may still be finding its footing, but for companies like Kornit and Brother, the shift to digital is the gift that keeps on giving.

💡 We think the takeaway here is clear: innovation in printing isn’t just a buzzword anymore— it’s the path forward. From Gildan’s plasma technology to Kornit’s on-demand systems and Brother’s rock-solid execution, the industry is weaving a new fabric of efficiency (literally, we see you, Gildan), sustainability, and profitability.

While the market may still be catching its breath, these companies are proving that those who embrace change today will be the ones setting the trends tomorrow. The digital printing revolution isn’t waiting—it’s happening, stitch by stitch.

Trumpin’ Tariffs

Now that the elections are over, it looks like tariffs are set to shake up production costs—but don’t expect big companies to lose sleep over it. Why? Because everyone’s in the same boat, and when the whole industry must adapt together, it levels the playing field. As Gildan succinctly put it, tariffs will impact all players equally and simply become another line item in pricing and cost structures.

The shift is already underway. As Ronen Samuel aptly noted, the U.S. textile market is pivoting toward nearshore sourcing from non-tariffed countries like Mexico, Vietnam and Bangladesh instead of China, signaling a massive transformation. At the same time, technology is stepping in to ease the pain of disrupted supply chains and inventory challenges, making the transition smoother for those ready to embrace it.

Yes, tariffs are tricky to navigate, but let’s not hit the panic button just yet. There’s a silver lining: local companies stand to benefit as higher import costs make domestically produced items more competitive. It’s the classic case of “what doesn’t kill you makes you stronger”—or at least, more strategic.

Smaller printers, unfortunately, are feeling the pinch. With limited negotiating power, they’ve been squeezed by rising costs for imported blanks like t-shirts and hoodies from tariffed countries such as China. On the flip side, domestic apparel printers are seeing a boost as clients shift to locally sourced garments to avoid import price hikes.

💡 Tariffs are undoubtedly challenging, but they’re also driving significant shifts in the apparel industry. From nearshore sourcing and new technologies to a growing focus on local production, companies are finding ways to adapt and thrive. While smaller printers face added pressure, larger players like Gildan and Hanesbrands are well-positioned to navigate these changes, leveraging their resources and strategic adjustments.

Change is never easy, but it’s often the nudge industries need to innovate and evolve.

Sweat Equity, Athleisure’s Big Gains

Driven by consumer demand for apparel that combines comfort and versatility, Improvements in fabric and design have made athleisure more functional and stylish. Right now, its both a favourite for exercise and also your go-to outfit for a grocery run. It’s almost like everyone has a pair or two, or more in their closets ready for daily wear.

This booming popularity is evidenced by projections that see the market growing at a robust CAGR of 8.8%, potentially reaching a staggering USD 920 billion by 2034.

The appeal of athleisure lies in its versatility, which has captivated a much wider audience, not just Ozempic users. Yeap, we been knew that ever since Ozempic and its semaglutide friends hit the pharmacies, it caused quite a stir to the athleisure market. Newsflash: active is the new in thing.

Industry giants like Gildan and Hanesbrands are seeing substantial benefits from this trend, or dare we say, new adapted lifestyle. Gildan, for example, reported an increase in gross margin to 31.2%, up from 27.5% the previous year, signaling strong performance and operational efficiency. Similarly, Hanesbrands has witnessed a 6% increase in activewear sales, underscoring the sector's robust growth.

For us in the printing industry, this thriving market will also positively influence the Direct-to-Film (DTF) printing industry, as the demand for polyester-based athleisure wear—perfect for DTF printing techniques—continues to rise. New innovative fabrics and advanced printing tech? Sounds like a print shop level up!

💡 Of course these kinds of changes in consumer behaviour will shape whatever goes on in not just one, namely the print industry, but so many more, creating a fast-paced and competitive space.

Bottom line? Whether you’re hitting the gym, running errands, or gearing up for some serious printing business, athleisure’s rise is a win for everyone.

Fleece the Season to Be Jolly!

And while we’re talking about leveling up, let’s take a moment to appreciate how smart inventory management can truly make or break a retailer. In an industry where timing and strategy are everything, companies like DICK’S Sporting Goods and Gap are showing everyone how it’s done. By keeping stock levels in check and avoiding unnecessary markdowns, they’re holding on to their margins even when the market gets tough.

Hanesbrands is also making headlines, boasting a record-breaking gross margin of 41.8% and an operating margin of 13%. Their secret? Cutting costs where it counts, streamlining their product lineup, and running an ultra-efficient supply chain.

Meanwhile, Gap and Old Navy are masters of seasonal planning. They know back-to-school season means big demand for denim and fleece, and they’re always ready with the right inventory to keep sales rolling in.

As for fleece? It’s still a fan favorite when the temperatures drop. While unseasonal weather might cause a slight delay, experts like Rhodri Harries remain confident: "We will see, I would say, good fleece sales in Q4." All signs point to a strong finish for this cozy wardrobe staple.

So since holiday seasons are in, right now might be the perfect time to clear that inventory pile up.

💡 In retail, timing truly is everything. The holiday season presents a golden opportunity for businesses to maximize sales, provided they have the right inventory strategy in place. Shoppers are on the lookout for gifts, seasonal essentials, and winter staples like fleece, creating a surge in demand that savvy retailers can capitalize on.

Clearing out excess stock ahead of the holidays not only frees up space for high-demand items but also ensures that shelves are stocked with what consumers are actively seeking. Well-timed markdowns or promotions on older inventory can help move those products quickly while boosting customer traffic. At the same time, having fresh, in-demand items—like cozy fleece jackets or trendy denim—readily available is key to capturing the attention of holiday shoppers.

Pro Tip: The holidays are also when emotions and urgency drive purchasing decisions, meaning consumers are more likely to spend on what they perceive as valuable or necessary.

Signs of Life

The economy might be hitting the brakes right now, but don’t count it out just yet. The slowdown is temporary, and many companies are already showing signs of recovery—quite literally after the chaos caused by Hurricane Helene. While the hurricane left a trail of economic disruption, businesses are dusting themselves off and starting to regain momentum.

Sourced from Koyfin

Take Hanesbrands, for example. After what seemed like a near-death experience these past few quarters, the company is making a comeback, proving that resilience pays off. Meanwhile, luxury brands like Gucci and Louis Vuitton continue to thrive, demonstrating that people are still willing to splurge on high-end items. Despite the economic hiccups, the appetite for luxury remains strong, keeping these brands afloat and even thriving.

Part of their success lies in how they adapt to market trends. Ralph Lauren and Tapestry have doubled down on digital enhancements and customer engagement strategies, reshaping their brands to resonate with younger, tech-savvy audiences. Tapestry, in particular, has emphasized how these shifts have modernized its image and strengthened its connection to the next generation of consumers.

So, while the economy and everything else is experiencing a seasonal slowdown, resilience, innovation, and smart strategies are keeping things on track. For the printing industry, this slowdown is a chance to adapt and innovate—because those who evolve now will lead when the market rebounds.