With more and more American citizens testing positive for the novel coronavirus and the nation’s death toll surpassing 12,000, U.S. hospitals and healthcare facilities are experiencing an acute shortage of personal protective equipment (PPE), including masks and gowns.
In light of the ongoing supply crunch situation, a handful of apparel companies have stepped up to provide support by shifting their production lines from making apparel to manufacturing face masks and gowns.
What’s the Role of Apparel Stocks?
Considering the rapid spread of the virus, the Centers for Disease Control and Prevention (CDC) has recommended Americans to cover their faces when they are outside their homes, especially around other people.
However, experts like U.S. Surgeon General Jerome Adams suggests that critical supplies like N95 masks must be reserved for doctors, nurses and other medical first responders.
In this context, CDC has advised that if N95 or other surgical masks are unavailable, healthcare providers may use homemade masks as a last resort.
Now, traditional mask manufacturers like 3M Company MMM and Honeywell International HON are already bogged down by immense pressure of manufacturing millions of high-quality face masks for front-line healthcare workers, having pledged to support the U.S. government.
Apparel companies have come forward to fill in the void. They are using their knowhow and supplier base to manufacture new masks and gowns or to transfer their own supply of masks to front-line healthcare workers or both.
Stocks in Focus
Here we are discussing four apparel companies that are doing their bit to tackle the crisis. The fact that each one of them boasts a solid long-term earnings growth rate makes them more attractive to investors. Moreover, their share price has shot up more than 10% since Apr 3, reflecting investor confidence in these stocks.
Per a report by CNBC, HanesBrands HBI is part of a consortium of apparel manufacturers with a contract with the U.S. federal government to produce cotton masks. HanesBrands aims to produce 1.5 million masks weekly while the entire consortium will produce 5 million to 6 million masks each week, using HanesBrands’ design and patterns. Of the more than 320 million masks the company expects to make, approximately 10 million have been delivered and the company is ramping production to make approximately 40 million per week. The company boasts a solid long-term earnings growth rate of 3.3% and has witnessed a 16.6% rise in its share price.
Retail giant Gap GPS is working on solutions to use any excess garment production capacity to produce additional fabric masks and protective gear. Moreover, the parent company of Gap, Old Navy, Banana Republic, Athleta and other brands have built a small team with members from its different brands and functions, along with California hospitals, to use Gap’s connections in the global supply chain to get protective masks and gowns. This company boasts a solid long-term earnings growth rate of 12% and witnessed a 23.4% increase in its share price.
Ralph Lauren RL is ramping up production to meet the target of manufacturing 250,000 masks and 25,000 isolation gowns. This company boasts a solid long-term earnings growth rate of 15% and has witnessed a 21% rally in its share price.
Canada Goose Holdings GOOS aims to manufacture scrubs and gowns for medical professionals at two of its manufacturing facilities, in Toronto and Winnipeg, with the opportunity to extend production across additional facilities as needed. Approximately 50 employees per facility will work to manufacture the gear. It has an initial goal of producing 10,000 units. This company boasts a solid long-term earnings growth rate of 20.7% and has witnessed 11.1% increase in its share price.
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Honeywell International Inc. (HON) : Free Stock Analysis Report
3M Company (MMM) : Free Stock Analysis Report
The Gap, Inc. (GPS) : Free Stock Analysis Report
Ralph Lauren Corporation (RL) : Free Stock Analysis Report
Hanesbrands Inc. (HBI) : Free Stock Analysis Report
Canada Goose Holdings Inc. (GOOS) : Free Stock Analysis Report
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