Hot Picks: Black Friday hype offers little insight as undervalued retail stocks emerge

Black Friday may draw headlines, but analysts warn it offers little concrete insight into the broader retail outlook. Despite persistent sector-wide competition and shifting consumer behaviour, several retail stocks are showing signs of value as investors recalibrate expectations.

BNN Bloomberg spoke with David Swartz, senior equity analyst in consumer equity research at Morningstar, who outlined why Nike, Lululemon and Gildan appear undervalued and well positioned for longer-term recovery despite near-term challenges.

Key Takeaways

• Nike is refocusing on performance products and rebuilding wholesale partnerships as it works through two difficult years.
• Nike’s ties to global sports and new leadership support its long-term competitive position.
• Lululemon remains highly profitable with solid global growth potential, despite concerns about slower North American demand.
• Lululemon is addressing a recent lag in product innovation as competition intensifies in women’s athleisure.
• Gildan’s acquisition of Hanesbrands is expected to transform its consumer business and expand its branded basics portfolio at an attractive valuation.

Read the full transcript below:

ANDREW: Let’s get to Hot Picks. And of course, it’s a big shopping day. Our focus is retail, and we’re joined by David Swartz, senior equity analyst in consumer equity research at Morningstar. David, great to see you. Do you pay a lot of attention to Black Friday? I mean, for an analyst in retail, does it provide important data, for example?

DAVID: No, not really. It’s really just one day out of the holiday period, and so you don’t really want to draw conclusions as far as what the Black Friday sales look like. It’s also hard to get good data. There’s a lot of anecdotal discussion about shopping mall traffic and things like that, but you never really know if that translates into sales until later. And so people often will jump to conclusions, perhaps prematurely.

ANDREW: Let’s get to your first idea — Nike. They, of course, are big in China. They’ve had their troubles, though, in recent years keeping up with the consumer. Actually, I didn’t know that the stock is down pretty sharply in the past year. You do see potential here, though?

DAVID: Yeah, I do. Certainly, Nike stock has been down quite a lot. The company really has had two difficult years, and that’s been reflected in the stock price. But Nike still has a lot of strengths, including its connection to global sports. The company got a new CEO about a year ago, and he seems to be moving the company in the right direction. They’re really focused on putting out quality products, performance products, and perhaps in the past Nike had gotten away from that a little bit by focusing too much on the actual retail experience and moving away from their wholesale accounts. Nike right now is really trying to improve its relationships with wholesale partners, including the combined Dick’s Sporting Goods and Foot Locker. And I think in the long run, Nike still has the strongest position in this market, and it’s still a favourable market. The sportswear market is very large and global. My fair value estimate is US$104 a share, and so I think that for people who are willing to wait and see how this works out, this is potentially a good time to buy Nike.

ANDREW: Okay, Lululemon. A go-go stock. Maybe we’ll put up a five-year chart — it did drop, something of a fallen angel. You see them getting their mojo back?

DAVID: Yeah. Like Nike, Lululemon had kind of a difficult year, but you have to keep it in perspective that Lululemon’s numbers are still really good for most apparel companies. The company generates very high margins. It mostly does direct selling, which is a model that is very profitable for them. But people have been concerned that Lululemon’s growth in North America has slowed. There are also concerns about the China sportswear market, which is a market where Lululemon expects to generate a lot of sales growth. My fair value estimate for Lululemon is US$295 a share, and so I think it’s actually quite undervalued right now, which is a big change from the past when Lululemon was often very highly valued. At one time it traded at a P/E of about 50 times. So Lululemon’s valuation has certainly contracted considerably. I think this is a good opportunity to buy the stock at a good valuation. It’s a company that has no debt and generates a huge amount of cash flow, so a very strong balance sheet as well.

ANDREW: Has the magic gone, though, for Lululemon? Could it be that sure, they were a cult stock, they did a great job organizing local yoga groups, but has the gloss gone off the story?

DAVID: It is true that the market itself has become more competitive, and we have seen some strong competition in the women’s athleisure space. But I still think that Lululemon has a lot of fans. I don’t think people have really soured on the brand. I think that recently Lululemon has not put out enough new stuff, and that people haven’t had as good a reason to shop there as they have in the past. But Lululemon has a lot of new products coming out, and I think consumers will respond. I still think Lululemon has a strong following and that the company puts out very high-quality products.

ANDREW: And then finally, Gildan. Very different story. Obviously, they do sell some stuff under their own brand, but they’re a huge supplier of generic garments as well.

DAVID: Yeah. So right now, Gildan is about to close its acquisition of Hanesbrands, the U.S. major underwear and basic apparel manufacturer, and that’s really going to affect Gildan’s consumer business. It’s going to be a major consumer business now. In the past, and still today, Gildan is mainly known for printwear, which is producing essentially blank shirts for the printwear market. But Gildan is also going to be a major company now in branded basics. I think this is a transformative acquisition for the company. People don’t necessarily recognize this. The stock, both in the U.S. and Canada, is trading at a very large discount to my fair value estimates. My valuation on the Canadian shares is $128. So I think there’s really an opportunity right now to buy Gildan at a good valuation, with this acquisition closing, which I think is being undervalued by the stock market.

ANDREW: Leave us with a final thought on retail generally. We know there’s a relentless march online. What other big trends are you seeing, David?

DAVID: Well, we are seeing some trends in terms of retailers that cater to lower-income consumers and higher-income consumers doing well, but the middle class is really not doing so well in the United States especially. We’re seeing a lot of weakness from department stores and from retailers that cater to the middle class. We’re seeing strength in retailers such as Ralph Lauren, for example, and also Urban Outfitters — labels in the U.S. that cater to higher-income consumers. Lower-income and middle-class consumers are shopping at clearance stores like Ross and TJ Maxx in the U.S. So we are seeing changes, and these have been ongoing for years, but they have continued this year and probably will continue into the future, where retailers that cater to the middle class are continuing to struggle.

ANDREW: We better leave it there. Thank you very much. David, thanks. David Swartz, senior equity analyst in consumer equity research at Morningstar.

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This BNN Bloomberg summary and transcript of the Nov. 28, 2025 interview with David Swartz are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.