Hanesbrands (NYSE:HBI), Nike (NYSE:NKE), Under Armour (NYSE:UA) Have Low Cotton Exposure

Based upon their fairly low exposure to cotton, Hanesbrands (NYSE:HBI), Nike (NYSE:NKE) and Under Armour (NYSE:UA) are strongly positioned to be able to raise prices and defend margins in response to inflationary pressures.

On the other hand, Volcom (Nasdaq:VLCM), Quiksilver (NYSE:ZQK) and Gildan (NYSE:GIL) are the most exposed to cotton, and will struggle to maintain margins and earnings going forward.

FBR said, "We believe companies with relatively low cotton exposure and the ability to raise prices to offset inflationary pressures will outperform peers in FY11. We believe Hanesbrands (Outperform), Nike (Outperform), and Under Armour (Market Perform) are the best positioned within our coverage universe given Nike’s and Under Armour’s relatively low cotton exposure and Hanesbrands’ strong execution in locking in cotton costs at favorable levels and effectiveness at raising prices.

"We believe Volcom (Underperform), Quiksilver (Underperform), and Gildan (Underperform) are the worst positioned among our covered companies given relatively high cotton exposure and challenges to raising prices to offset product cost inflation."

Hanesbrands closed Wednesday at $25.37, down $0.09, or 0.35 percent. Nike closed at $88.58, down $0.70, or 0.79 percent. Under Armour ended the trading day at $54.78, down $1.97, or 3.47 percent. Volcom closed at $18.74, down $0.25, or 1.32 percent.
Quiksilver closed down at $5.16, losing $0.17, or 3.19 percent. Gildan closed at $29.37, down $0.44, or 1.48 percent.