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Investing.com -- Morgan Stanley analysts said agentic artificial intelligence could drive a “~$6B total cost savings opportunity” for the softlines retail and brands sector by 2026, lifting profitability across the board.
In a new report, the bank introduced its proprietary Softlines AI framework, which measures both potential profitability gains (“reward”) and corporate focus on AI (“recognition”).
“At the midpoint, we calculate a ~$6B total cost savings opportunity from agentic AI-driven operating efficiencies … which could boost Softlines Retail and Brands’ ‘26e EBIT/EBITDA by ~20% on avg., and margins by ~200 bps,” Morgan Stanley said.
The analysts highlighted Gap, Macy’s, and Victoria’s Secret as the most positively positioned. These companies “could see large ‘26e profitability gains (‘reward’), and appear more focused on AI than peers (‘recognition’).”
By subsector, department stores stand to benefit most due to their larger workforces and lower EBIT bases, while brands may see less upside.
Among individual tickers, “American Eagle, Kohl’s, and Under Armour could enjoy the largest ‘26e EBIT/EBITDA benefit … and Amer Sports, On Holding, and Tapestry the least,” according to Morgan Stanley.
The bank noted that AI use in softlines has so far centered on “inventory management, supply chain automation, demand planning/forecasting, and customer care/service.”
While transcript mentions peaked in 2023 before declining in 2024, Morgan Stanley observed they are “once again mostly trending higher y/y since 4Q24 – suggesting potentially renewed and higher focus on AI.”
Overall, the analysts said the framework highlights “the broad-based agentic AI-driven operating cost savings opportunity across our group,” with Gap, Macy’s, and Victoria’s Secret emerging as the only companies in the most favorable quadrant.