US Softlines Retail "Industry Outlook: Don't Count Out the US Consumer; ..."

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US Softlines Retail "Industry Outlook: Don't Count Out the US Consumer; ..."

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US Softlines Retail Equities

AmericasIndustry Outlook: Don't Count Out the US

Consumer; Remain Bullish Retailers, Specialty

Jay Sole

Analyst

jay.sole@ubs.com

We remain bullish on Softlines stocks… +1-212-713 3559

We see more upside than downside to Street FY26 EPS estimates and Softline stock P/Es. Mauricio Serna, CFA

New May survey data shows US consumer apparel and footwear spending intentions Analyst

remain solid. US consumers’ view of the economy has been impacted by the Middle East mauricio.serna@ubs.com

conflict. Yet the data shows the US consumer remains resilient. This is the main reason +1-212-713 9028

we remain bullish. Furthermore, the Softlines group P/E looks low. The group trades at a Natalie Koltermann

20% P/E discount to the S&P 500 vs. its 8% historical avg. premium (Fig. 51). Associate Analyst

natalie.koltermann@ubs.com

…and like Buy-rated stocks such as ONON, GIL, TPR, BURL, and others: +1-212-713 4229

We believe the market is overestimating the negative impact of high oil prices on Aditya Kulkarni

consumer demand and Softline company margins. Plus, we believe the market is under Associate Analyst

appreciating the power of the “Wealth Effect” on consumer spending given the S&P aditya.kulkarni@ubs.com

500 is up 8% YTD and 24% over the LTM. Lastly, we believe the market is significantly +1-212-713 1098

underestimating the potential for AI to positively impact Softline companies’ sales and Serge Severenchuk

margins (link). Stocks we like and rate Buy: ONON, GIL, TPR, BURL, LEVI, RL, TJX, AEO, Associate Analyst

ANF, ATZ, BIRK, DECK, GAP, GRGD, PVH, SIG, VSCO, and WWW. We like these stocks serge.severenchuk@ubs.com