Investing.com — Wells Fargo forecasts a stable consumer backdrop in 2025, supported by healthy U.S. demand, a strong holiday season and stabilizing European trends, according to the retail sector outlook.
The brokerage upgraded Bath & Body Works (NYSE:) Inc and Capri Holdings (NYSE:) Ltd to “overweight,” given their growth potential and value appreciation. Ross Stores Inc (NASDAQ: ) was downgraded to “equal weight” due to a more balanced outlook.
“We believe ROST’s current growth potential is limited given the sluggish business trajectory as ROST continues to adjust to its mix of changes and margins are under pressure from their mix initiative, lack of significant compensating leverage and continued pressure on wages,” the analyst added. .
Wells Fargo (NYSE: ) highlighted inventory concerns and freight challenges as risks to already elevated margins, with gross margins around 400 basis points above 2019 levels.
Top long picks include Bath & Body Works Inc, Capri Holdings, RealReal (NASDAQ:) Inc, Signet Jewelers (NYSE:) Ltd and Tapestry (NYSE:) Inc. The goal of the short idea Hanesbrands (NYSE:) Inc, Canada Goose Holdings Inc (NYSE: ), Ulta Beauty (NASDAQ: ) Inc and VF Corp (NYSE: ), citing valuation and company-specific challenges.
