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Investing.com -- Goldman Sachs downgraded Macy’s Inc and Torrid Holdings Inc, citing growing macroeconomic headwinds and tariff-related risks that threaten to weigh on U.S. apparel retailers.
The firm lowered its sector outlook and cut its U.S. GDP forecast for 2025 to 0.5% from 2.5%, warning of a 45% chance of recession.
While not baking in a full downturn yet, Goldman said the mix of slowing growth, geopolitical uncertainty, and rising tariffs could pressure earnings across the sector.
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“We reduce our outlook for the US apparel and softlines sector to reflect a more cautious macro backdrop,” Goldman wrote, adding that higher tariffs, inventory imbalances, foreign boycotts, and weaker tourist-driven demand all present risks.
Goldman downgraded Macy’s to “Neutral” from “Buy” with a $12 price target, citing the department store’s exposure to economic cycles.
Historical data suggests department store sales consistently underperform during downturns, analysts at Goldman said.
Torrid was downgraded to “Sell” with a $4 target.
While noting recent efforts by management, Goldman said the brand is especially exposed to slower U.S. growth and had already shown signs of weakening consumer demand.
Tariff-related uncertainty remains a key overhang. Although a 90-day pause allows retailers to buy holiday products at reduced rates, Goldman said a 145% tariff on goods from China, especially in home categories, poses significant disruption.
Off-price retailers such as TJX (NYSE:TJX), Burlington (NYSE:BURL), and Ross may also face challenges, particularly in home goods sourcing.
Despite the downgrade, Goldman highlighted select names with pricing power and strong balance sheets, like TJX, Burlington, Tapestry (NYSE:TPR), and Ralph Lauren (NYSE:RL), as better positioned to weather the current volatility.
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