Apparel retailers face tough profit outlook in 2025, Morgan Stanley says

Urban Outfitters

21/01/2025 15:32

** Morgan Stanley expects challenging profit outlook for
apparel retailers in 2025 but says revenue trends will remain
consistent 
    ** Brokerage upgrades Urban Outfitters Inc  URBN.O  to
"overweight" from "under-weight" and American Eagle Outfitters
 AEO.N  to "equal-weight" from "underweight"; URBN up 6% and AEO
up 5%
    ** Brokerage expects improved profitability for URBN, along
with positive revisions to earnings-per-share and valuation in
2025, and sees potential stock gains for AEO after significant
decline in December
    ** Brokerage expects more-of-the-same demand for softlines —
goods that are literally soft, such as clothing and linens 
    ** Brokerage cuts rating on Ross Stores  ROST.O   to
"equal-weight" from "overweight"; shares down ~1% 
    ** Views ROST as overvalued with limited near-term growth
prospects
    ** Brokerage cuts PT on ROST to $140 from $164, lowest among
22 analysts covering the stock, as per LSEG data; new PT is a 6%
downside to stock's last close
    ** Brokerage resumes coverage of Tapestry Inc  TPR.N  with
"equal-weight" rating and $65 PT
    ** Brokerage expects TPR's profit improvement to be
challenging 
    ** In 2024, URBN gained ~54%, ROTH rose ~9%, AEO dropped
~21%  
    
 Company     Prior PT    Current PT
 Name                    
 Urban       $41         $63
 Outfitters              
 American    $15         $16
 Eagle                   
 Outfitters              
 Tapestry    NA          $65
 Inc                     
    
  

 (Reporting by Rashika Singh in Bengaluru)
 ((rashika.singh@thomsonreuters.com))