Investing.com -- Barclays (LON:BARC) launched new coverage across the retail sector this week, expressing a cautious near-term outlook for apparel amid rising tariff risks and consumer uncertainty.
"We are initiating coverage of GIL at Overweight, COLM&M at Equal Weight, and CRI&KSS at Underweight," Barclays analysts wrote Sunday.
The firm said it remains "cautious on the near term, with market volatility and uncertain policy rattling consumer and business confidence."
Apparel retailers are said to be particularly exposed, with Barclays noting, "the majority of the clothes we wear in the U.S. are made somewhere else, and there is no easy alternative to that without consistency in long-term policy."
Gildan Activewear (NYSE:GIL) earned an Overweight rating as Barclays sees strength in "operationally differentiated" companies that can better "insulate from tariff pressures."
Additionally, Gildan is viewed as "attractive on a free cash flow to equity perspective that have optionality to return capital to shareholders."
Meanwhile, Kohl’s was rated Underweight. Barclays said it is "relatively cautious on businesses that are: 1) facing structural top-line headwinds; 2) primarily exposed to U.S. sales to absorb tariff pressures; and 3) constrained by financial leverage in a deteriorating environment."
Despite some stabilization in inventory management through 2024, Barclays warned that "the potential for supply chain disruption as well as a deteriorating outlook for consumer demand in 2H25 leads to our view that retailers will approach ordering conservatively."
Looking ahead, Barclays believes "there will be a negative impact on units in 2H25 and 1H26" due to tariff-driven price increases, even though "there is significant uncertainty in the estimates today."
