The outlook for the global retail and apparel industry remains bleak due to the unresolved U.S. tariff policy, according to credit rating agency Moody’s Ratings.
Even with the current tariff levels, US companies in the segment continue to face increased expenses, with department stores, big-box retailers, and clothing and footwear companies suffering the most, according to a report by Moody’s credit analysts.
Additionally, the credit analysts maintained their revenue growth forecast for the upcoming year in the range of 0–3%, indicating that poor unit demand was compensating for greater expenses through higher prices.
The analysts found that because companies will have limited flexibility to raise prices without affecting demand, the effect of tariffs will considerably drag earnings until at least the first half of 2026. They also noted that affordability is still a critical factor for customers with middle- and lower-incomes. They added that if businesses sell off whatever product they bought earlier in 2025, the expenses of the imposed tariffs will start to negatively impact retailers’ profits.
Even the biggest retail and clothing companies may see higher short-term expenses as they attempt to reorganise supply chains or redesign products to use inputs more efficiently, even though they can absorb the increased costs from tariffs.
Given that several Asian nations are important suppliers, US department stores and footwear and clothing companies are most likely to be negatively impacted by more tariff increases. Nike and Under Armour were also mentioned by Moody’s as companies affected by their significant focus on technical clothing and footwear that is challenging to export from Asian production centres. Furthermore, the report stated that “it is more difficult to raise prices in some of their assortment due to heavy promotional activity.”
The credit analysts also stated that they anticipate Walmart to do better because of its size, substantial grocery exposure, and comparatively low tariff risk, which are aided by the discounter’s supply-chain know-how and vendor negotiation power. On the other hand, they anticipate that Target’s operating performance will be poor, partly because of the mass discounter’s larger assortment of general products that is discretionary.
