Morgan Stanley highlights top apparel stocks for back-to-school season

Morgan Stanley has identified key apparel retailers that may outperform during the back-to-school shopping season, despite a general slowdown in the clothing industry. Analysts noted that consumer interest in back-to-school shopping is at its highest since 2014, indicating potential growth in demand. Abercrombie is highlighted for its strong alignment with current fashion trends, particularly stripes and cargo styles, although it faces a projected decline in sales due to low net spending intentions. Meanwhile, Lululemon is also positioned favorably for the season, benefiting from easier comparisons and potential innovations. However, Kohl's and Torrid Holdings are expected to struggle, with concerns about their ability to attract younger consumers and improve traffic and revenue. Morgan Stanley's analysis suggests that Kohl's may not effectively implement its strategic initiatives, leading to a negative outlook for the retailer. The firm has assigned an underweight rating to Kohl's, reflecting skepticism about its future performance. The report emphasizes the divergence in performance among retailers, with some likely to thrive while others may falter. Analysts are particularly cautious about Abercrombie's high valuation and potential earnings revisions, despite a positive outlook for the third quarter. Lululemon's prospects are bolstered by a favorable market position and anticipated growth in the latter half of the year. Overall, the back-to-school season presents both opportunities and challenges for apparel retailers, with Morgan Stanley's insights highlighting the importance of brand relevance and consumer engagement in a competitive landscape.