Title: Textile Retailers Face Challenging Second-Half Trading Environment Amid Improving Consumer Sentiment Ahead of US Presidential Election - Morgan Stanley Analysis
Investing.com -- The second-half trading outlook for textile retailers is proving to be challenging, but there is hope on the horizon as consumer sentiment appears to be more positive than in previous election years, according to analysts at Morgan Stanley.
In their note to clients, the analysts highlighted that consumers' optimism is on the rise as the crucial US presidential election approaches in November. Despite some quarter-on-quarter demand weakening, recent surveys such as the AlphaWise US Consumer Pulse Survey and the University of Michigan sentiment index indicate that Americans have a more optimistic outlook for the next six months.
This positive sentiment could support textile-focused retailers and brands in the final months of 2024, with limited risk to Wall Street's income estimates for the second half of the year. The analysts pointed out that historical data suggests that softlines stocks tend to perform well during election seasons, and mall foot traffic trends may not necessarily translate into fundamental deterioration for textile retailers.
Looking ahead, the analysts also considered the potential impact of the US presidential election on corporate returns. Democratic candidate Kamala Harris currently holds a narrow lead over Republican rival Donald Trump, with differing tax plans that could affect company profits. Trump's proposed corporate tax cuts are projected to boost average 2025 company earnings by 5%, while Harris's plan to increase taxes could lead to a 3% decline in earnings.
For textile firms, the analysts identified Burlington Stores Inc, Foot Locker Inc, Nordstrom Inc as the most exposed to potential changes in the US corporate tax rate, while Lululemon Athletica Inc, Nike Inc, and Skechers USA Inc are considered to be the least affected.
In summary, textile retailers are facing challenges in the second half of the year, but improving consumer sentiment and potential corporate tax changes could impact their performance. Investors should keep a close eye on these factors to make informed decisions about their investments in the textile sector.
