AI applications boost UBS's optimism for the U.S. softline retail sector's top pick

Investing.com – UBS’s latest analysis shows that U.S. softline retailers are adopting artificial intelligence at a much faster rate than many investors expected. The company’s benchmark research indicates that out of 45 softline companies covered, 43 are currently using AI in some form, marking a significant shift compared to over a year ago when many companies appeared slow to embrace the technology.

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UBS notes that recent conversations with listed and private companies reveal that firms are highly sensitive to disclosing AI usage, suggesting they view these capabilities as potential competitive advantages. This widespread adoption contradicts UBS’s October 2023 survey at the Generative AI Conference, where softline companies seemed cautious about rapidly deploying AI solutions.

Despite market concerns about potential AI-related risks, UBS emphasizes compelling bullish reasons for the sector. The firm believes AI can significantly improve operational efficiency for softline retailers, potentially boosting sales, profit margins, and return on invested capital. UBS cites companies like Ralph Lauren and Tapestry as examples, suggesting that AI deployment may have contributed to their recent strong performance. The firm states that if this trend expands across the sector, Wall Street earnings estimates could rise, and price-to-earnings multiples could expand.

Here are the top-ranked stocks in the U.S. softline retail sector according to UBS:

Gildan Activewear — As the sector embraces AI-driven operational improvements, UBS has a buy rating on this softline retailer.

Levi Strauss & Co — With accelerated AI adoption across the industry, this denim apparel manufacturer is on UBS’s list. Recent news shows Levi Strauss & Co. reported Q4 FY2025 earnings and revenue exceeding analyst expectations. Additionally, Jefferies has initiated coverage on the company with a buy rating.

On Holding — This athletic footwear and apparel company is featured in UBS’s sector picks. On Holding AG announced the appointment of Frank Sluis as new CFO, effective May 1, 2026. The company also received reaffirmed buy or outperform ratings from multiple analysts, including UBS and Stifel.

PVH Corp — The parent company of Calvin Klein and Tommy Hilfiger is also among UBS’s selected softline stocks. PVH announced a partnership with OpenAI to integrate AI into its operations, and its Q3 FY2025 earnings per share exceeded expectations.

Ralph Lauren — UBS considers this luxury apparel manufacturer as an example of a company that could benefit from AI deployment. Ralph Lauren Corp recently reported strong Q3 FY2026 results, with EPS and revenue surpassing analyst estimates.

Signet Jewelers — This jewelry retailer ranks sixth in UBS’s softline retail list. Signet Jewelers received updated ratings from multiple analysts, including Goldman Sachs initiating coverage with a neutral rating, and Jefferies raising its target price while maintaining a buy rating.

Vince Holding Corp — This contemporary fashion brand’s Q3 FY2025 results exceeded analyst expectations in both EPS and revenue.

UBS believes that the rapid deployment of AI among softline retailers indicates that companies see significant potential financial gains from these investments.

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