Agency AI could lift retail profits by 20% - Morgan Stanley. Who is the beneficiary?

The introduction of agent-based AI will save U.S. retailers about $6 billion in total costs and increase profits by 20% by 2026, according to Morgan Stanley, one of the largest investment banks. He named the companies that stand to gain the most. However, there are skeptics in the market who warn: everyone has the same access to technology, so it will be extremely difficult to get ahead.

The introduction of so-called agent-based AI has the potential to give the largest U.S. retailers a combined effect of about $6 billion in savings by 2026, Morgan Stanley said in a Sept. 22 note. "Agency AI could improve operational efficiency and add up to 20% to earnings forecasts over the next two years," said analyst Alex Straton.

Agency AI is a system capable of making decisions independently, acting in a complex environment and bringing processes to fruition. On average, the bank estimates that the use of such tools in inventory management, logistics and customer service can increase industry profitability by about 2 percentage points. At the same time, although AI can open up significant opportunities for retailers to reduce costs and improve margins, it is unlikely to become a "lifeline" for the entire industry, the bank said.

Morgan Stanley estimates that American Eagle, Kohl's and Under Armour are likely to have the biggest impact, while Amer Sports, On Holding and Tapestry are the least sensitive to AI adoption. Meanwhile, when considering two metrics - the potential impact of AI on revenue and the frequency of management mentions of the technology - Gap, Macy 's and Victoria's Secret are best positioned. According to the investment bank, the fact that a company is talking a lot about AI indicates engagement and active implementation.

- Macy's is pushing the topic of artificial intelligence in its public statements more than anyone else, Morgan Stanley notes. The company is already using AI in three key areas: inventory management, supply chain optimization and pricing. Due to the fact that Macy's has a lot of employees and a relatively low profit base, the effect of automation is particularly noticeable. The investment bank estimates that by 2026, AI implementation could increase Macy's profits by nearly 47% over current levels.

- Gap is also actively implementing AI tools in logistics and supply management. The main goal is to forecast demand more accurately and reduce the costs of storing products. According to analysts' models, this could add about 33% to the company's profits and raise profitability by about 2.3 percentage points. That's among the best performance among competitors.

- Victoria's Secret is different in that it has a very high growth potential thanks to AI. Analysts estimate that automation can increase its profits by about 42% by 2026. At the same time, the company's management is actively discussing AI in the public space, emphasizing its role in the development of personalization.

Morningstar senior analyst David Schwartz is less optimistic. "No one has yet been able to quantify the effect [of AI adoption]. What companies say and what will actually happen are different things," he told Yahoo Finance.

Schwartz agrees that the most promising applications lie in the area of internal operations: AI has the potential to help retailers better understand how much and which items to order, leading to lower markdown costs and reducing excess inventory, which remains a chronic problem in the industry. In addition, marketing, targeting and personalized recommendations can be made more effective, and in the long term, there is discussion of applying AI to design and new product development.

That said, AI "will not be a miracle cure for all market problems," Schwartz warns. "Competition in retail remains fierce, and access to technology is roughly the same for all players. Therefore, it will be extremely difficult to gain a sustainable competitive advantage," the analyst reminded.

This article was AI-translated and verified by a human editor