Moody's Upgrades Retail's Outlook for the First Time in a While, and Off-Price Wins Again

Moody's Ratings has raised its outlook for the global retail and apparel sector to stable from negative, pointing to easing tariff costs and a labor market that has held steady. The agency now expects sector revenue to grow 2% to 4% and adjusted EBIT to grow 0% to 2% over the next 12 to 18 months, reversing an earlier 2026 forecast that called for adjusted EBIT to be flat to down 2%, after it actually fell 0.7% in 2025.

Moody's expects spending to stay "resilient but increasingly bifurcated": upper-income households keep driving growth, while lower- and middle-income shoppers face pressure from housing, insurance, food, and energy costs and lean harder on value, essentials, and credit. The winners read like a familiar list: discounters, off-price, and dollar stores, with Walmart and Target sitting on roughly $4 billion in combined tariff refunds to plow back into pricing, and TJX, Ross Stores, and Dollar General all named as beneficiaries of price-conscious shoppers. Lower tariffs are also easing costs for import-heavy players like Nike and Gap, while home-improvement names Home Depot and Lowe's get only tepid growth projections, held back by higher interest rates weighing on housing.

Moody's flags the usual landmines: unresolved trade policy with Mexico and Canada, prolonged high energy prices, and geopolitical tension that could squeeze discretionary spending and revive pressure to raise prices. The firm's bottom line for the holidays is a promotion-driven season full of budget-conscious shoppers, which is Moody's way of saying the outlook improved, but nobody is popping champagne over it.

Source: Retail Dive

Kyle Duford, Founder & Editor, BRNDWIRE. More from Kyle →