1、Equity ResearchRating Change December 16,2025Retailing,Specialty Softlines,and E-commerce2026 Retailing,Specialty Softlines and E-commerce Sector OutlookUpgrading GAP,VSCO;Downgrading CPRIOur CallWhile we continue to see a winners/losers setup,bigger picture,we lean more positive on the space enteri

2、ng 2026 due to:1)better-than-feared early holiday reads,2)benefits from tax reform(esp 1H26)and 3)optionality on tariff repeal/refund.Health of the Consumer.Consumer spending habits in 2025 were largely informed by tariffs and promos(often trending hand in hand)-creating episodic shopping patterns.E

3、ntering 2026,were more optimistic,as tax reform benefits(esp 1H)flow through to middle-income shoppers(relatively weaker in 25)that most likely boosts discretionary spend-but not large enough to spend on big ticket.That said,the lower-income cohorts likely continue to struggle(stimulus-focused elsew

4、here).Talkin Tariffs.Interestingly,the key tariff theme entering 2026 is repeal/refund.While fluid,early indications could suggest both reversing a majority of tariffs implemented to date and a refund of tariff revenue collected-which could create a material tailwind to our space(group has absorbed

5、150-200bps of tariff headwind).In a Bull Case,wed see 1)UAA,2)CRI,3)CPRI,4)VSCO and 5)GAP as key tariff reversal winners-based on the amount of tariff absorbed relative to OM levels.Talkin Tariffs(Part 2).Digging deeper into the subject,we highlight work from our macro strategy team(Note here),as we

6、ll as our own bottoms-up analysis showing that our sector would be among the largest beneficiaries should tariffs be reversed-seeing a potential 15%benefit to EBIT.Weve seen a material negative impact from tariffs to date across our space,which could potentially bring back hundreds of bps of margin-