Artificial intelligence may offer retailers big gains, but it won’t be their saving grace.
In a note to clients, Morgan Stanley analyst Alex Straton wrote that agentic AI could represent an estimated “$6B total cost savings opportunity” for some of America’s biggest retailers, boosting profit estimates by as much as 20% by 2026.
The report ranks Gap (GAP), Macy’s (M), and Victoria’s Secret (VSCO) as the “stand out” trio best positioned to capture the benefits.
Wall Street’s appetite for an AI-driven margin story remains strong, particularly for an industry long plagued by thin profits and bloated inventories.
Straton’s analysis combines two measures: an “AI” reward that models potential operating-cost savings and an AI “recognition” score based on how often companies mention AI in transcripts.
At its midpoint, the bank’s framework estimates roughly $6 billion in annual cost savings from agentic AI tools such as inventory planning, supply chain automation, and automated customer service. If realized, that could add about 200 basis points to sector margins.
But not everyone is convinced the math will play out cleanly. Morningstar senior equity analyst David Swartz is skeptical about how retailers are actually talking about and deploying AI.
“As far as what the numbers are … it’s not something that anybody has really quantified,” Swartz told Yahoo Finance, citing discussions with industry peers.
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AI’s use is being “talked about in different ways,” Swartz added, but “how that saves money over time is kind of hard to know.”
He walked through the practical uses of AI, many of which line up with Morgan Stanley’s scenarios. Marketing, product recommendations, coupons, and even design could all benefit, Swartz said. For instance, AI could help retailers target customers more precisely and test promotions faster than legacy systems can.
Like Morgan Stanley, Swartz argued that internal operations such as inventory management may prove more meaningful in the long run, suggesting AI could help retailers “know how much to order and what to order.”
Improved demand prediction could reduce markdowns and waste — a chronic industry problem — and materially affect margins if executed well, he added.
So far, though, “AI has had minimal impact on inventory efficiency,” Straton said.
As adoption grows, retailers could see a lift, but it likely won’t transform the industry overnight, Swartz cautioned.