Artificial intelligence (AI) could represent an estimated "$6 billion total cost savings opportunity" for some of America's biggest retailers, boosting profit estimates by as much as 20% by 2026, Morgan Stanley analysts wrote in a note to clients on Wednesday.
They highlighted Gap Inc (NYSE:GPS), Macy's, Inc. (NYSE:M), and Victoria's Secret & Co. (NYSE:VSCO) as the three chains best positioned to reap the benefits of AI.
Morgan Stanley’s framework estimates about $6 billion in yearly cost savings from agentic AI tools such as inventory planning, supply chain automation, and automated customer service.
This could add about 200 basis points to sector margins, the analysts stated.
Specific AI benefits for retailers include targeting customers more precisely and test promotions faster than traditional methods.
Also, AI-powered inventory management could help retailers know what and how much to order.
Better demand prediction could also reduce markdowns and waste, which would materially affect margins if executed properly.