Softgoods spending is projected to decline due to consumers’ economic outlook
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U.S. consumer demand for softgoods â clothing, outerwear, and linens â is weaking, according to UBS Evidence Labâs industry outlook, published Tuesday.
UBS September market research showed that consumer spending intentions for softgoods for the next 90 days declined 3.5% compared to last year. 

A slowdown in softgoods spending will take place over the next six to 12 months. 
In addition, earnings per share for the 2024 fiscal year are 13% below what the consensus estimates for 44 stocks UBS covers. 
"We think investors don't fully appreciate the macro challenges facing U.S. consumers, or how acutely these challenges will negatively impact the Softlines industry," wrote UBS analyst in their report.
UBS researchers found that the percentage of consumers who plan to spend less this holiday season increased by 840 basis points. The percentage of consumers who said they would spend more increased by 340 basis points.
On the other hand, Softline stocks have underperformed the S&P 500 by 1,770 basis points year-to-date, the report said. "Therefore, some investors are asking if Softline stock prices can go much lower. We believe the answer is yes."
UBS believes that Softline stocks price-earnings ratio will fall (about 27%) when sales growth trends decline, leading to further price-earnings ratio compression and trading at the bottom of the cycle.
Some stocks that UBS categorizes as buys are: (UAA), (AEO), (PVH), (ONON), (LEVI), (NKE), (GIL), (KTB), (RL), (SKX), (DECK), and (SIG).
Stocks rated as "sell" include (M), (BURL), (VSCO), (JWN), (ROST), (KSS), (URBN), (FL), (GPS), and (DDS).

"Softlines typically trades at a 16% FY1 P/E premium to the S&P 500," the report said. "Today, the stocks are trading at an 11% discount."
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