<\/p>\n
\n\tArtificial intelligence is everywhere in fashion, or a least on the way. <\/p>\n
\n\tThat much is true. But the actual impact of outsourcing the frontal cortex?\u00a0<\/p>\n
\n\tNobody really knows.\u00a0<\/p>\n
\n\tThere are signs, though, that the transformative technology is taking hold \u2014 and more so than investors appreciate.\u00a0<\/p>\n
\n\tNew research from UBS analyst Jay Sole suggests that AI is already having a big financial impact across the fashion industry.\u00a0<\/p>\n
\n\t\u201cAI will significantly help softline companies drive better sales growth and higher operating profit margins,\u201d Sole predicted in the research note. \u201cThis trend has likely already begun.\u201d<\/p>\n
\n\tTo get at how AI is seeping into fashion, Sole looked at the sales per employee ratio in fashion, which has increased at a 0.5 percent compounded annual growth rate since 2021. Meanwhile, margins on earnings before interest and taxes, adjusted for tariffs, are marching back to their post-pandemic peak in 2021.<\/p>\n
\n\tThat indicates that fashion companies have become more efficient since COVID-19, which caused a spike in e-commerce penetration.\u00a0<\/p>\n
\n\tAnnual sales per employee rose to $272,000 for the 2021-to-2025 period, up from $222,000 during the 2017-to-2019 run, the research showed.<\/p>\n
\n\tBut the rush toward e-commerce has long since stabilized and the report argued: \u201cThe increase in sales per employee since 2024 must have another explanation. We suspect the reason is softlines companies\u2019 increasing use of AI.\u201d<\/p>\n
\n\tIt\u2019s not surprising Wall Street would need to use a little guesswork to figure out the impact of AI, considering how new the technology is and how vague many companies have been on exactly how they\u2019re putting the bots to work.\u00a0<\/p>\n
\n\t\u201cAI isn\u2019t an \u2018application\u2019 which can alone boost companies\u2019 financial performance,\u201d Sole said. \u201cAI is a tool which companies are integrating into hundreds of business processes across their organizations. Thus determining the return on investment from adding AI into one small part of a business is hard to measure.\u201d<\/p>\n
\n\tThe details could also be \u201ccompetitively sensitive,\u201d the analyst said.\u00a0<\/p>\n
\n\tThat tracks with how the industry has been talking about the tech.\u00a0\u00a0<\/p>\n
\n\tThe body language from chief executive officers is that AI is a force multiplier that will help employees be better and faster at their jobs. The chief financial officers see cost savings.\u00a0<\/p>\n
\n\tIt sometimes seems like the C-suite sees what it wants to see and the workforce sees only what it doesn\u2019t want to see.\u00a0<\/p>\n
\n\tThe Pew Research Center found in a survey last year that 50 percent of Americans are \u201cmore concerned than excited about the increased use of AI in daily life, up from 37 percent in 2021.\u201d\u00a0<\/p>\n
\n\tRegardless, it\u2019s a transformational technology. And it\u2019s everywhere all at once, whether it\u2019s destined to improve work life or just put people out of work.\u00a0<\/p>\n
\n\tBracken Darrell, VF Corp. president and CEO, told WWD in January that he was staying hush-hush when it comes to AI specifics.\u00a0<\/p>\n
\n\t\u201cWhat we\u2019re not doing is trying to storytell AI as a way to get people engaged in our stock,\u201d Darrell said. \u201cWhat we are doing is we have 14 different projects to re-engineer 12 different pieces of our business using AI to be more effective, more productive, more creative. We\u2019re working on it everywhere from customer service to digital content creation to product creation.<\/p>\n
\n\t\u201cI\u2019ve seen some of the most amazing things that we\u2019re working on that are not going to be in market overnight despite that they\u2019re AI generated,\u201d the CEO said. \u201cIt\u2019s amazing what we\u2019re going to be able to do, and so we\u2019re just going to really do it and then we\u2019ll talk about it.\u201d<\/p>\n
\n\tDarrell said it was still too early to say how all this AI would impact employment.<\/p>\n
\n\tWhile investors have been laser-focused on the technology overall, they have not generally seen fashion as an AI play.<\/p>\n
\n\t\u201cOur conversations with investors suggest the market is skeptical softlines companies can leverage AI to significantly improve their financial performance,\u201d said UBS\u2019 Sole. \u201cMoreover, investors\u2019 attention seems occupied by events in Iran.\u201d<\/p>\n
\n\tBut he said AI is \u201can important reason to own softline stocks.\u201d<\/p>\n
\n\tUBS pegged fashion sales growth this year at 4.5 percent, while the number of industry jobs is set to grow just 2.8 percent and margins on earnings before interest and taxes are due to jump 50 basis points.\u00a0\u00a0<\/p>\n
\n\tDoing more with less is certainly an idea that Wall Street could come around to.\u00a0<\/p>\n
\n\tIt remains an open question just what it will do for everyone else. <\/p>\n
\n\tThe Bottom Line is a business analysis column written by Evan Clark, deputy managing editor, who has covered the fashion industry since 2000.<\/p>\n
#AIs #Growing #Impact #Fashion #Efficiency #Financial #Gains<\/p>\n","protected":false},"excerpt":{"rendered":"
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