Retailers face mixed 2026 backdrop as value and AI shape demand: Telsey

Investing.com -- Retailers are entering 2026 with improving sales prospects but continued pressure on consumers from higher prices, according to Telsey Advisory Group analyst Dana Telsey.

In a 2026 outlook note, Telsey said several large-scale activations, including the Winter Olympics, the FIFA World Cup and America 250, are expected to support consumer interest and spending.

However, she cautioned that tariffs introduced under U.S. President Donald Trump “are continuing to push consumer prices higher, which should last through mid-2026,” while demand elasticity remains a headwind.

Telsey noted that performance across retail categories diverged in 2025, with softlines companies delivering year-on-year sales and earnings growth, while hardlines saw flattish sales but improved profitability.

Looking ahead, she expects sales growth to improve in 2026, supported by “a continued focus on value, product innovation, and newness,” alongside productivity gains and the lapping of tariffs later in the year.

Telsey described 2026 as “the year of the ‘A,’” highlighting affordability, assortment, adaptability, artificial intelligence and advertising as the key themes shaping retailer strategies.

On technology, she said, “The age of AI has arrived in the retail industry,” noting that while larger players such as Amazon and Walmart are leading adoption, smaller retailers are increasingly evaluating where AI can deliver the greatest returns.

Telsey feels that retailers that combine strong brands, compelling value and effective use of technology are best positioned, adding that agility developed over the past five years should help companies navigate ongoing macro challenges.

Some of the firm’s top picks in retail include Levi’s, Amazon, Macy’s, TJX, Costco, Walmart, Best Buy, Gap, Ulta Beauty and On Holding.

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