Investing.com -- Goldman Sachs downgraded Macy’s Inc and Torrid Holdings Inc, citing growing macroeconomic headwinds and tariff-related risks that threaten to weigh on U.S. apparel retailers.

The firm lowered its sector outlook and cut its U.S. GDP forecast for 2025 to 0.5% from 2.5%, warning of a 45% chance of recession.

While not baking in a full downturn yet, Goldman said the mix of slowing growth, geopolitical uncertainty, and rising tariffs could pressure earnings across the sector.

“We reduce our outlook for the US apparel and softlines sector to reflect a more cautious macro backdrop,” Goldman wrote, adding that higher tariffs, inventory imbalances, foreign boycotts, and weaker tourist-driven demand all present risks.

Goldman downgraded Macy’s to “Neutral” from “Buy” with a $12 price target, citing the department store’s exposure to economic cycles.

Historical data suggests department store sales consistently underperform during downturns, analysts at Goldman said.

Torrid was downgraded to “Sell” with a $4 target.

While noting recent efforts by management, Goldman said the brand is especially exposed to slower U.S. growth and had already shown signs of weakening consumer demand.

Tariff-related uncertainty remains a key overhang. Although a 90-day pause allows retailers to buy holiday products at reduced rates, Goldman said a 145% tariff on goods from China, especially in home categories, poses significant disruption.

Off-price retailers such as TJX (NYSE:TJX), Burlington (NYSE:BURL), and Ross may also face challenges, particularly in home goods sourcing.

Despite the downgrade, Goldman highlighted select names with pricing power and strong balance sheets, like TJX, Burlington, Tapestry (NYSE:TPR), and Ralph Lauren (NYSE:RL), as better positioned to weather the current volatility.

Related articles

Goldman Sachs downgrades Macy’s and Torrid on macro, tariff risks

Cantor initiates coverage of U.S. large-cap pharma stocks: Gilead, AbbVie at Buy

Barclays downgrades Texas Instruments on China risk, demand concerns