Artificial intelligence is everywhere in fashion, or a least on the way.
That much is true. But the actual impact of outsourcing the frontal cortex?
Nobody really knows.
There are signs, though, that the transformative technology is taking hold — and more so than investors appreciate.
New research from UBS analyst Jay Sole suggests that AI is already having a big financial impact across the fashion industry.
“AI will significantly help softline companies drive better sales growth and higher operating profit margins,” Sole predicted in the research note. “This trend has likely already begun.”
To 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.
That indicates that fashion companies have become more efficient since COVID-19, which caused a spike in e-commerce penetration.
Annual 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.
But the rush toward e-commerce has long since stabilized and the report argued: “The increase in sales per employee since 2024 must have another explanation. We suspect the reason is softlines companies’ increasing use of AI.”
It’s 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’re putting the bots to work.
“AI isn’t an ‘application’ which can alone boost companies’ financial performance,” Sole said. “AI 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.”
The details could also be “competitively sensitive,” the analyst said.
That tracks with how the industry has been talking about the tech.
The 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.
It sometimes seems like the C-suite sees what it wants to see and the workforce sees only what it doesn’t want to see.
The Pew Research Center found in a survey last year that 50 percent of Americans are “more concerned than excited about the increased use of AI in daily life, up from 37 percent in 2021.”
Regardless, it’s a transformational technology. And it’s everywhere all at once, whether it’s destined to improve work life or just put people out of work.
Bracken Darrell, VF Corp. president and CEO, told WWD in January that he was staying hush-hush when it comes to AI specifics.
“What we’re not doing is trying to storytell AI as a way to get people engaged in our stock,” Darrell said. “What 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’re working on it everywhere from customer service to digital content creation to product creation.
“I’ve seen some of the most amazing things that we’re working on that are not going to be in market overnight despite that they’re AI generated,” the CEO said. “It’s amazing what we’re going to be able to do, and so we’re just going to really do it and then we’ll talk about it.”
Darrell said it was still too early to say how all this AI would impact employment.
While investors have been laser-focused on the technology overall, they have not generally seen fashion as an AI play.
“Our conversations with investors suggest the market is skeptical softlines companies can leverage AI to significantly improve their financial performance,” said UBS’ Sole. “Moreover, investors’ attention seems occupied by events in Iran.”
But he said AI is “an important reason to own softline stocks.”
UBS 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.
Doing more with less is certainly an idea that Wall Street could come around to.
It remains an open question just what it will do for everyone else.
The Bottom Line is a business analysis column written by Evan Clark, deputy managing editor, who has covered the fashion industry since 2000.