Retail Turnarounds Are Rare, but Some Stocks Could Still Gain From AI

what happened

Analysts at Bernstein, as reported by Barron's, reviewed a century of retail history and concluded that successful turnarounds in the sector are rare. Investors point to Target, whose stock has climbed sharply this year as sales improved, but the analysts say it is too early to call its recovery a success. The troubles at Nike and Lululemon Athletica, once investor favorites, show that even the largest names are not immune to change.

Analyst Zhihan Ma argues that retailers must keep adapting their business models, and the most nimble firms are the ones that survive. Her review of more than 100 bankruptcies over the past 25 years found that disruption often becomes the first problem, with management errors making it worse. A recession, higher leverage or fraud usually delivers the final blow.

Ma believes Walmart is best positioned for the age of agentic AI, thanks to its early e-commerce acquisitions and investments. Costco, by contrast, is clearly behind in e-commerce and technology, though it remains more insulated for now because members enjoy in-store shopping.

why it matters

The key takeaway for markets is that the roster of the largest U.S. retailers could change over the next decade if fewer shoppers buy clothes, home goods and electronics in stores. Investors should keep in mind that the visibility of rare success stories, the survivorship bias, can distort how often comebacks actually happen.

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