• by Sarah Mahoney , Yesterday

Both Gap and American Eagle Outfitters recently unveiled quarterly results that highlight just how complex America's relationship with fashion basics is these days. While sales at AEO's Aerie banner continued to surge, up 10%, revenues fell 2% at AEO stores, as consumers — especially women — said “no thanks” to denim and bottoms. The company is forecasting comparable sales gains in the mid-to-high single digits next quarter.

At Gap, overall sales notched their ninth consecutive quarter of gains, with the flagship seeing sales jump 10%, buoyed by denim, while Old Navy, the largest division, managed a gain of just 1% — holding on to its Top Three denim status. Yet Gap's outlook is considerably darker, anticipating second-quarter sales to be either flat or down 1%.

If it sounds like America's most popular denim stores are all over the place, they are.

"The apparel market entered 2026 still navigating a recalibration of consumer priorities," writes Kristen Classi-Zummo, industry analyst for Circana. "Prices continue to rise as macro-economic factors push up the baseline cost of apparel, shaping a marketplace where spending is more cautious and unit demand remains soft."

The result, she notes, is an increasingly fussy shopper — one focusing dollars on essentials and clear value, while deprioritizing apparel outside a handful of winning categories. Jeans, sweaters and sweatshirts are leading those gains, reflecting renewed consumer appetite for casual silhouettes that feel purposeful and versatile.

The ongoing conflict in the Middle East is adding to the pressure, squeezing both manufacturing costs and consumer wallets. A new sector analysis from Moody's finds that while chemicals and airlines are most exposed to risks from the prolonged Strait of Hormuz disruption, retail and apparel face what it rates as moderately negative exposure — with over 80% of rated companies in the sector feeling the effects of deteriorating macro-financial conditions. The weakest players, already contending with stretched balance sheets, face the most acute risk.