inflation is a worry for retailers in an obvious way if prices go up to protect margins it could cause sticker shock for consumers leading them to buy less yet retailers face another threat as well notes barclays analyst adrienne yih companies are buying inventory now “locking in peak inflationary costs well ahead of unknown demand” yih writes right now shortages may be keeping supply tight and in turn supporting prices however if that bottleneck were to ease companies may have to offer steep discounts to move merchandise that would hurt more than usual if they paid top dollar for those products yih downgraded the retail sector to neutral from positive on friday citing this and other concerns she notes these companies have to walk a very fine line “demand is forecasted three to nine months out with pricing locked in while retailers remain exposed to future demand volatility” if demand does falter she warns margins could be squeezed in the back half of the year that said she’s more worried about some companies than others she downgraded wayfair ticker w to underweight from equal weight and cut her price target to 103 from 123 yih’s concerns include slowing growth after the pandemic boom—including a shift back toward more instore purchases—rising costs associated with advertising and attracting new customers and sourcing from areas in asia that are seeing delays although she believes that “the home furnishings segment is shifting online at a doubledigit pace in the longer term and wayfair is gaining the majority of that ecommerce share …the nearterm may see a step back in the company’s path to profitability” she also took her rating on gap  gps  down to underweight from equal weight and lowered her target to 13 from 17 yih is concerned about discounting at its flagship and old navy divisions which don’t enjoy much in terms of brand loyalty and the increasing need to spend on advertising that said the potential for activist investors to call for the company to split off fastgrowing athleta could provide a boost to the shares she adds apparel retailers american eagle outfitters aeo and urban outfitters urbn were also downgraded by yih but just to equal weight from overweight citing inflation and inventory concerns she cut american eagle’s price target to 19 from 24 and lowered that of urban outfitters to 29 from 34