It pinches here; drags there; the draping is wrong. These are some of the examples of the feedback a new crop of artificial intelligence apps might give a prospective customer trying on clothing ahead of a purchase, and in the process reduce the chances of a product being returned to a store.

Fashion retailers are increasingly turning to AI to solve the issue of rising product returns, a persistent drag on profitability and something many in the industry refer to as the industry’s “silent killer”.

A growing number of AI start-ups have emerged to provide virtual try-on technology, allowing potential customers to visualize fit and style before they buy.

While tech companies have attempted to solve online fit issues since the 2010’s, the rapid development of generative AI has finally made these applications good enough to meaningfully impact retailers’ bottom lines. 

The U.S. National Retail Federation late last year estimated that 15.8% of annual retail sales were returned in 2025, totaling $849.9 billion. For online sales, that number jumped to 19.3%. Gen Z is driving this trend, with shoppers aged 18 to 30 averaging nearly eight online returns per person last year, the NRF found.

Most returned items never make it back to the shelves and often cost the retailer more to process than the value of the refund itself. It’s a multibillion-dollar problem for the industry that’s eating directly into companies’ margins.

“Figuring out how to proactively use returns and then how to minimize them can be a meaningful driver of business and profitability,” Guggenheim Senior Managing Director Simeon Siegel told CNBC.

While fit technology will never be as good as trying something on in person, it’s a great way to bridge the gap, Siegel said. “It’s going to continue to get better, I think that’s going to continue to reduce returns.”

The primary reason for returns and abandoned shopping carts is uncertainty over fit, Ed Voyce, founder and CEO of AI startup Catches, told CNBC in an interview.

Catches has developed a platform that allows users to create a “digital twin” to try on clothes virtually with what it calls “mirror-like realism.” The application went live last month on luxury brand Amiri’s website for a select range of clothes.

Unlike other models that Voyce says “just look pretty,” the Catches platform incorporates the physics of fabric texture and how material interacts with a moving body.

“The reason we built Catches was to take advantage of a kind of confluence of technologies that is taking place right now to solve this issue effectively,” says Voyce, who founded the startup backed by LVMH’s Antoine Arnault and built on Nvidia’s CUDA platform.

While e-commerce has grown rapidly in recent years, with online shopping driving retail sales growth, the current U.S. trade policy under President Donald Trump has put a dampener on the sector which relies heavily on manufacturing in Southeast Asia. Across the price spectrum, retailers are struggling to maintain margins as costs rise and consumers become increasingly price sensitive amid inflationary pressures.

The online fast fashion player has been experimenting with virtual try-ons in partnership with deep-tech startup AIUTA, allowing prospective customers to see a piece of clothing on a range of body types, heights, and skin tones. ASOS, however, cautions that the tool is designed to give general guidance and that customers must still check size guides before purchasing. 

Shopify, meanwhile, has integrated startup Genlook’s AI virtual try-on app into its commerce platform, which it says “removes sizing doubts, boosts buyer confidence and drives higher conversion rates while reducing costly returns.” 

Tech giants like Amazon, Adobe, and Google have also created virtual try-ons in various shapes and forms, partnering with major brands to roll out the technology. 

From April 30, Google’s virtual try-on tech can be accessed directly within product search results across Google platforms, according to Google Labs’ website. 

As for Catches, it projects that its app can drive a 10% increase in conversions and a 20- to 30-times return on investment for brand partners. It focuses on luxury brands because of their higher price point. The startup hasn’t yet put a number on how much returns might decline with the use of its platform, but targets “massive reductions.”

“There are certainly companies that have absolutely seen benefits – figuring out how to quantify them is more difficult,” said Siegel. 

While the benefits are clear, the analyst cautions that AI is not a magic wand. Beyond fit, retailers are looking at AI for inventory management, customer targeting, and fraud prevention.

“All of those are really interesting use cases, as long as companies don’t abandon who they are,” Siegel says.

“What you sell is always going to be more important than how you sell, and so I just think remembering that will help dictate who wins and benefits and amplifies from AI versus who gets consumed by it.”

Italian regulators are looking to clamp down on the tween skincare obsession and are investigating the LVMH-owned cosmetic brands Sephora and Benefit over an “insidious” marketing campaign to children.

The Italian Competition Authority (AGCM) said Friday that it has launched investigations into the two cosmetic brands centred on “unfair commercial practices,” which saw children and young people, even those under the age of 10, being encouraged to purchase serums, masks, and anti-ageing creams.

The regulator said the marketing is fuelling behavior known as “cosmeticorexia,” which refers to an unhealthy fixation on skincare amongst minors.

It emphasized that both Sephora and Benefit had failed to appropriately label products or omitted at times important precautions on products not intended for use by minors, both in-store and online on social media, which could cause serious harm to their health.

Additionally, AGCM said the popular cosmetic brands employed an “insidious marketing strategy” which involved young micro-influencers promoting other young people to buy their products.

AGCM officials and the Italian financial police carried out inspections of the premises of Sephora Italia, LVMH Profumi e Cosmetici Italia, and LVMH Italia on Thursday.

LVMH said Sephora, Benefit, and LVMH P&C Italy had been notified of the investigation.

“As the investigation is ongoing, Sephora, Benefit and LVMH P&C Italy cannot share further comments at this stage, they express their willingness to fully cooperate with the authorities,” LVMH said in a statement to CNBC. “All the companies reaffirm their strict compliance with applicable Italian regulations.”

Sephora boasts nearly 23 million followers on Instagram and over 2 million followers on TikTok, with the beauty brand at the center of tween beauty trends.

The “Sephora kids” social media trend has gained traction over the past few years, with viral videos on TikTok and Instagram showing stores flooded with teenage girls loading up their baskets with brightly-coloured and fun-looking skincare products.

In some videos, young girls show off their skincare routines with products containing anti-ageing ingredients like retinol.

A CBS News analysis of 240 skincare posts from teen influencers on TikTok found that many of the videos hadn’t been properly tagged as promotional content, with only 15 videos, or just 6% of posts, doing so. This means many content creators may unintentionally be advertising products to unsuspecting children.

One teen skincare influencer, Embreigh Courtlyn, told CBS that some brands would ask her not to label videos with “#ad,” which could be off-putting to viewers, but instead be referred to as partners, which would enable the content to perform better.

A peer-reviewed study published by Northwestern University in June last year reviewed 100 popular skincare videos posted by influencers aged 7 to 18 years old. It found that only a quarter of the videos included sunscreen, while the top 25 most viewed videos had an average of 11 and a maximum of 21 potentially irritating active ingredients.

Meta, the parent company of Facebook, Instagram, and Threads, faced two stinging defeats in court cases centered on social media harms this week. Meta was found liable by a New Mexico jury on Tuesday for nearly $400 million in damages after it concluded that it failed to protect children on its platforms from predators.

The surge in fuel prices since the U.S. and Israel attacked Iran nearly two weeks ago is already driving up airfare. Consumers’ appetite for travel this year will dictate just how much.

Cathay Pacific on Thursday said it would roughly double fuel surcharges on tickets starting March 18.

Earlier this week, Australia’s Qantas said it is raising fares to help cover its costs, Scandinavian Airlines said the “unusually rapid and substantial increase” in fuel prompted it to raise prices, and Air New Zealand pulled its financial outlook “until fuel markets and operating conditions stabilise,” adding that it has made “initial fare adjustments.”

“If the conflict leads to continued elevated jet fuel costs, the airline may need to take further pricing action and adjust its network and schedule as required,” Air New Zealand said.

U.S. airline CEOs and other executives will update investors on Tuesday at the J.P. Morgan Industrials Conference in Washington, D.C.

Analysts expect an earnings hit at least in the first quarter if not the first half of the year, though the impact will depend on how long higher fuel prices last.

“We think a hit to 1Q EPS appears almost certain at this point,” UBS airline analysts Atul Maheswari and Thomas Wadewitz wrote in a note last week.

United Airlines CEO Scott Kirby said last week on the sidelines of an event at Harvard University that higher fares were likely on the way because of the surge in fuel prices.

Kirby said travel demand is still strong, however. Two other senior airline executives at U.S. carriers, speaking on the condition of anonymity because they weren’t authorized to speak to media, also said travel demand has held up. If those trends persist, it could give airlines more pricing power, but that will depend on the war’s duration.

“Airlines never met a higher fare they didn’t want,” said Scott Keyes, founder of flight deal company Going, previously known as Scott’s Cheap Flights.

So what should consumers do?

Keyes said travelers can’t lose by booking early, as long as they’re not buying restrictive basic economy tickets. That way, customers can try to exchange or cancel their tickets and buy cheaper ones if airfare ends up falling.

“If you book a $500 summer flight today, and two weeks from now the price drops to $350, you can call up the airline and get the $150 difference back as a credit. Heads you win; tails the airlines lose,” he said.

Jet fuel is airlines’ biggest cost after labor, accounting for about a fifth or more of expenses, depending on the airline.

United alone spent $11.4 billion last year on fuel, at an average price of $2.44 a gallon, according to a securities filing. U.S. jet fuel on Wednesday was going for $3.78 a gallon, according to Platts.

Jefferies airline analyst Sheila Kahyaoglu said in a note Thursday that she expects “the most acute financial impact to airlines from surging oil prices to be in the next 30-90 days as airlines have been booking yields for close-in flights assuming a much lower fuel price and carriers cannot retroactively raise fares.”

She said Delta Air Lines and United, which produce most U.S. airline profits, are better positioned than other carriers because of their high-end demand. Risks to demand, particularly for more price-sensitive customers, include the recent jump in gasoline prices.

Most U.S. airlines no longer hedge fuel costs, or lock in prices using futures and other securities. Southwest Airlines was one of the last holdouts, and it quit last year. A spokesman for the Dallas-based airline told CNBC that Southwest currently has “no plans” to resume hedging.

Shares of Adidas fell as much as 8% on Wednesday after providing a disappointing 2026 outlook, as it grapples with unfavorable currency swings and a hit from U.S. tariffs.

The German sportswear company sees 2026 revenue growth in the high single digits from 2025’s total of 24.8 billion euros ($28.86 billion).

Operating profit is expected to increase to around 2.3 billion euros, despite a 400 million euro negative impact from U.S. tariffs and unfavorable currency developments.

The profitability outlook “will disappoint” investors, as it was 15% below overall expectations, said RBC Capital Markets analysts. “The question will be how conservative is the EBIT guidance given adidas’ preferred approach to be prudent at the start of the year,” they added.

An implied 9% margin from operating profit of 2.3 billion euros is well shy of expectations, Jefferies analyst James Grzinic said.

Fourth-quarter sales and profit both slightly missed the mark at 6.1 billion euros and 164 million euros in constant currencies, respectively, according to FactSet estimates. 

“Driving double-digit growth in the fourth quarter despite all the external turbulence, and more than doubling our operating profit in the quarter made the year end very well,” said Adidas CEO Bjørn Gulden.

Adidas also presented mid-term targets on Wednesday, seeing currency-neutral sales growing at a high single-digit rate in 2026-2028, with operating profit expanding by a mid-teens annual growth rate over that period.

Shares of Adidas were last seen 6.7% lower, notching a fresh 52-week low.

Coming into Wednesday trading, Adidas shares had fallen about 43% over the past 12 months as investors remain skeptical about Adidas’ future.

The growth prospects of the global sportswear industry, characterized by excess supply and changing consumer preferences in China, represent another pressure point for investors. 

Country peer Puma and bigger U.S. competitor Nike have faced similar woes and are also in the midst of a turnaround. In October, Nike’s CEO told CNBC it would “take a while” for the company to return to profitable growth.

Adidas on Wednesday also extended CEO Gulden’s contract until 2030, in an apparent vote of confidence in his strategy.

Gulden took the reins in 2023 to steady the company after its split with rapper Ye, formerly known as Kanye West, over antisemitic comments and triggering a crisis for Adidas, which had been relying on sales of the Yeezy sneaker line that Ye fronted.

Airline and travel stocks fell Monday after airspace closures throughout the Middle East forced carriers to cancel thousands of flights, disrupting trips as far as Brazil and the Philippines.

United Airlines, which has the most international exposure of the U.S. carriers, was down 6% in premarket trading. Service to Tel Aviv, Israel, is one of the airline’s most profitable routes, but airlines were also was forced to pause flights to Dubai, in the United Arab Emirates, one of the busiest airport hubs in the world.

Dubai is a home base for airline Emirates.

Shares of Delta Air Lines and American Airlines were also each off about 6%. Flights through the Middle East were grounded including to destinations like Tel Aviv.

Other carriers like Southwest Airlines, which is more U.S.-focused, had smaller stock moves but shares still fell as investors assessed a possible run-up in oil prices. Fuel is generally airlines’ biggest cost after labor.

Hotel chains also fell, with Marriott International and Hilton Worldwide Holdings down.

International travel has been a bright spot in the travel sector. In January, international air travel demand jumped 5.9% from a year ago while domestic flight demand was nearly flat, the International Air Transport Association, an airline industry group, said in a report on Monday.