Analyst Coverage Initiation and Outlook
BMO Capital Markets launched coverage of the softlines retail, apparel and footwear sector, adopting a cautious stance for fiscal 2027 as it sees a weakening consumer environment, sticky inflation and rising input costs that could pressure earnings. Analyst Kelly Crago highlighted that while shoppers have continued to turn out during peak periods, the firm observes weaker lulls and a shift toward value‑seeking behavior as the year progresses into the fall.
Athletic Segment Negative View
Crago expressed the strongest negativity toward the athletic category, arguing that the market does not fully appreciate the adverse impact on brands that are out‑of‑step when a cycle turns against them. Consequently, BMO assigned Underperform ratings to several athletic‑exposed stocks, setting target prices of $30 for Nike, $70 for Deckers, $110 for Dick’s Sporting Goods and $70 for Lululemon, with earnings models positioned well below consensus estimates.
Constructive Ratings on Turnaround Stories
In contrast, BMO was more constructive on companies it views as having self‑help narratives. The firm initiated Outperform ratings for Abercrombie & Fitch, Amer Sports, Carter’s and Steve Madden, citing brand turnarounds and growth drivers. It also started Market Perform coverage on a broader set of peers, specifically American Eagle, Gap, Ulta Beauty, Urban Outfitters, Victoria’s Secret, Birkenstock, Bath & Body Works, On Holding and Academy Sports, reflecting a more neutral stance on these names.
Macro Headwinds
The coverage note underscores sticky inflation and higher costs as macro‑level headwinds that could continue to weigh on sector profitability through FY2027.