The lack of innovation in the athletic footwear sector will take time to work through, and that means challenges are ahead this holiday season for some sneaker brands.
“The athletic footwear and apparel category remains challenged, as a lack of newness and innovation continues to shift consumer interest toward other areas of the closet and pressure the sector,” said Lorraine Hutchinson and Mary Sport, analysts at Bank of America Securities (BofA), in a research note.
Only one athletic brand in the firm’s coverage universe was cited for its growth prospects. “Amer Sports remains the bright spot, with innovation and strong execution across Arc’teryx, Salomon, and Wilson demonstrating that consumers are still responding to compelling newness,” they wrote.
Nike and Lululemon were called out for their ongoing struggles. “Nike has made some progress on innovation, but not enough to offset broader areas of weakness,” the report noted. “Lululemon faces a similar challenge as it works to re-engage customers through improved product and branding.”
Nike’s troubles aren’t new, and its struggles have resulted in company veteran Elliott Hill returning to the brand in 2024 as president and chief executive officer to head up its turnaround. And just recently, Swoosh also brought in new chief financial officer David Denton to strengthen the finance team’s influence across the company.
BofA’s analysts note that Nike’s turnaround potential is offset by limited visibility into a durable sales and earnings recovery. The sportswear and sneaker brand could do better if faster-than-expected innovation drives full price sales, there’s stronger wholesale sell-through and a recovery in China. But the turnaround could take longer if weaker-than-expected sales in China and wholesale continue, or if innovation is too slow or fails to resonate with consumers. In addition, continued pressure in larger lifestyle categories would be a downside risk, as will an ongoing promotional retail environment.
For Lululemon, a faster recovery in the U.S. — if newness resonates — and improvement in China could counter the brand’s recent choppy performance. But a slowdown in consumer demand globally also could cause comps to retrench, especially if newness fails to resonate with consumers and sales become worse than expected.
“We view widespread inflation as the biggest risk to sales for [companies in] our coverage as higher oil prices impact consumer prices,” the BofA analysts concluded.
That’s one reason why they think the off-price channel could be the big winner this holiday season. While higher income spending remains healthy, inflation and higher fuel costs disproportionately hurt lower-income households, impacting discretionary spending in areas such as footwear and apparel. Moreover, increased pricing competition could see a wider range of consumer households trading-down as they seek “value without trading out entirely.”
The National Retail Federation said earlier this month that it believes retail sales in November and December will grow 4.2 percent over 2025 levels, or reach a total spend of $1.013 trillion. In comparison, last year’s holiday sales rose 3.1 percent over 2024 levels to reach $972 billion.” NRF president and CEO Matthew Shay said “consumers will prioritize the holiday season even as they remain mindful of their budgets,” adding that inflation, rising gas prices and pressure on household spending will impact consumers differently across income groups.
And David Silverman, senior director at credit ratings firm Fitch Ratings, said: “Recent spending trends suggest a reasonable holiday season, though as always it will be characterized by promotional calls to action and discount-oriented messaging. Retailers that have received tariff refunds have an additional tool in their arsenal, with funds available to use to reduce consumer prices, amplify marketing spend or enhance the service offering.”
But the BofA analysts also said that cost pressures are likely to be the biggest concern for companies now as they begin their 2027 budgeting process.
“Higher fabric costs and freight are expected to be a 2027 headwind, labor remains inflationary, and healthcare costs continue to rise,” they noted. “Price increases are no longer viewed as an option to offset, so retailers are working hard to find cuts to offset the pressures.”
Footwear Distributors and Retailers of America (FDRA) president and chief executive officer Matt Priest said last week that “prices for footwear hit a record in September,” noting that the shoe sector is about a $125 billion dollar industry at retail. “Shoe stores are on a pace to have a great year for the decade,” he said of the higher prices, although at the same time the retailers are also selling fewer pairs of shoes.
Priest said the higher footwear prices are getting impacted by increases in oil prices. Those increases are raising fuel costs for energy usage at the factories, as well as with freight prices. The FDRA CEO also said that shoe firms are seeing high prices for rubber and synthetic materials, components that are core staples in sneaker production.
Shoe prices were already on the upswing this year, with FDRA projections that shoe prices could see a five percent spike this year due in part to higher input costs. And because producers have sold through the components bought when costs were lower, fall 2027 product going into production now could see higher prices hitting stores in late summer of 2027.