Bank of America Warns of End to 20-Year 'Sneaker Boom'
Adidas downgrade signals headwinds for Nike, Deckers as analysts call a top to the long-running casual footwear trend, citing a cyclical downturn in consumer demand.
A two-decade boom in athletic footwear may be drawing to a close, according to a stark new report from Bank of America that is sending cautionary signals across the global sporting goods sector. The bank issued a rare double-downgrade of Adidas to "Underperform" from "Buy," warning that the long-running "casualization trend" that propelled sneakers into mainstream fashion is showing signs of fatigue.
The note suggests a cyclical downturn for the industry, potentially impacting U.S. giants like Nike (NKE) and high-flying brands such as Deckers Outdoor's (DECK) Hoka. Shares of Deckers fell over 4% in recent trading, while Nike saw a modest gain.
The End of an Era?
Bank of America's analysis, reported by Morningstar, argues that the macro trend that saw sneaker market share expand from 20% to 50% over the last 20 years is now reaching its peak. "We think the casualization trend, which has been a tailwind to the sector for 20 years, is now coming to an end," the analysts stated. They project a return to more modest single-digit sales growth for Adidas in 2026, a significant deceleration that could mirror broader industry trends.
This sentiment shift arrives as consumers, particularly in North America and Europe, grapple with persistent inflation and a slowdown in discretionary spending. The exceptional demand for high-end sneakers and athletic wear seen during the pandemic has normalized, leaving companies to contend with more discerning buyers and heightened competition.
Market Reacts to Sector Headwinds
The warning casts a shadow over a sector that has produced immense growth. Deckers Outdoor, parent company of the exceptionally popular Hoka running shoe brand, has been a market standout. However, its stock price of $103.76 remains significantly off its 52-week high of $223.98, and the recent drop suggests investor sensitivity to any potential slowdown in its growth trajectory.
Meanwhile, industry leader Nike has already been navigating challenges. With a market capitalization of nearly $98 billion, the company is contending with what many analysts see as a period of lagging innovation and fierce competition. While its last quarterly revenue grew by a scant 0.6%, its earnings per share fell by over 32% year-over-year, indicating significant pressure on profitability. Bank of America's report specifically noted that a turnaround effort from Nike could present a major competitive threat to Adidas, further intensifying the battle for market share in a potentially shrinking pie.
A More Competitive Field
The BofA note advised caution for the broader sporting goods sector, and the landscape has become increasingly crowded. Brands like Hoka and On Running have successfully chipped away at the dominance of stalwarts like Nike and Adidas, particularly in the performance running category. As the market pivots from a growth phase to a more mature, cyclical one, the fight for consumer loyalty is expected to become more pronounced.
Investors will be closely watching upcoming earnings reports from Nike, Deckers, and their peers for signs of slowing consumer demand and inventory buildup. While the end of the "sneaker boom" does not spell doom for athletic apparel, it signals a transition to a more challenging environment where brand strength, innovation, and disciplined inventory management will become more critical than ever.