BofA: Amer Sports Alone Shows Growth as Footwear Inflation Hits Holiday

Bank of America Securities names Amer Sports as the only growth story in its athletic footwear and apparel coverage universe this holiday season, while Nike and Lululemon face continued pressure from weak product newness and an inflation-hit consumer.

"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," analysts Lorraine Hutchinson and Mary Sport wrote in a research note.

Who is growing and who is not?

"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," the analysts wrote.

Nike has made progress on innovation, but not enough to offset broader weakness. The company brought back veteran Elliott Hill as president and chief executive officer in 2024 to lead its turnaround, and recently appointed David Denton as chief financial officer. BofA sees limited visibility into a durable sales and earnings recovery.

Lululemon faces a similar challenge as it works to re-engage customers through improved product and branding. The brand's recovery could accelerate if U.S. demand rebounds and China improves, but weaker global consumer demand could push comps lower.

What are the upside and downside scenarios?

For Nike, faster-than-expected innovation driving full-price sales, stronger wholesale sell-through and a recovery in China would improve results. The turnaround takes longer if China and wholesale stay weak, innovation is slow, or lifestyle categories and a promotional retail environment keep pressuring margins.

"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.

Why does off-price stand to win?

BofA expects the off-price channel to be the big holiday winner. Inflation and higher fuel costs hit lower-income households hardest, squeezing discretionary spending on footwear and apparel. Increased pricing competition could push a wider range of households to trade down in search of "value without trading out entirely."

The National Retail Federation forecasts November and December retail sales will grow 4.2 percent over 2025 levels, reaching $1.013 trillion. Last year, holiday sales rose 3.1 percent over 2024 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."

David Silverman, senior director at 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." He noted retailers holding tariff refunds can deploy those funds to cut consumer prices, amplify marketing or enhance service.

What does the 2027 cost outlook hold?

BofA flagged cost pressures as the biggest corporate concern heading into 2027 budgeting. "Higher fabric costs and freight are expected to be a 2027 headwind, labor remains inflationary, and healthcare costs continue to rise," the analysts noted. "Price increases are no longer viewed as an option to offset, so retailers are working hard to find cuts to offset the pressures."

That margin squeeze is already visible in footwear. FDRA president and CEO Matt Priest said last week that "prices for footwear hit a record in September" in a roughly $125 billion retail industry. Shoe stores are on pace for one of their best years of the decade on revenue, but they are selling fewer pairs.

Oil price increases are raising factory energy costs and freight rates, while rubber and synthetic materials — core sneaker inputs — remain expensive. FDRA projects shoe prices could rise five percent this year, and with cheaper pre-purchased components now sold through, fall 2027 product entering production now could carry higher prices into stores by late summer 2027 — setting up another cost-versus-price test for brands already unable to pass increases to consumers.