Baird Equity Research on Monday downgraded Dick’s Sporting Goods, Nike, VF Corp. and Rocky Brands to “Neutral,” citing increasing uncertainty over consumer spending that will likely create hurdles in reaching second-half growth expectations.
Analyst Jonathan Komp kept his ratings on Under Armour and Canada Goose at “Neutral,” but added both stocks to his “Bearish Fresh Picks” list through mid-November. At the same time, Komp reiterated his “Outperform” on Amer Sports, On Holding, Kontoor Brands, Wolverine Worldwide, Boot Barn and Crocs. Komp said the narrowed group of outperform-rated stocks “now better reflect only our highest-conviction ideas in a tougher backdrop.”
In becoming more bearish on the sector, Komp wrote in a note that his team was “incrementally bullish” at the start of 2026, expecting earnings to inflect higher with a boost from “a stable/healthy consumer and strong economy, catch-up in tariff mitigation (offsetting front-weighted costs at the time), and well-balanced inventory and discounting.”
He added, “Sentiment bounced initially, but since has been severely pressured by the Middle East/Iran developments and the resulting higher oil prices and interest rates, which are fueling concerns of an eventual consumer spending falloff.”
Those consumer concerns, according to Komp, further “intensified” over the last few months, with soft sales seen in July and “more cautious” commentary arriving from retailers on second-quarter analyst calls, with particular call-outs to pressures facing lower-to-middle income consumers.
August “generally looks better” with the benefit of a back-to-school shift, but the “reads thus far look inconsistent” and Q3 spending growth overall is tracking below Q2 levels.
Other factors beyond spending indicators contributing to Baird’s more cautious outlook include higher risks of warmer U.S. weather this fall/winter due to a strong El Niño pattern; WTI crude oil back climbing above $100 a barrel in recent days; 10-year Treasury rates reaching their highest level since October 2023; an uptick in promotions, including some offering price breaks tied to tariff refunds; and “waning sales benefits” from tariff-driven price increases. The report further noted that higher freight and global shipping disruption risks could also “contribute to cautious management outlooks again with Q3 reporting.”
Komp added that consensus estimates “look aggressive in many cases.” Estimates for the third quarter appear “derisked,” with many firms providing conservative Q3 guidance given the market uncertainty. However, forecasts beyond the third quarter haven’t changed, with many forecasts requiring “year-over-year growth acceleration and sequential ramps” to meet Q4 consensus targets. Risks for Q4 shortfalls were seen as particularly high for Canada Goose, Under Armour and VF Corp.
Komp noted that his more-cautious view of valuations in the active lifestyle space comes despite many stocks already seeing significant reductions so far this year. Komp wrote, “While stocks and valuation levels look washed out, a lack of upcoming positive catalysts, and, as highlighted above, incremental risks to calendarQ4E for several names could drive incremental near-term pressure for the group.”
Image courtesy The North Face
