Analysts at BNP Paribas became the latest Wall Street firm to call for a “return to dress,” after a long trend toward athleisure and more casual offerings pre- and post-pandemic. The shift is expected to be beneficial to Levi Strauss, Steve Madden and Zara-parent Inditex while presenting headwinds for Lululemon, Nike, Dick’s Sporting Goods, and Wolverine Worldwide.
“The athleisure megacycle is normalizing with consumers shifting back to dressy offerings,” wrote analysts led by Laurent Vasilescu in a research note. He cited recent retailer commentary on quarterly analyst calls on the shift away from casualization as well as recent mentions on Google Trends.
Vasilescu, in a note, said that athleisure “was strong pre-COVID and was likely extended by increased casualization during and after the pandemic.”
The strength led many “premium brands” to enter the athletic sneaker market, as evidenced by Jimmy Choo’s entry into the category. Post-pandemic, consumers “gravitated toward more casual, comfort-driven dressing, supported by social distancing, remote work and an increased focus on wellness,” with major fashion retailers including Macy’s, Nordstrom and Urban Outfitters indicating active, casual and athleisure categories outperformed dresswear categories during this period.
Vasilescu said that in 2022, occasion-related categories “began to recover” as consumers returned to social activities, but “casual and activewear remained popular.”
More recent quarterly analyst calls, however, suggest “the dress-up cycle is gaining real momentum.”
Vasilescu noted that on Macy’s most recent Q305 call, management highlighted improving performance in tailored clothing and dresses, indicating renewed consumer interest in occasion-driven apparel.
The note included a quote from Tony Spring, chairman and CEO of Macy’s, from the analyst call, “We’re in a dress-up cycle right now. We’re selling tailored clothing really well. We’re selling dresses really well. We’re selling career sportswear really well. We’re selling evening and dress shoes really well. So, I just think it’s the ebb and flow of the nature of our business. We are well prepared and will stay committed to a strong and healthy active business, but it just happened to be softer for the category.”
Vasilescu said Macy’s CEO’s comments were similar to management comments from JD Sports’ earnings call in September, noting that female consumers are increasingly seeking footwear options beyond traditional sports shoes.
Michael Armstrong, JD Sports’ global managing director, said on the call, “I think with reference to women’s, I mean, women generally compared to men have a lot more choice and they like to change their mind more, and, as I said, they were consuming a lot of sports shoes and she’s finding other things to buy right now, that’s just the nature of women’s fashion. We’ll have another upcycle sometime soon, I reckon. But we don’t know when, we’ll just take it when it comes.”
Vasilescu also said that while Urban Outfitters did not directly call out a fashion shift, “it has emphasized sustained momentum in bottom categories such as denim and loungewear over the past several quarters.” He also noted that officials at Steve Madden highlighted strong improvement in its dress shoe business during the second- and third-quarter calls last year.
The report noted that Nordstrom officials, on its third-quarter analyst call, indicated that sales growth in women’s apparel was driven by contemporary styles, with notable strength in dresses and knit tops. However, Nordstrom still said active was its top performer for the sixth consecutive quarter at both Nordstrom full-line and Rack, up double-digits, and led by On, New Balance and Vuori.
On the vendor side, the analyst also noted that athletic brands are increasingly embracing dressed-up offerings, pointing to an Asics Tiger store in London offering “cable knit sweaters as well as a dressed-up version of the Mexico 66 shoe and even a handbag offering.” Vasilescu also noted that Lululemon started offering tailored bottoms with its Daydrift franchise, launched in early 2025.
Google Trends Data Shows Shift Toward Linen and Denim
Vasilescu also said a fashion rotation shift is apparent in Google Trends data, with apparel searches seeing “a shift of consumer interest from activewear to more elevated categories, including linen and denim.”
Search interest in leggings has remained in sustained decline since peaking in 2021, while search interest in linen, denim and other dress-oriented apparel categories, including quarter-zip styles and fur styles, remains elevated. He noted that interest in dress and tailored offerings may be supported by more companies requiring employees to return to offices.
Vasilescu said he believes apparel “tends to lead the fashion cycle rotation and play a critical role in shaping footwear demand,” while also noting that Google search interest in retro running styles, including Asics Gel-Kayano 14, and New Balance 327 and 1906R, “has peaked and begun to wane over the past several months, suggesting that consumer demand for these silhouettes is entering a normalization phase following a strong run.”
In contrast, dressier silhouettes, including ballet flats, Mary Janes, loafers, and boat shoes, “are gaining momentum, as reflected in the rising search interest,” the analyst stated.
Stock Implications
Within BNP’s apparel coverage, Ralph Lauren and Levi’s are seen as the main beneficiaries of the shift toward dressier styles, while Lululemon “is likely to remain under pressure should product innovation continue to disappoint,” wrote Vasilescu.
BNP kept its “Outperform” rating on Ralph Lauren while raising its price target to $403 from $370. Levi’s was reiterated at “Outperform” at a $31 price target, while Lululemon was kept at “Neutral” with its price target reduced by 10 percent to $206.
Among footwear firms, Steve Madden is seen benefiting with BNP reiterating its “Outperform” rating and lifting its price target to $53 from $42.
Among those hurt by the trend, BNP reiterated Nike at “Underperform” with a $35 price target. Vasilescu noted that with Nike’s classics business at 40 percent of footwear revenues, Nike remains “structurally challenged with the current footwear cycle.”
BNP downgraded Wolverine Worldwide to “Neutral” and slashed its price target to $19 from $38, with Saucony and Sweaty Betty particularly impacted by the “shift to more formalwear.”
Dick’s Sporting Goods was reiterated as “Underperform” at a $175 price target as it faces “incremental headwinds given its performance-oriented exposure” with the expected trend shift. Vasilescu also said its rating on DKS reflects slower momentum in the key footwear category due in part to the completion of the rollout of premium footwear decks in stores and the moderation of door penetration of On and Hoka, while “a broader shift away from athletic footwear as the default casual option could also put pressure on DKS comps.”
Bank of America Research Note Predicts Slowdown in Casualization Trend
BNP’s research note came after Bank of America (BofA) analysts, led by Thierry Cota, issued a January 6 note that caught widespread media attention and called for a slowdown in the lengthy trend toward casualization.
Among the reasons for the slowdown, Cota said the 20-year trend of casualization, which caused sneakers to expand from an estimated 20 percent of world footwear sales to 50 percent, “culminated with COVID and is now largely complete.”
He also noted that the performance segment in sports apparel and footwear “offers no relief as sport participation, at least in the U.S., is not increasing.”
Lastly, Cota noted that Nike and Adidas, which represent nearly 60 percent of industry sales among publicly traded firms, “are not expanding their retail exposure as a share of total revenues, removing the technical boost of moving sales from wholesale to retail.”
As reported, Cota in the note issued a rare double-grade downgrade of Adidas to “Under Perform” from “Outperform” and cut its price target on Adidas to €160 from €213.
BofA reduced its rating on JD Sports to “Neutral” from “Buy” and lowered its price target to £96 from £112. BofA kept Puma at “Neutral” with a €24 price target and reiterated its “Buy” rating on On Holding at a $63 price target, citing the Swedish brand’s strong growth prospects.
Image courtesy Ralph Lauren
