BMO Is Cautious on Softlines and Most Bearish on Athletic Names

BMO Capital Markets has initiated coverage of the softlines retail, apparel and footwear sector from a defensive posture, cautioning in a research note that a softening consumer and climbing cost pressures cloud the group’s outlook into fiscal 2027.

Analyst Kelly Crago explained that a softer consumer, sticky inflation and elevated expenses leave the firm cautious, adding that BMO favors names with ‘a story to tell in FY27 to help offset rising macro headwinds.’

So far this year, shoppers have turned up during the key peak periods, but Crago highlighted weaker stretches between those bursts and a more pronounced value-seeking mindset as the fall approaches.

BMO took its most downbeat stance on the athletic category. ‘We are most negative on the athletic sector, even after the recent sell-off, because we believe the market does not fully appreciate the negative impact on brands that are off-sides when a cycle moves against them,’ Crago wrote.

That bearish view resulted in Underperform ratings on several athletic-exposed stocks, including Nike with a $30 price target, Deckers at $70, Dick’s Sporting Goods at $110 and lululemon at $70, with BMO’s earnings estimates for each modeled well below consensus.

Elsewhere, BMO was more constructive on companies with self-help stories, launching Abercrombie & Fitch, Amer Sports, Carter’s and Steve Madden at Outperform while citing brand-turnaround potential and durable growth drivers.

The firm also started coverage of American Eagle, Gap, Ulta Beauty, Urban Outfitters, Victoria’s Secret, Birkenstock, Bath & Body Works, On Holding and Academy Sports at Market Perform.