Sneak-er-head/snēker hed/: a sneakerhead.
Trainers are the most popular type of footwear with 47% of all consumers saying they wear “trainers” most often. For teenagers, sneakers aren’t just about comfort or functionality, and what they wear on their feet says as much what they have on their shoulders. Piper Sandler’s Teen Survey takes a closer look at teens and sneakerheads, what these “sneakerheads” buy, how much they buy, and where they buy it.
What was most striking in the study was the decline in the number of teens who identify as sneakerheads, down 80 basis points year over year, to 24%, and are spending 3% less overall as the tailwinds of COVID dissipates and inflationary pressures remain.
Teens still like Nike (NYSE: NO) with the Jordan brand preferred by 78% of sneakerheads, a trend that hasn’t changed for two years. But other brands are catching up. New Balance is gaining market share, as are HOKA (DECK), On Running (ONON), ASICS and Japanese fashion brand A Bathing Ape. Losing shares are Adidas/YEEZY (ADDYY, ADDDF), Vans (VFC), Converse (NKE), Under Armor (UA), Puma and Reebok. Saucony (WWW) remained unchanged at 2%.
On (ONON)’s growing penetration in the US cannot be understated, and while it currently has the lowest brand awareness, it also has the highest implied growth rate, amplified by the addition of apparel. Popular among athletes and fashion enthusiasts, On also enjoys strong DTC sales. Wall Street analysts are mostly bullish on On (ONON), but some bears point to the stock’s high valuation and doubt it can maintain a growth trajectory to fuel stock price gains. Piper Sandler gives ONON an Overweight rating and a 17% upside price target.
HOKA by Deckers was the company’s only brand to see increased sales in the first quarter and is currently Deckers’ (DECK) fastest-growing brand and second-largest brand, accounting for nearly 40% of fiscal year 23 sales (UGG is number one). Despite the popularity of HOKA and UGG, most analysts give Deckers (DECK) a Hold rating due to valuation concerns and potential disruptions to its supply chain which remains heavily concentrated in Asia. Piper is also neutral on Deckers (DECK) and sets its price target at 2.5% below Friday’s close.
Losing market share are Crocs (CROX), leading Piper to believe the Crocs trend may be at or near its peak among the teens. Analysts remain bullish on Crocs (CROX), however, even with the drag on its teen-focused HEYDUDE category and slowing first-quarter revenue and earnings growth forecasts. A consensus is building that the worst may be behind Crocs (CROX) as management continues to deleverage its balance sheet and HEYDUDE’s stock correction appears to be complete by the end of the year. Crocs (CROX) is rated Overweight by Piper with a $140 price target.
Teens are most likely to purchase sneakers on the brand’s website, followed by secondary websites such as Dick’s Sporting Goods (DKS), Amazon (AMZN), and Foot Locker (FL). But gaining market share in this demographic is Academy Sports (ASO) [+2%]Hibbett Sports (HIBB) [+2%]and fanatics [+2%].
As for risks, consumer spending is a potential risk common to all brands followed by inflation, fashion trends and inventory. And while some are more insulated from changes in fashion, like Nike (NKE), Piper Sandler warns that macroeconomic pressures are starting to impact sneakerhead spending.