Baird's Rating Adjustments Reveal Profound Shifts in Investment Logic for the Athleisure Industry

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The differentiated rating adjustments by investment firm Baird for three athleisure companies—Deckers (DECK), Crocs (CROX), and Under Armour (UAA)—reflect a profound reshaping of institutional investors’ views on the industry’s competitive landscape and valuation logic. This rating adjustment reveals that the athleisure industry is undergoing a paradigm shift from “growth above all else” to “quality first”, and from “single hit product-driven” to “multi-brand synergy” [0].

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Based on trading data from July 2025 to January 2026, the three companies showed distinctly different trends [0]:

Company	Normalized Price (July=100)	Period Return	Annualized Return
DECK	98.75	-1.25%	-49.26%
CROX	79.71	-20.29%	-23.15%
UAA	80.82	-19.18%	-31.76%

Deckers showed the strongest resilience among the three, but still recorded a nearly 50% plunge over the year; Crocs and Under Armour exhibited greater volatility in both absolute and relative performance.

Metric	DECK	CROX	UAA
Market Capitalization (USD 100 million)	156.0	47.6	24.6
Price-to-Earnings (P/E)	15.21x	25.79x	Loss
Return on Equity (ROE)	40.31%	11.08%	-4.61%
Net Profit Margin	19.36%	4.48%	-1.74%
Gross Profit Margin	56.2%	54.5%	48.2%
Revenue Growth Rate	12.62%	~8.5%	~3.2%

: Deckers has significant advantages in profitability and growth quality, while Under Armour remains in a loss-making position, and Crocs has relatively weak profitability [0].

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Based on a compilation of multiple sources, Baird’s downgrade of Deckers is mainly based on the following considerations [1][2][3]:

: The sales growth rate of HOKA, Deckers’ core growth engine, has fallen from its earlier high double-digit levels, growing only 11.1% in Q2 FY2025 and dropping to 10.0% in Q4. This slowdown has raised market concerns about whether the “hit product dividend” has faded [2].

: HOKA is facing strong competition from On Running in the U.S. performance running shoe market. On Running achieved an impressive 43% growth in Q1 2025, while HOKA’s growth rate in the same period was only around 10%, putting its market share at risk of redistribution [1].

: Although the stock price has fallen more than 50% from its peak, market expectations for HOKA remain high. Some institutions believe that the current valuation does not fully reflect the risk of growth slowdown. Goldman Sachs lowered its target price from $92 to $81, maintaining a “Sell” rating [3].

: The company’s transition to the wholesale channel has brought pressure on profit margins, and the overall softening of demand in the U.S. market has exacerbated this challenge.

The challenges facing Crocs are more structural and long-term [4][5]:

: The HEYDUDE brand, acquired for $2.5 billion in 2022, has become a “heavy burden”. The brand’s revenue fell 21.6% year-over-year in Q3 2025, and the company has impaired the HEYDUDE trademark and goodwill, indicating that integration has fallen far short of expectations [4].

: Crocs expects full-year 2025 revenue growth of only 2%-2.5%, with the core Crocs brand growing by about 4.5%, but the HEYDUDE brand is expected to decline by 7%-9%, resulting in extremely limited growth after offsetting the two [5].

: HEYDUDE faces inventory backlogs in wholesale channels, forcing the company to increase discount efforts, which further erodes profit margins and brand image.

Baird has labeled Under Armour a “new trading opportunity”, reflecting a typical “turnaround” investment approach [6][7]:

: The company expanded its previously announced restructuring plan in 2025, incurring approximately $147 million in restructuring and related expenses as of September 2025, indicating that management is actively promoting transformation [6].

: Gross profit margin expanded by approximately 70 basis points year-over-year to 48.2%, indicating improved operational efficiency [7].

: Licensing revenue grew 12% year-over-year, becoming a bright spot in performance.

: As a former industry leader, Under Armour’s current price-to-sales (P/S) ratio is at a historical low, providing a high margin of safety for investors willing to take on execution risk.

: Although North American revenue still faces pressure, the company is attempting to regain market share through product innovation and brand reshaping.

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The global athleisure market is experiencing structural growth. According to data from industry research institutions [8][9]:

• Market Size
  : The global athleisure market size is approximately
  USD 154.69 billion
  in 2025, expected to reach
  USD 163.35 billion
  in 2026, and expand to
  USD 266.75 billion
  by 2035, with a compound annual growth rate (CAGR) of approximately 5.6%.
• Consumer Preferences
  : Approximately 68% of consumers choose an athleisure lifestyle, 63% prioritize comfort, and 58% actively participate in fitness activities.
• Segment Trends
  : Apparel (leggings, yoga wear) dominates demand; online channels account for more than 55% of sales; sustainability is a concern for approximately 52% of consumers.

: Nike’s market share fell from 63% in 2018 to 51% in 2023, while brands such as HOKA, On Running, and Brooks are rapidly emerging. On Running achieved 130% sales growth in the Asian market in Q1 2025, and HOKA accounted for 32.6% of the market share in the Western States 100 ultramarathon [1][10].

: On Running entered the market with differentiated “cloud sole” technology, and Brooks holds a 22% share of the North American adult performance running shoe market. These agile challengers are eroding the market share of traditional giants [10].

: The top 10 brands control approximately 48% of the market share through innovative design and global strategic cooperation, but digital-native brands and niche-specialized brands are also rapidly seizing the long-tail market [9].

: The importance of the DTC (Direct-to-Consumer) model is increasingly prominent, but inventory management challenges in wholesale channels have also become a pain point for brands. Crocs’ HEYDUDE dilemma is a typical example of this contradiction [4].

: From chasing the “myth of high growth” to prudently evaluating “sustainability of growth”. Investors are now paying more attention to profitability (ROE, profit margins), cash flow quality, and competitive barriers, rather than simply user or revenue growth rates.

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Baird’s rating adjustments mark a fundamental shift in institutional investors’ investment logic for the athleisure industry:

Dimension	Old Logic (2021-2023)	New Logic (2024-2026)
Core Metrics	Revenue growth, user growth	ROE, FCF, profit margins
Valuation Anchor	P/S (Price-to-Sales) multiple	P/E (Price-to-Earnings)/EV/EBITDA
Growth Expectations	The higher the better	Sustainability first
Risk Assessment	Track risk	Sustainability of competitive advantages
Brand Premium	Hit product-driven	Brand portfolio synergy

The dilemma of Crocs’ acquisition of HEYDUDE reveals the risks of the “multi-brand platform” strategy:

• Underestimated Integration Difficulty
  : The complexity of cultural integration, channel synergy, and supply chain integration far exceeds expectations
• Overly Optimistic Growth Assumptions
  : HEYDUDE’s high growth before the acquisition is difficult to maintain during the integration period
• Goodwill Impairment Risk
  : The $2.5 billion acquisition price becomes a heavy burden when the brand’s performance falls short of expectations

In contrast, Deckers’ integration of HOKA was relatively successful, but HOKA’s own growth slowdown also reminds investors of the objective existence of a “hit product life cycle”.

The bullish outlook on Under Armour reflects the capture of a “turnaround” opportunity, but the application of this strategy requires the following conditions to be met:

• Management has a clear transformation plan with verifiable execution progress
• Core brand assets (technology, channels, user perception) have not been fundamentally lost
• Financial position can support cash consumption during the transformation period
• Valuation has fully priced in pessimistic expectations

Under Armour’s restructuring plan progress, signs of improved profit margins, and growth in its licensing business support its “turnaround” narrative, but the recovery of demand in the North American market remains uncertain.

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Company	Rating	Core Logic	Risk Factors
DECK	Cautious	Growth slowdown but strong profitability remains	Intensified competition for HOKA, softening U.S. demand
CROX	Prudent	HEYDUDE integration dilemma suppresses valuation	Goodwill impairment, sustained integration costs
UAA	Opportunity to Watch	Turnaround potential + attractive valuation	Execution risk, market share loss

: Leading enterprises with technological barriers and brand recognition in niche segments such as performance running shoes and yoga wear.

: Adopt a prudent attitude towards strategies of building a “multi-brand portfolio” through large-scale acquisitions, focusing on evaluating brand synergy and integration execution capabilities.

: Against the backdrop of a tightening interest rate environment, the importance of free cash flow and profitability has increased.

: The increase in athleisure penetration in the Asia-Pacific market (especially China) brings incremental opportunities, and enterprises leading in digitalization and sustainability have stronger long-term competitive advantages.

• Macroeconomic Downturn
  : A decline in consumers’ disposable income may suppress athleisure consumption
• Intensified Competition
  : Sustained impact from emerging brands and technological disruptors
• Supply Chain Risks
  : Geopolitical and tariff uncertainties affect cost structures
• Execution Risks
  : The execution progress and results of corporate transformation strategies may fall short of expectations

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Baird’s differentiated rating adjustments for Deckers, Crocs, and Under Armour are a microcosm of the paradigm shift in athleisure industry investment. As the industry transitions from a “period of incremental dividends” to a “period of stock competition”, investors are shifting from chasing high growth to prudently evaluating the sustainability of profit quality and competitive advantages. The slowdown of Deckers’ HOKA and the dilemma of Crocs’ HEYDUDE reveal the limitations of the “hit product-driven” and “acquisition-led growth” models, while Under Armour’s “turnaround” narrative provides a potential contrarian opportunity for investors willing to take on execution risk.

Against this backdrop, the core task for investors is to shift from “track investment” to “enterprise quality investment”, identifying high-quality targets with truly sustainable competitive advantages in an increasingly differentiated market.

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[0] Jinling AI - Market Data and Financial Analysis API
[1] Porter’s Five Force - Deckers Competitive Landscape Analysis (https://portersfiveforce.com/blogs/competitors/deckers)
[2] Deckers Outdoor FY2025 Q4 Results (https://ir.deckers.com/news-events/press-releases/press-release/2025/Deckers-Brands-Reports-Fourth-Quarter-and-Full-Fiscal-Year-2025-Financial-Results/default.aspx)
[3] Yahoo Finance - Deckers Stock Slides After Wall St. Downgrades (https://finance.yahoo.com/news/deckers-stock-slides-wall-st-193458749.html)
[4] Crocs Inc. Q3 2025 Results (https://investors.crocs.com/news-and-events/press-releases/press-release-details/2025/Crocs-Inc--Reports-Third-Quarter-2025-Results/default.aspx)
[5] MatrixBCG - Crocs Growth Strategy and Future Prospects (https://matrixbcg.com/blogs/growth-strategy/crocs)
[6] Under Armour - Fiscal 2025 Restructuring Plan Expansion (https://about.underarmour.com/en/stories/press-releases/release.25246.html)
[7] Public.com - Under Armour Stock Forecast and Analyst Ratings (https://public.com/stocks/uaa/forecast-price-target)
[8] Global Growth Insights - Athleisure Market Trends (https://www.globalgrowthinsights.com/zh/market-reports/athleisure-market-121951)
[9] Business Research Insights - Athleisure Market Trends 2026-2035 (https://www.businessresearchinsights.com/zh/market-reports/athleisure-market-117411)
[10] Best Colorful Socks - Running Shoes Consumer Statistics 2025 (https://bestcolorfulsocks.com/blogs/news/running-shoes-consumer-statistics)