Nike, Lululemon Lose Ground as Youth Brand Preferences Shift, Morgan Stanley Survey Finds

Shifting consumer preferences are fragmenting the apparel and athletic footwear markets while consolidating the handbag space, according to Morgan Stanley's eighth annual AlphaWise intern survey released Tuesday. The report highlights declining popularity for former stalwarts like Nike and Lululemon, while brands such as Coach and On Running are gaining significant ground among younger consumers.

Key Survey Findings

The survey pointed to several notable shifts in brand loyalty across key retail categories:

• Athletic Footwear: Market fragmentation continued as Nike lost market share for the fifth consecutive year, falling to its lowest level in the survey's history. In contrast, On Running posted the largest year-over-year share gain and climbed to the number two preference ranking.
• Apparel: This category also saw increased fragmentation, with leaders like Lululemon and Zara losing share. Lululemon's preference ranking declined for a third straight year to an all-time survey low. Brands gaining the most share included Ralph Lauren and Vuori.
• Handbags: Unlike other categories, handbag preferences became more concentrated. Coach, owned by Tapestry, rose to the number one position for the first time in the survey's history, with its share growth occurring alongside that of other luxury brands.

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Implications for Investors

Morgan Stanley noted that the survey's findings support its current investment ratings on several key stocks. The firm stated the results reinforce its underweight view on Lululemon (NASDAQ: LULU), indicating what it sees as "continued brand pressure and intensifying competition."

Conversely, the strong performance of Coach underscores the brand's momentum and supports Morgan Stanley's overweight rating on its parent company, Tapestry (NYSE: TPR). The survey provides a data-driven look at consumer trends that can influence a company's future sales and market position.