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Is the ‘Sneaker Supercycle’ for Real?

Heading into the 2022 holiday season, consumer footwear preferences could be at a crossroads. On one hand, one analyst believes the best is yet to come from sneaker sales. And on the other, it appears demand for dressier footwear is kicking back into gear, as categories like boots and loafers further gather steam among consumers returning to work and suiting up for weddings, galas and nights out on the town.

“We are in the beginning of a sneaker supercycle,” Omar Saad, managing director at Evercore ISI said during an Oct. 8 Yahoo Finance Live interview. “People are wearing sneakers more. Their feet are absolutely used to the comfort that sneakers and other comfortable footwear bring during Covid and are hesitant to go back to uncomfortable dress shoes on a daily basis just for special occasions.”

Saad went on to say that Nike “is the best-positioned company to take advantage of this massive sneaker supercycle.”

But while one projection calls for a surge in sneaker sales, a recent Financial Times report highlighted some of the recent style changes in the U.K. that seem to be giving way to “the post-sneaker era,” suggesting that the return of dress footwear like loafers may make a dent in activewear or leisurewear sales that dominated the Covid-19 pandemic. The FT article opened with an anecdote describing a farmer’s market visitor sporting “bright green sports shorts, a creased white crewneck tee, a baggy zip-up hoodie and thick gym socks” alongside classic formal black leather Derby shoes by Paraboot.

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The author, FT’s fashion assistant Grace Cook, highlighted how people she has recently encountered combined sportswear like Gore-Tex jackets with penny loafers from Grenson. Cook attributes the rise in this phenomenon to newly relaxed standards for office attire.

“As office dress codes become more casual and city workers sport bright white sneakers with their Savile Row suits, millennials and Gen Z are hitting control-alt-delete on their choice of kicks,” Cook wrote. “Consider sneakers the footwear equivalent of Facebook: somewhat passé now they’re pervasively co-opted by baby boomers and billionaires. Mark Zuckerberg likes Nike, while Jeff Bezos prefers Converse.”

In August, NPD Group reported that in the second quarter of 2022, total U.S. footwear sales declined 4 percent to $10.7 billion. But for the year to date, it appears trends in the U.S. did in fact follow the narrative laid out in the Financial Times article.

Among the segments the market research firm tracked, leisure footwear sales saw the biggest dip at 11 percent to $4.8 billion, further adding onto idea that consumers are revisiting styles appropriate for formal occasions. Meanwhile, fashion footwear rose 8 percent to $4.2 billion while performance footwear declined 7 percent to $1.8 billion.

Based on sales revenue, fashion shoes, fashion sandals and walking shoes were the top three footwear growth categories for the second quarter, according to NPD’s August said.

Matt Powell, senior industry advisor, sports, at The NPD Group, told Sourcing Journal that on the whole, third-quarter sneaker sales were “somewhat better” than the first half.

“Sneaker sales in the U.S. remain challenged,” Powell said. “Given the reported inventory glut, this will be the most promotional holiday in history. Athletic footwear remains the shoe of choice for the younger generations, but short term growth will only be driven by markdowns.”

Of course, these are the very issues that Nike is facing now as it plans to capitalize on the hypothesized “supercycle” and the demand that should come with it. The Jordan Brand owner will still have plenty of short-term pressure with inventory up 44 percent, with much of that pileup offloaded using price cuts to move product.

“We think there’s gonna be a really, really tough holiday [season], and part of this is really about the forward 2023 purchasing behavior in the wholesale channel,” Adrienne Yih, managing director at Barclays, told Yahoo Finance. “Nike still has about 55 percent in the wholesale channel even though they’re making great strides in moving to [direct-to-consumer]. So that’s sort of the crux of the near to medium term.”

But the long-term outlook for the sports footwear market is likely to remain positive, and unlikely to be derailed by the current issues across supply and demand. According to an analysis from Fortune Business Insights, the market is projected to grow from $97.42 billion in 2021 to $134.99 billion in 2028, at a combined annual growth rate of 4.8 percent during the seven-year-stretch.

For dress footwear, top industry names have hinted that fashion is very much back in the consumer consciousness.

Steve Madden CEO Ed Rosenfeld said in a July earnings call that on the fashion side, the company was seeing “good early reads on boots and booties. That’s a category that’s performing better at this time of the year than it did a year ago.”

One month later, Caleres CEO Diane Sullivan shared similar results in her own footwear company’s earnings call, pointing out boots as showing positive trends, while dress remained strong.

“About a third of our business in fall is in boots,” Sullivan said. “We’re seeing things that are not quite as casual as they had been, and a little bit more dressed up on heels.”

In August, Designer Brands Inc. CEO Roger Rawlins didn’t share any details as to the performance of any dress categories in the DSW parent’s earnings call, but remained steadfast in his belief that there “continues to be pent-up demand for dress and seasonal products tied to social occasioning and travel.”

Additionally, Shoe Carnival chief merchandising officer Carl Scibetta said that the retailer experienced a shift away from its normal 50/50 athletic-nonathletic sales balance in its second quarter, which posed a problem in the supply chain as the company was “unable to deliver the non-athletic receipts to meet demand within our athletic product categories.” Women’s non-athletic was up in the “high-20s” versus 2019, while dress shoe sales were up 50 percent in that time frame. Men’s dress shoe sales were up over 20 percent, while boots were up over 30 percent.

Fraser Moss, co-founder of the British contemporary apparel label YMC, told FT that the resurgence in dress shoes likely comes from what else—the younger generation’s aversion to older trends.

“Their parents are wearing trainers, so kids are rebelling by dressing like their dads once did,” Moss said, calling the casual, leather moccasin “a geography teacher’s shoe.”

The shift toward dress shoes mirrors that of dresses and suits in general, with formal apparel benefitting amid estimates that the 2022 wedding season will end up as the biggest in the U.S. since 1984.

If this dress focus sticks for younger consumers, one could point the finger at the current state of resale as a catalyst for change, Oliver Hooson, a 32-year-old photographer in London, told FT. He said most millennials are “sick to death of StockX” and the inflated prices that come with resale culture. Unlike popular sneaker drops today, normal shoes aren’t limited edition, and don’t often resell for unreasonably high prices.

“There’s so much noise,” Hooson said. “However much your sneakers cost equals how good they are.”