Baird analysts presented three distinct scenarios for the outlook of global athletic and retail brand stocks while crude oil prices remain above $100 per barrel on Day 10 of Operation Epic Fury, the U.S.-Iran conflict that began on February 28.
The firm highlighted that the confrontation has spread across the Middle East and has impeded maritime traffic through the Strait of Hormuz - a critical chokepoint that handles more than 20% of global petroleum consumption. Baird noted that its global brand coverage has underperformed the S&P 1500 by roughly 1,200 basis points over the past two weeks, a pattern the analysts said is similar to the sell-off seen in early 2022 when crude surpassed $120 per barrel amid the Russia-Ukraine conflict.
Baird quantified the potential consumer impact of higher oil by estimating that crude oil at the low-$100 per barrel level could translate into a $7 billion to $14 billion monthly year-over-year drag on U.S. consumer spending, based on more than 11 billion gallons of gasoline consumed per month. The firm added that the near-term pull on spending should be partially offset by tax refunds, which are tracking about $25 billion higher year-over-year.
Three scenarios
- Best-case - Rapid de-escalation: Baird outlined a rapid de-escalation occurring within a four- to six-week window, a timeline the analysts consider the most probable in a U.S. mid-term election year. They pointed to coordinated releases of petroleum reserves by the IEA - and noted the U.S. has proposed releasing 300 million to 400 million barrels compared with 240 million barrels in 2022 - as evidence that policy action could ease pressure on prices and open a higher-conviction trading opportunity in the weeks ahead.
- Higher-for-longer: The firm compared the current environment to March 2011 through July 2014, when monthly crude prices were at or above $100 per barrel and U.S. Real GDP averaged about 2%. During that earlier period, global brand stocks outperformed the S&P 1500 by roughly 16%. Baird observed that the group's median NTM+1 P/E and EV/EBITDA are presently 12% to 13% below the averages from that period, which the analysts view as providing valuation cushion.
- Worst-case - Global recession: Baird flagged a worst-case scenario in which sustained higher oil precipitates a global recession, referencing the June 2008 episode when oil spiked above $150 per barrel. The firm also pointed out that betting market odds of recession remain well below the highs recorded on April 2025 Liberation Day.
Weighing the three pathways, Baird said it is gaining comfort in the risk-reward profile for global athletic and retail brands on the assumption that no recession materializes. The analysts called out a list of higher-conviction, Outperform-rated names that could benefit, particularly in a de-escalation scenario:
- On Holding (NYSE:ONON)
- V.F. Corporation (NYSE:VFC)
- Amer Sports (NYSE:AS)
- Nike (NYSE:NKE)
- Boot Barn Holdings (NYSE:BOOT)
- Kontoor Brands (NYSE:KTB)
- Dick's Sporting Goods (NYSE:DKS)
- Wolverine World Wide (NYSE:WWW)
- Rocky Brands (NASDAQ:RCKY)
The analysts' assessment blends a near-term focus on oil-driven consumer headwinds with medium-term valuation comparisons to prior high-price intervals, while underscoring the central uncertainty - whether elevated energy costs will tip the economy into recession.