Baird's Stock Picks In Footwear And Fitness Amid Brexit Fallout - adidas (OTC:ADDYY), Boot Barn Holdings (NYSE:BOOT)

Baird prefers

Nike IncNKE

Planet Fitness IncPLNT

and

Duluth Holdings IncDLTH

in the apparel, footwear and fitness sectors, despite being concerned about market volatility and political uncertainty raising the risk of a U.S./global recession in the intermediate term.

"Overall, the Outperform-rated stocks we are least concerned about in a range of potential scenarios include NKE (earnings likely insulated, even with above-average Europe exposure), as well as PLNT and DLTH which are domestic businesses with robust secular drivers," analyst Jonathan Komp wrote in a note.

The analyst said the greatest short-term earnings risk for companies with above-average revenue penetration in Europe include the following:

adidas AG (ADR) ADDYY
VF Corp VFC
Nike
Crocs, Inc. CROX
Deckers Outdoor Corp DECK
Foot Locker, Inc. FL
Genesco Inc. GCO
Wolverine World Wide, Inc. WWW

All these companies are estimated to have more than 10 percent revenue mix in Europe.

But What If...

In the event of a U.S./global recession, the analyst sees downside earnings risk for higher-fixed cost retail businesses such as Finish Line Inc FINL, Zumiez Inc. ZUMZ, Boot Barn Holdings Inc BOOT, Genesco and Foot Locker.

Komp is also concerned on branded apparel/footwear vendors with the lowest existing operating margin including Crocs, Rocky Brands Inc RCKY, Deckers and adidas. In addition, high-valuation names like Under Armour Inc UA and adidas would be exposed in the event of a recession.

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