The '90s fashion revival has past its peak.
Over the last few years, women ditched skinny jeans for the classic Levi's style, Champion windbreakers flew off shelves and streaming platforms battled for the rights to the hit show "Friends." This revival of 1990s consumer tastes put certain brands like Fila and Supreme in the spotlight. But now the trend is fading, and as the decade returns to a thing of the past, there will be clear winners and losers, according to Jefferies.
"Retailers with exposure to 'classic' retro brands with a longer, steadier track record of consumer demand are likely better positioned than those with heavy exposure to pure retro brands that have surged in large part from the '90s revival," Jefferies analyst Janine Stichter said in a note to clients on Tuesday.
Demand for street-wear and retro brands is slowing, the firm said.
Ahead of Black Friday, the largest brands in the retro space are seeing interest wane and social media engagement weaken. Brands that rode the retro wave like Champion, Supreme, Fila and Off-White are going to struggle, the firm said. Urban Outfitters and Foot Locker are also in a tough spot as they rely heavily on retro style sales from the aforementioned brands.
"These brands in particular are no longer driving the buzz they did [last year]," said Stichter. While brands like Zumiez and Guess "are showing relatively better staying power."
While clothing store Zumiez relies heavily on sales of Vans shoes, the retailer is diverse enough to weather a deceleration in the retro cycle, said Stichter, who has a buy rating on Zumiez and a $38 price target. Jefferies also said VFC, parent company of shoe retailer Vans, is showing "durability" during the downfall of the '90s craze.
Zumiez has catered largely to skateboarders, and "data suggests a major resurgence in skateboards/parts, which after many years of decline, could further support current comp momentum," said Stichter.
Clothing company Guess is capitalizing on younger consumers' interest in logo merchandise. Jefferies sees Guess' "brand momentum on the rise" and site traffic from 'logo' doubling from last year, said Stichter. The firm has a buy rating on Guess and a $24 price target.
Under Armour will benefit from the shift from retro brands like Fila and Champion back to performance sportswear and shoes. A downtrend in retro logo apparel could help Under Armour recapture some of its lost share in North America.
"As this fad dissipates and younger consumers potentially re-focus on athletic brands like UAA, the company stands to resume a quicker pace of growth," said Stichter. Jefferies has a buy rating on Under Armour and a $22 price target.
Jefferies is cautious about Urban Outfitters and Foot Locker weathering the death of the retro revival. Brands like Champion and Fila have been successful for Urban but demand is slowing, "potentially driving a ripple effect across the rest of the business as these brands are key traffic drivers."
Jefferies' overall recommendation is for brands to take a nuanced approach: Stay diversified and nimble and focus on overall brand concentration.
—With reporting from CNBC's Michael Bloom.