In a note Thursday, Bernstein named Nike (NYSE:), Burlington Stores (NYSE:), and TJX Cos. (NYSE:) as its top US apparel and specialty retail picks and downgraded shares of Adidas AG (OTC:) to Neutral from Outperform.

Analysts told investors that 2024 is shaping up to be a year of two halves for US consumer discretionary spending. They see an H1 middle-income squeeze and trade-down to off-price, followed by an H2 rally in sportswear and brands driven by easy comparables and rate cuts.

Nike, which has been given a $134 price target by Bernstein, is the firm’s top pick for the next six months. Analysts said December’s guidance cut creates some opportunity for a short-term beat. In addition, “the market overreacted in slashing FY25 numbers,” they wrote. “We expect to see positive revisions through the next few months as Fall 2024 growth looks better than expected. Meanwhile, the multi-year margin story is still intact, and we model ~20% EPS growth over the next 3 years.”

Burlington, which was given a $218 price target, up from $200 per share, is Bernstein’s top pick for a 12-month timeframe, with “the off-price underdog” underperforming its high-quality peers. Analysts said the company has a huge 27% EPS CAGR ahead. “Even accounting for some execution risk from less-seasoned buyers and mgmt, this earnings growth ramp is not priced in yet, and we expect the multiple to expand as confidence in Mgmt builds through the year,” they wrote.

Meanwhile, TJX, which the firm has assigned a $107 price target, up from $100, is the top pick for a 2+ year timeframe, with the company moving beyond conventional off-price into more categories, higher price points, and higher income customer segments. Analysts said this is driving a multi-year expansion in both comps and margins, with very low execution risk from a high-quality mgmt team. “Our numbers gradually diverge from consensus over the next 3 years, as we think this TAM expansion story is not priced in yet,” they wrote.

Finally, Bernstein downgraded Adidas shares, lowering the price target to €200 from €205. Analysts said that consensus estimates are too high for the first half, and the combination of soft wholesale order books and weak global consumer demand means that H1 guidance is “likely to disappoint.” While the firm likes Adidas over the long term and still sees some upside, it prefers to tactically wait out a short-term correction before getting more constructive.