Investing.com -- Wells Fargo on Friday reshuffled its ratings across the U.S. apparel and retail sector, upgrading Victoria’s Secret and downgrading Nike and Deckers, arguing that the rapid adoption of GLP-1 weight-loss drugs is impacting consumer spending in ways that favor clothing over footwear and athletic wear.

GLP-1 medications — which include Ozempic, Wegovy, and Zepbound — are driving a "mega-trend" in apparel demand as users lose weight, drop clothing sizes, and replace their wardrobes, analysts led by Ike Boruchow said in a note.

They estimate the trend has already added roughly 100 basis points to apparel spending growth in 2024 and 120 basis points in 2025, and project incremental lifts of 160, 170, and 30 basis points over the following three years.

"There are few opportunities to become bullish on apparel...and this is one," the analysts wrote, highlighting that U.S. GLP-1 penetration has reached approximately 12% of adults, with barriers to further adoption, including cost, the availability of injectable-only formats, and limited insurance coverage, continuing to fall.

A Wegovy pill launched in January at $149–$299 per month helped drive a surge in new prescriptions in the first quarter.

Wells Fargo said it conducted a proprietary survey of roughly 1,000 consumers and found that GLP-1 users spent over 40% more on clothing annually than non-users, replacing a greater share of their wardrobes and expressing stronger intent to keep spending. Bottoms and bras were cited as the highest-priority purchases.

Against this backdrop, the broker upgraded Victoria’s Secret to Overweight from Equal Weight, raising its price target to $57, pointing to improving business momentum under CEO Hillary Super, strong recent comparable sales, and a significant gap between the company’s current operating margin and its historical benchmark.

The analysts also flagged intimates, particularly bras, as among the categories most directly benefiting from GLP-1-related body changes.

At the same time, Nike was cut to Equal Weight from Overweight, with Wells Fargo lowering its price target to $45 from $55, pointing to the company’s heavy footwear exposure and ongoing international challenges, including double-digit sales declines in Greater China and elevated inventory in Europe.

Deckers was also downgraded to Underweight from Equal Weight, with the price target falling to $90 from $115. The analysts described the move as primarily thematic, noting that Deckers’ HOKA brand faces competitive pressure from Nike’s efforts to recapture share in specialty running.

Among other names the analysts highlighted as well-positioned for the GLP-1 tailwind are Kontoor Brands, Levi Strauss, Gap, Burlington, Ross Stores, and ThredUp.

"[We] highlight them as a clear winner today," they said.