Will Adidas help Foot Locker get over Nike?

Discussion
Sources: Instagram/@footlocker
May 24, 2022

Foot Locker is counting on Adidas, the second largest athletic footwear vendor, to help compensate for the loss of business as Nike, the largest, Nike, pulls back some of its business.

The retailer in February announced that Nike is expected to account for about 55 percent of fourth-quarter sales and continue at that level into 2023 — down from 65 percent in the 2021 fourth quarter. That includes reduced allocations of “high heat” products, such as Air Jordans.

The reduction reflects Nike’s moves to consolidate wholesale accounts in a direct-to-consumer (DTC) push. Foot Locker guided comps down eight to ten percent this year, with the biggest Nike impact expected in the fourth quarter.

Foot Locker earlier this month announced an enhanced Adidas relationship that establishes the retailer as the lead partner for Adidas in basketball, heightens collaboration on “energy and hype” launches, and prioritizes franchises across women’s, kids and apparel. The Adidas collaboration targets over $2 billion in retail sales by 2025, nearly tripling levels from 2021.

In the first quarter, non-Nike comps increased in the high teens as Foot locker made progress diversifying its assortments. Beyond Adidas, the retailer drove gains with Puma as well as 50 percent growth from New Balance, Crocs and Converse.

Foot Locker also sees growth in performance running with expansion plans set for two upstarts, On and Hoka One One, that are looking to reach younger consumers. Accelerated private label apparel growth is also expected to help offset Nike’s retrenchment.

Overall quarterly comps slid 1.9 percent due to difficult year-ago comparisons against stimulus payments.

Analysts appeared particularly concerned about Foot Locker’s ability to compete in the basketball category with fewer Nike products.

On the quarterly analyst call, Dick Johnson, Foot Locker’ CEO, said in addition to Adidas, Puma and New Balance, which both recently returned to the performance basketball category, as well as classic basketball products from Reebok, are expected to support the retailer’s basketball push.

Mr. Johnson said, “We just feel good about basketball in general and firmly believe that Adidas is going to be one of the key players along with our existing portfolio of Nike hot silhouettes and the others.”

DISCUSSION QUESTIONS: Do you see Adidas as the lynchpin to resetting Foot Locker’s merchandise mix amid reduced allocations from Nike? Does a broader mix of lifestyle product make sense, or should Foot Locker still aim for a strong point of view around basketball?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"An assortment and brand diversification strategy are precisely what Foot Locker needs to help offset some of the losses attributed to Nike's reduced allocations."
"No doubt the reduced presence of Nike hurts but Foot Locker’s broadening of brands make good sense."
"Foot Locker needs to be cautious of just shifting its reliance from Nike to Adidas."

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16 Comments on "Will Adidas help Foot Locker get over Nike?"


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Mark Ryski
BrainTrust

Yes, I believe that Foot Locker needs Adidas to help fill the gap in their offering Nike created. While it’s impossible to completely displace Nike, the fact is Adidas is a formidable brand and Nike isn’t the only player in the market. I have no doubt that Nike well understand the potential market share risk of departing from Foot Locker, but now they’re seeing it. As important as basketball is to the sneaker market, I think Foot Locker should look to broaden their appeal to basketball and beyond.

Neil Saunders
BrainTrust

Foot Locker has already reduced its dependence on Nike. Adidas has helped, but so too have other brands including those like Crocs. On top of this, own brand development in apparel has also produced some good results. It is still early days, but Foot Locker is delivering pretty solid results and seems to have a clear strategy for growth. Nike is important, but it is not the only game in town. Foot Locker knows this and is adapting accordingly.

Katie Thomas
BrainTrust

There’s a lot of potential movement in the retailer/manufacturer relationship in the coming years. In this particular case, Adidas can help Foot Locker offset some of its Nike losses, especially if they are considering exclusive collections or limited editions. But Foot Locker needs to be cautious of just shifting its reliance from Nike to Adidas.

Overall, the DTC landscape will change manufacturer/retailer relationships across industries. In grocery, manufacturers are increasingly frustrated by high trade dollars with strict shelf resets. While there’s still value to the consumer to have the curated yet diverse assortment a retailer offers, there’s opportunity to shift the dynamic.

Shep Hyken
BrainTrust

I can’t speak to the specifics of the shoe industry, but this seems to be more of a general business problem. What’s happening at Foot Locker is the evolution of business. Today’s business model won’t last forever without flexibility and willingness to change. All companies must reinvent themselves as their landscape changes. Foot Locker is no exception. Nike’s decision to change their distribution model impacts Foot Locker and many other retailers. Foot Locker’s ability to change up their merchandise and not be dependent on one brand is a key to their future success.

Carol Spieckerman
BrainTrust

Well this discussion is well-timed! In my latest podcast episode (Not Everyone is Nike. Maybe That’s a Good Thing), posted this morning, I take on the post-Nike world of retail and the ripples from its wholesale pull-out. The big question is whether broad assortments of non-Nike brands like Adidas can fill the void left by Nike. In the meantime, predictions that a flood of brands would follow Nike’s narrow direct-to-consumer game plan have largely been unfounded. In fact, a slew of brands is leaning into wholesale once again.

Brandon Rael
BrainTrust

An assortment and brand diversification strategy are precisely what Foot Locker needs to help offset some of the losses attributed to Nike’s reduced allocations. Adidas has a prime opportunity to take advantage of this moment by being a key strategic partner with Foot Locker, capitalize on the distribution capabilities, and compete in a space that Nike has dominated.

Foot Locker has been synonymous with basketball shoes for decades, and we shouldn’t expect that to change. What will be evolving is their product mix, which will include plenty of more offerings from Adidas, Puma, New Balance, and others. The brand’s product diversification strategy has evolved with changing consumer tastes. Foot Locker has stepped up with their apparel, accessories, and seasonal categories.

Ultimately, Foot Locker is well-positioned to pivot and adjust around the changing dynamics of its relationship with Nike.

Liza Amlani
BrainTrust

Assortment is everything and putting the customer in the middle of an assortment strategy is critical. Adidas is hot right now – especially with their luxury collaborations.

The challenge for Foot Locker will always be their ways of working. Siloed banners and redundant processes is going to slow them down, no matter their product strategy. They need to keep up with their vendors and having archaic processes driven by manual ways of working will always hold them back.

Jeff Sward
BrainTrust

It’s a little surprising that both Nike and Foot Locker allowed Nike to grab such a huge share of Foot Locker’s total business. And at 55 percent, it will still be huge. So this may be a healthy move for both companies. And it’s a clear market share opportunity for Adidas. Adidas is no schlump of a brand, so I think this heightened level of competition is going to be good for everybody. It’s interesting that in being prepared to protect its own brand integrity, Nike is prepared to give a key competitor an elevated profile in the market. I think that’s confidence, not arrogance. And obviously a demonstration of just how serious they are about brand integrity.

Paula Rosenblum
BrainTrust

Yes, Adidas will help Foot Locker. And, as a recent convert to Hoka One One, I will say it’s not just for kids. What a comfortable sneaker! It’s meant to be a running shoe but it’s fine for walking.

The other question is, given how cyclical the footwear industry is (and it really, really is), will Nike reverse direction and increase Foot Locker’s allocations again? I’ve said this before, I know, but Nike has reversed direction multiple times in the past five years. I’m never convinced that a current iteration of their strategy will have legs.

Private label is always a profit boon, but establishing a footwear brand is really hard. And again, cyclical.

Mohamed Amer, PhD
BrainTrust

Smart move by Foot Locker and Adidas that benefits both parties. I will be surprised if Nike’s share of Foot Locker’s business in the second half of the year isn’t well under 50 percent. Adidas and other brands are stepping in to help Foot Locker diversify its assortment, putting the retailer on a less treacherous footing.

Richard J. George, Ph.D.
BrainTrust

When life gives you lemons make terrific lemonade or, on the other hand, if life takes away some of your lemons, make some other juices, like orange, pineapple, etc. No doubt the reduced presence of Nike hurts but Foot Locker’s broadening of brands make good sense. While Foot Locker is focusing on Nike replacements, it still needs to up its online game.

Craig Sundstrom
Guest

Everything helps, obviously (translation: there’s no reason not to go “full ahead” with Adidas); but at the same time let’s be real: no, it’s not going to be a replacement … at least not a full one.

Brad Halverson
Guest

Extended family members under the age of 20 continue to remind me that Nike remains the cool brand right now, with designs and innovation surpassing most other brands, even as the behemoth they are.

Foot Locker is wise to go horizontal and build relationships with more shoe companies. As a lesson, Nordstrom has done well with a diversified brand merchandising approach for decades.

Ricardo Belmar
BrainTrust

Foot Locker is on the right path with an added focus on Adidas. Part of this strategy to recover from too high a dependency on Nike is to embrace multiple competing brands to reinforce with consumers the idea that Foot Locker is THE place to go for the best sneaker and athletic wear selection. That means Foot Locker needs to pursue similar arrangements with other brands in addition to building out their own private label products.

MohitNigam
Guest
1 month 6 days ago

Nike and Adidas have got their brand loyal customers. COVID-19 has impacted these brands positively with people’s focus shifting toward sports and leisurewear. This is a temporary phase and data may shift again in another couple of months to 2019 levels. Brands I feel will be picking up in future will be Asics, Puma, and New Balance but I have doubts about Reebok.

Anil Patel
BrainTrust

The collaboration could work if Foot Locker and Adidas successfully align their branding and marketing strategies. Also, instead of aiming at the highly competitive basketball category, it would be better for Foot Locker to focus on defining a category Adidas could excel in and dominate the same.

Moreover, though Foot Locker has made this collaboration to compensate for its lost sales due to Nike’s impact, the opportunity is quite huge for Adidas as well. As the former has numerous locations, which could help the latter in penetrating deeply into the market.

wpDiscuz
Braintrust
"An assortment and brand diversification strategy are precisely what Foot Locker needs to help offset some of the losses attributed to Nike's reduced allocations."
"No doubt the reduced presence of Nike hurts but Foot Locker’s broadening of brands make good sense."
"Foot Locker needs to be cautious of just shifting its reliance from Nike to Adidas."

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