DISCUSSION
Will Foot Locker be better off long-term with fewer Nike shoes on its shelves?
Written by Tom Ryan
Shares of Foot Locker crashed 30 percent on Friday after the sneaker chain said sharply-reduced allocations from Nike would lead to a same-store decline of between eight and 10 percent in 2022.
The change reflects Nike’s shift in recent years toward direct-to-consumer (DTC) sales while narrowing its wholesale account base. The chain also attributes part of its sales decline to the absence of another government stimulus.
Foot Locker expects Nike to supply about 55 percent of its sales by the fourth quarter of 2022 and continue at that level into 2023 — down from 65 percent in the 2021 fourth quarter and as high as 75 percent overall in 2020.
On its fourth-quarter analyst call, Dick Johnson, Foot Locker’s CEO, said Nike will “remain an important partner for our business, especially in basketball, kids and sneaker culture, where we have an unrivaled connection with our consumers.”
The big blow, Mr. Johnson said, will come from reduced allocations of “high heat” product, such as retro Air Jordans and LeBron James’ signature shoe. “We’ll still have access, we’ll just see fewer units in those SKUs.”
To make up for the Nike reduction, the chain is increasing allocations in Adidas, Puma, New Balance, Timberland, Ugg, Reebok, Crocs and other brands. The action is an acceleration of a plan launched in 2019 to add more brands and categories to better diversify Foot Locker’s mix.
Mr. Johnson believes Foot Locker will be better positioned as “a true house of brands.”
He added, “I think that COVID has allowed us all to see the consumer is changing. … Our consumer is clearly saying that they want choice and that multi-brand destinations matter. And when 75 percent of your purchases are with one vendor, it doesn’t leave a lot of space in your store for choice.”
Foot Locker will also increase Investments in apparel and private label offerings while accelerating its expansion of larger off-mall stores and making two recent acquisitions, WSS and Atmos.
Mr. Johnson admitted that Foot Locker will be challenged replacing Nike-like launch product. He said, “There is nothing like a retro Jordan launch that comes in on a Friday and sells on a Saturday. That’s a tough dynamic to overcome.”
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