Nike’s Tustle with Footlocker

In the latest financial reports, apparel retailer Foot Locker reported an 11% year–over–year drop in sales, along with a miss on both revenue and profits. This disappointing news sent ripples through the stock markets, with Foot Locker‘s largest wholesale partner, Nike, feeling the effects.

John Kernan, Cowen analyst, noted that the unacceptable earnings “signals trouble for Nike, Deckers, Dick‘s, and Academy Sports in particular.”

Mary Dillon, Foot Locker‘s CEO, had also expressed excitement about the renewal of its partnership with Nike at an investor day in March.

“I have spent a great deal of time with Nike, revitalizing our partnership, developing a shared vision of the future marketplace, aligning on growth plans in key strategic areas like basketball, kids, and sneaker culture,” she said at the time.

However, Nike‘s stock is now down more than 6% since Foot Locker‘s reports released on Friday. Tom Nikic of Wedbush analyst, who was initially impressed by the promise of the renewal of the partnership in March, acknowledged that the tight connection between the two companies comes with a downside.

Jim Duffy of Stifel had lowered his full–year revenue and earnings–per–share forecast for Nike, due to the slowing of sales in the US. Sam Poser, Williams Trading analyst, downgraded Nike‘s shares to “sell,” citing the lack of preparation to accommodate the return of in–person shopping.

Poser added that Nike‘s transformation to digital and direct sales, although navigated well during the pandemic, was not enough to compensate for the loss of senior people and the corresponding “historical institutional knowledge of Nike.”