Nike’s direct-to-consumer push hurts Foot Locker

Worldwide
Published:  28 February, 2022
Credit: Nike

Nike’s accelerated shift to direct-to-consumer (DTC) sales means a bleak outlook for retailer Foot Locker.

Reporting its 2021 financial results on February 25, Foot Locker said: “Beginning in the fourth quarter 2022, Foot Locker, Inc. does not expect any one vendor to represent more than 55% of total supplier spend, down from 65% in the fourth quarter of 2021.  

“As a result, no single vendor is expected to represent more than approximately 60% of total purchases for fiscal 2022, down from 70% in 2021, and 75% in 2020. This change reflects the accelerated strategic shift to DTC by one of the company's vendors (Nike) and Foot Locker, Inc.'s ongoing brand and category diversification efforts.”

The retailer has estimated the result of this change with a forecasted drop of 4-6% in sales for the current financial year.

Nike’s aggressive DTC strategy has seen the brand close its wholesale accounts with retailers including Zappos, Dillard’s, DSW, Urban Outfitters and Shoe Show, in addition to cutting back the quantity of product available in existing vendors like Foot Locker.

Baird analyst Jonathan Komp said: “Today’s update is likely to fuel longer-held investor concerns about Foot Locker’s extremely concentrated exposure to Nike which has been emphasising its own DTC channels and has announced strategic relationships with others.”

Source: Footwear News