Foot Locker’s stock tumbled 35% Friday after the shoe store predicted sales and profit would fall sharply this year. The culprit: Nike.
The retailer, which didn’t explicitly mention Nike in its earnings report, said Friday that no single supplier is expected to account for more than about 60% of its total purchases for fiscal 2022. Nike accounted for 75% of its sales in 2020 according to Foot Locker (FL)’s most recent annual report.
Foot Locker, whose suppliers also include Adidas and Puma, projected that this year’s sales at stores open for at least a year would decline by 8% to 10%. Shares are down about 40% for the year.
Nike (NKE), Foot Locker’s biggest supplier, is ramping up its focus on its direct-to-consumer business. Last year, Nike (NKE) said it was shifting to selling more of its products through its own shops, websites, mobile apps and select retailers, cutting ties with many stores.
The apparel company has significantly slashed the number of traditional retailers it sells to in recent years to improve profits and tighten control over how its products are showcased. In December, Nike announced it will stop selling to DSW.
Nike’s go-it-alone strategy has hurt some independent sneaker and athletic shops, which rely heavily on selling Nike — the largest shoemaker in the world — to attract customers.
Selling goods on its own website and physical stores nets Nike more than double the profit it would receive from selling through wholesale partners. The company also gains much tighter control over the shopper experience and pricing. That’s a big advantage for a premium brand like Nike that wants to present merchandise to customers in enticing and consistent ways, and prevent products from being discounted too heavily.
Rivals Under Armour and Adidas are following Nike’s lead, pulling back on retail partners and building the direct-to-consumer sales channel.
– CNN Business’ Nathaniel Meyersohn and Reuters contributed to this report.