Will Adidas help Foot Locker defeat Nike? – RetailWire
May 24, 2022
Foot Locker is counting on Adidas, the second-largest supplier of athletic shoes, to help offset the loss of business as Nike, the largest, Nike, withdraws some of its business.
The retailer in February announced that Nike is expected to account for approximately 55% of fourth quarter sales and continue at that level through 2023, up from 65% in the fourth quarter of 2021. Which includes reduction in allowances of “high-temperature” products, such as Air Jordans.
The reduction reflects steps taken by Nike to consolidate wholesale accounts into a direct-to-consumer (DTC) push. Foot Locker has guided comps down eight to ten percent this year, with Nike’s biggest impact expected in the fourth quarter.
Foot Locker earlier this month announced a improved Adidas relationship which establishes the retailer as Adidas’ premier basketball partner, bolsters collaboration on “energy and hype” launches, and prioritizes franchises for women’s, kids’ and apparel. The collaboration with Adidas is targeting more than $2 billion in retail sales by 2025, almost triple that of 2021.
In the first trimester, non-Nike comps have increased among teens as Foot Locker has made progress in diversifying its assortments. Beyond Adidas, the retailer saw gains with Puma as well as 50% growth with New Balance, Crocs and Converse.
Foot Locker also sees growth in running performance with expansion plans set for two upstarts, On and Hoka One One, looking to reach younger consumers. Accelerating growth in private label apparel should also help offset Nike’s decline.
Overall quarterly offsets fell 1.9% due to tough comparisons a year ago with stimulus payments.
Analysts seemed particularly concerned about Foot Locker’s ability to compete in the basketball category with fewer Nike products.
On the quarterly analyst callDick Johnson, CEO of Foot Locker, said that 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 strongly believe that Adidas is going to be one of the key players with our existing portfolio of hot Nike silhouettes and the like.”
DISCUSSION QUESTIONS: Do you see Adidas as the keystone in resetting Foot Locker’s merchandise mix amid Nike’s reduced allocations? Does a broader mix of lifestyle products make sense, or should Foot Locker still aim for a strong point of view on basketball?
“An assortment and brand diversification strategy is precisely what Foot Locker needs to help offset some of the losses attributed to Nike’s reduced allocations.”
“There’s no doubt that Nike’s reduced presence hurts, but Foot Locker’s expanded brands make sense.”
“Foot Locker needs to exercise caution before simply shifting its dependence from Nike to Adidas.”