What Nike’s Recent Results Reveal About Foot Locker, Dick’s Sporting Goods and More

Shoshy Ciment
·3 min read

Nike was upbeat about some of its top wholesale partners in its most recent earnings report, a sentiment that bodes well for shoe retailers struggling to regain momentum amid a rough wholesale environment.

Nike’s wholesale revenue grew 1 percent in Q1, but declined 8 percent in North America, as the brand looked to rein in some products. Even so, Nike EVP and CFO Matthew Friend said the company saw “high single-digit to low double-digit retail sales growth and strong inventory management” with several of its wholesale partners, including Dick’s Sporting Goods and speciality stores in North America. Nike also highlighted retailers such as JD Sports, Zalando and Sports Direct in EMEA and Topsports and Pou Sheng in Greater China.

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In the wake of the announcement on Thursday, several retail stocks — including Dick’s Sporting Goods, Foot Locker and Academy Sports and Outdoors — rallied on Friday morning, Seeking Alpha reported.

“Overall, Nike’s results speak to an athletic footwear industry that is getting progressively healthier,” wrote BTIG analyst Janine Stichter in a note to investors last week.

While DTC has been a top priority for Nike over the last few years, inventory excesses in prior quarters have led to an outsized growth in the wholesale channel as it offloads merchandise. Now, the company is narrowing its wholesale focus to specific retailers that connect members digitally and offer an elevated retail experience, Nike CEO John Donahoe said in a call with investors last week. For example, Nike will launch a connected membership program with Hibbett in October and the company touted a similar program it currently runs with Dick’s.

“We think there’s a lot of growth opportunity with those strategic wholesale partners,” Donahoe said.

However, despite recent growth in these channels, Friend said that no single retailer makes up more than “a mid-single digit of Nike’s total business.”

Notably, Nike also spotlighted its renewed partnership with Foot Locker, but said the brand expects “near-term sales declines as it invests in consumer-right concepts for the future.” According to Stichter, reduced Nike allocations to Foot Locker will put the company under pressure, but the retailer will likely benefit from Nike’s strong basketball shoe pipeline.

“Basketball is where Foot Locker excels, and we expect Foot Locker’s Nike strategy go-forward to look to leverage its core competencies, with a deeper focus on basketball, kids, and ‘sneaker culture,'” Stichter wrote.

Nike also highlighted its renewed focus on the running category, which appeared to bode well for competing footwear stocks like Deckers (which owns the fast growing Hoka brand) and On, the popular Swiss Running brand; both of those stocks also rallied after Nike’s earnings report last week.

“We need to drive more meaningful consumer connections among everyday runners and scale these innovations more effectively across the marketplace,” Donahoe said in a call with investors.

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