Can Running Brands Like Hoka and On Help Foot Locker Get Back on Track as It Recalibrates Nike Relationship?

Despite its successful diversification beyond Nike and into brands like Hoka and On, Foot Locker hasn’t yet fully experienced the powerful byproducts of a booming running market, which has lifted brands’ DTC sales and has galvanized the running specialty retail sector as a holy grail for wholesale.

Foot Locker’s financial results were weaker than expected in 2023, which prompted the company to delay its long-term sales targets by two years. The company has also begun to close about 125 underperforming locations of its Champs banner.

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The retailer on Wednesday said its percentage of non-Nike brand sales in the fourth quarter grew to 40 percent, up from 37 percent in Q4 last year. That’s in line with a goal to have more than 40 percent of its brand mix be outside Nike by 2026.

As it weans off of the Swoosh, Foot Locker has turned its attention to smaller, high-growth brands that live in the lifestyle and running space. In Q4, executives called out running brands that have continued to bolster the non-Nike business.

“We also continue to see consumers gravitate towards new ideas in the running category, led by brands such as On, Hoka and Asics,” said chief commercial officer Frank Bracken in a call with analysts. “We will continue to scale these brands through door expansion and allocation increases as well as connecting them to our consumers through integrated marketing campaigns.”

Still, Foot Locker’s somewhat neutral position in the running market could be attributed to an increasingly competitive sector dominated by highly specialized retailers.

“Foot Locker is up against retailers like Dick’s Sporting Goods that are experts in the sport category,” explained Jane Hali & Associates analyst Jessica Ramirez in an interview with Footwear News. In other words, a consumer taking up a sport like running is more likely to shop for shoes at a sporting goods store than at Foot Locker, a chain that is leaning more deeply into its connection with “sneaker culture.”

Foot Locker is also still deeply connected — for better or worse — to Nike, its biggest vendor. So while it may be progressing in diversifying its product assortment, its broader sales results are still being impacted by how the Swoosh decides to allocate its product.

“The improved Nike allocations [at Foot Locker] are on product that Nike needs to sell, such as Nike Basketball and Nike Running,” explained Williams Trading analyst Sam Poser in a Wednesday note. “Not on product that consumers want such as Dunks, Air Force Ones, and Jordan Retro.”

In other words, Foot Locker is still being impacted by a lack of high heat product from Nike. And that’s something even Hoka and On can’t fix at the moment.

“Strength from New Balance, Puma, Adidas, Under Armour, Hoka, Ugg and On cannot, in our view, offset the strength of the marquee Nike/Jordan product that FL has lost,” Poser said.

According to Matt Powell, an advisor at Spurwink River and senior advisor at BCE Consulting, avoiding dependence on Nike — or on any one brand — is a smart decision. But it’s important to remember that Nike is still a top player in the market, even if the brand is currently underperforming compared to others.

“Nike is not going away,” Powell said. “Are they the strong brand that they were five years ago? No, they’re not. But are they dominant? Absolutely.”

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