Foot Locker blamed delayed income tax returns for sluggish sales early in Q1 that weren’t made up later in the quarter and reported results that missed forecasts.Estimates: EPS virtually unchanged at $1.38, with revenue edging up 1.4% to $2.015 billion.Results: EPS of $1.36 on revenue of $2.
Investor Business Daily, The WSJ and a host of other news outlets are discussing FTL’s Q1 woes and blaming it on late income tax returns. I actually have a different position on why there was a slow down in footwear and it is based on my work on this site when I write Should You Buy To Flip?
My series SYBTF? has taken a serious hit as of late. There hasn’t really been a general release shoe that has “popped” and this is where the problem lies. I’m not saying the small group of sneakerheads who flip shoes or collect shoes has created this slow down in sales, but the attempt by brands to diminish the ability for the resale market to flourish is causing the slow down. I wrote this article last year. While I still think it is true, it is only one element of why the shoe market is growing, but slowing.
Growing but Slowing
The primary reason Foot Locker, who for a while seemed immune to the slow down facing Hibbett Sports and Finish Line, is finally starting to see slower sales, is because the smaller accounts are discounting heavily to compete. Chains like DTLR and City Gear are inundated with inventory. This increase in inventory has to be liquidated. How are the smaller chains getting rid of product? Discounts.
When you take into consideration Nike’s DTC push includes their own physical stores, Clearance and Factory Stores, which sell their merchandise at a considerable markdown it’s only natural that locales with Nike stores in the area will have slower sales. Add into the mix stores like City Gear and DTLR who are marking down shoes 50-75% there is a very interesting thing that begins to happen in footwear. People are no longer willing to buy a shoe upon its initial release… especially when it’s a commercial release. Everyone is waiting on a sale before they buy. The only people not really waiting are sneakerheads looking for collabs or hyped Jordan Brand releases.
The second issue with the slowdown of sales is the increase of launch shoes by brands. I’ve been writing for a while that the slowdown in the sale of adidas shoes is impending. Today I saw this article: Retro White Craze is Over
This article is discussing Foot Locker’s CEO explaining that the slowdown in the sale of adidas Stan Smith’s and Superstars is beginning. In my last article I said that this was going to happen and then I added that adidas is releasing far too many of its most popular shoes. Just this weekend alone adidas will drop another 20 colors of its popular NMD shoe.
This is not a smart thing to do as it is going to push the NMD into Roshe territory at a higher price. What does this mean? People will begin to wait to purchase the NMD. Once the Superstar slows, and the NMD slows, adidas slows.
With the influx of releases from Jordan Brand and adidas, the two biggest players, the overall buying of shoes is increasing, but the money isn’t as big because all of these shoes are being sold at a discount.
The market is growing, but it is slowing and Foot Locker is not immune especially when the shoe wall in Foot Locker, Footaction and Champs is covered in red and blue sale tags and Retro Jordans are being marked down. Maybe disrupting the resale market isn’t such a smart idea and continuing to push sales may be the undoing of sneaker retail.