Foot Locker shares are tumbling after the retailer forecast revenue to drop in 2022.
This is not gloating. I have a lot of friends at Foot Locker and it pains me to read a post where the rest of the world is catching up to what I already knew, but Foot Locker has doors. They won’t be done selling Nike, but because their entire business was built on the Nike wall, they have moved away from a more knowledgeable team and they have relied heavily on part timers for years. Foot Locker was once a location where every employee had a depth of knowledge on the product, that you could place anything on the walls and it could be sold. As Nike and Foot Locker began to grow in sync, Foot Locker relied on the dope to sell itself. The walls became dominated by the Swoosh and in marketing Foot Locker fell into a failed stream of strategies eventually failing to fix their e-commerce issues and failing to differentiate beyond a House of Hoops that was “throw Nike Basketball and Jordan Brand on the wall and see what happens.”
But… Foot Locker has doors and with adjustments, this is the shift by Nike that is the Achilles Heel in their Consumer Direct Acceleration. I said I wouldn’t gloat, but the sheer fact that CNBC reports that, “Analysts had been looking for year-over-year revenue growth of 2%, according to Refinitiv.” Tells me that these analysts have no ears to the streets at retail or in resale. It also frustrates me because as a small analyst, I don’t get a chance to pitch or share my thoughts which I think has hurt a lot of retailers, but I digress.
I wrote this post in 2017. It covers a span from 2006 to 2017:
Shiekh Shoes Seeks Bankruptcy Protection | The Nike Wall In The CDO Era – ARCH-USA
Let’s look at Foot Locker. From 2007 to 2016 they increased their ecommerce/DTC sales from 6.6 million to 944 million in 2016. On the surface that looks great, but Nike hadn’t begun a full investment into growing DTC/ecommerce until around 2014. They really only started to push ecommerce in 2012.
In 2014 Foot Locker’s ecommerce sales were 842.3 million. Nike has since ramped up investment in DTC. The growth of Foot Locker’s DTC from 07-14 has continued, but appears to have plateaued. From 2014 to 2016 Foot Locker basically grew ecommerce 6% each year, which isn’t bad. In comparison Nike in 2014 saw a 42% increase in web sales at 767 million.
Those numbers pale by comparison with today’s Nike Direct growth. I know there are a lot of links here, but I need you to realize that I’ve been discussing this for a while, but I’ve also been delivering solutions:
In-Store Visit Series: The Nike Wall is Leaving Other Brands Fighting for Space – Part 1 – ARCH-USA
It’s not a surprise that Foot Locker is stating that they will reduce reliance on Nike. They don’t have a choice. Nike and Foot Locker were once joined at the hip. Nike innovated; Foot Locker relied upon, but Foot Locker has doors and that real estate can’t be shut down quickly since there are leases. The chain is going to put the squeeze on every aspect of its business, but if they are smart, they could be the reason Nike finally finds itself in an uncomfortable position as they begin to open more of their own brick and mortar doors. Now that the rest of the world has caught up, the real discussions can take place. This is going to be very interesting.
P.S: The irony is in 2016 Nike named Foot Locker as a primary partner in a conference call. Today Foot Locker is announcing a reduction in Nike allotment. What happened? Foot Locker relied upon and failed to acquire or innovate. Foot Locker had enough in their coffers to acquire a number of chains. They invested in businesses (GOAT, Rockets of Awesome, Super Heroic, Pensole, Carbon 38) and committed to strategies (Greenhouse and flawed App development), which accomplished very little. Foot Locker allowed JD Sports, Snipes, Hibbett Sports to acquire every major urban retail account. Eventually Foot Locker acquired WSS and Atmos, but neither will improve the revenue of Foot Locker. Now Foot Locker will have to act, adjust and innovate. If the same people are in place within the company how does that happen? Expect a serious shake up.
Note: sharing this isn’t me ignoring what’s happening in the Ukraine. I truly hope the people and troops come to a resolution fast. As a Disabled Vet and veteran of Desert Storm and Shield, and Operation Restore Hope, I understand that war is not the answer, but responding accordingly requires an active military to be involved.
