Quantcast
Foot Locker shares stumble as 2022 forecast hit by Nike’s shift – Metro US

Foot Locker shares stumble as 2022 forecast hit by Nike’s shift

FILE PHOTO – A woman shops inside a Foot Locker
FILE PHOTO – A woman shops inside a Foot Locker store in New York

(Reuters) -Shares of Foot Locker Inc plunged as much as 36% on Friday following a bleak full-year forecast that underlined the footwear retailer’s struggles as biggest supplier Nike Inc ramps up selling directly to customers.

Nike will account for about 60% of total purchases for 2022, down from 70% in the past year and 75% in 2020, the company said on a post-earnings call.

This change reflects Nike’s shift in strategy to direct-to-consumer (DTC) business and Foot Locker’s ongoing efforts to diversify its offerings, the company said.

“We always thought that Foot Locker’s position as a ‘strategic partner’ would insulate them somewhat from Nike’s DTC push… but this is a dramatic change,” said Wedbush analyst Tom Nikic.

“We don’t really see a silver lining here.”

Nike, battling supply chain issues and production facility closures over the last year, has been increasingly moving toward directly selling to consumers instead of wholesalers.

In its latest quarter, DTC sales rose to $4.7 billion, accounting for about 40% of Nike’s total sales.

“We still have access to all of those products. We’ll just see different quantities flowing our way,” Foot Locker’s Chief Executive Richard Johnson said on the call.

Foot Locker has been leaning on other brands including Adidas, Puma and Timberland to mitigate the risks from Nike’s new strategy, while also expanding its apparel offerings and launching its private label brands to diversify.

The company said it expects comparable sales to fall 8% to 10% in fiscal 2022, while estimating adjusted profit between $4.25 and $4.60 per share. Analysts on average were expecting $6.49 per share, according to Refinitiv estimates.

Foot Locker’s shares were down 35% at $26.85 in afternoon trading. If the losses hold, the stock was set for its worst day ever.

(Reporting by Deborah Sophia in Bengaluru; Editing by Shailesh Kuber and Sriraj Kalluvila)