Foot Locker stock drops because Nike wants to go it alone

The retailer, which did not explicitly mention Nike in its earnings report, said Friday that no supplier is expected to account for more than about 60% of its total purchases in fiscal 2022. Nike accounted for 75% of its sales in 2020 according to Foot Locker (Florida) most recent annual report.

Foot Locker, whose suppliers also include Adidas and Puma, forecast that sales this year at stores open for at least a year would decline by 8% to 10%. Shares are down about 40% for the year.

Nike (NKE), Foot Locker’s largest supplier, is focusing more on its direct-to-consumer business. Last year, Nike said it was shifting to selling more of its products through its own stores, websites, mobile apps and select retailers, cutting ties with many stores.

The clothing company has drastically reduced the number of traditional retailers it sells to in recent years to improve profits and increase control over how its products are presented. In December, Nike announced that it would stop selling to DSW.

Nike’s go-it-alone strategy has hurt some independent sneaker and sports stores, which rely heavily on selling Nike – the world’s largest shoemaker – to attract customers.

Selling merchandise on its own website and in physical stores earns Nike more than double the profit it would receive from selling through wholesale partners. The company is also gaining much tighter control over customer experience and pricing. This is a big advantage for a high-end brand like Nike that wants to present its products to customers in an attractive and consistent way, and prevent products from being overpriced.

Rivals Under Armor and Adidas are following Nike’s lead, pulling out of retail partners and building the direct-to-consumer channel.

— Nathaniel Meyersohn of CNN Business and Reuters contributed to this report.

James T. Quintero