Is Nike Ditching Foot Locker As It Only Tests Jordan Stores?

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Nike (NKE) – Get the Class B report from NIKE, Inc. gives and Nike takes back.

Foot locker (Florida) – Get the report from Foot Locker, Inc. owes much of its success to the rise of sneaker culture over the past decade. This culture has been stimulated by an increased interest in Nike.

Specifically, the culture was driven by interest in retro Jordans.

Michael Jordan’s iconic shoe brand has been good for Nike and Foot Locker.

Six years ago, former Nike CEO Mark Parker set a goal for the Jordan brand to reach $4.5 billion in annual revenue. A year ago, the company saw its unit revenue jump 31% to $4.7 billion.

This increase in revenue comes at a time when the rest of the performance sneaker industry is experiencing steep declines.

The performance basketball shoe market peaked in 2015 and has seen double-digit sales declines in most years in the United States since then, according to market research firm NPD Group.

But the “retro” or lifestyle footwear industry has bucked this trend, led by Jordan, which by some estimates controls 96% of the market.

Like many other companies during the pandemic, Nike has placed more emphasis on its direct-to-consumer channels in order to combat pandemic lockdowns that have completely frozen or significantly slowed down its other retail channels.

“Nike Digital continues to be our fastest growing component of the market. This quarter, downloads of the NIKE mobile app accelerated, and member purchase frequency and average order values ​​increased. further improved as we continue to test member engagement,” said Matt Friend, Nike’s chief financial officer. during the company’s most recent earnings conference call.

Third-quarter Nike Digital revenue grew 3 points year-over-year and now represents 26% of the company’s brand revenue.

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The company attributed Digital’s growth to strong demand through its Nike app.

Despite these trends and plans to directly increase consumer growth, Nike says it hasn’t forgotten about Foot Locker as a partner.

“To be clear, Foot Locker has always been and always will be an important and important partner of NIKE. And it will continue to be so,” CEO John Donahoe said this week.

“And they will have a very distinct role in our market strategy as a wholesaler, with a particular focus on basketball culture, on sneaker culture and on kids, which is a really big and important opportunity for we.”

Despite this assurance, Nike plans to test stores in North America that will only sell Jordan-branded sneakers.

One of these Jordan-only stores already exists in the Fulton Mall in downtown Brooklyn, New York.

This store is right next to Foot Locker and three or four other shoe retailers, and despite what Nike assured investors in its earnings call, the store is definitely eating away at the competition.

You can see the same new releases at Champs and Foot Lockers in the Fulton Mall, but the Jordan store has exclusive drops that, sometimes, you can’t even get online.

Nike said it plans to extensively test a Jordan-only concept in North America starting in fiscal year 2023. Nike says the concept has already seen “tremendous success” in China, the Philippines and Korea .

He also had some success in Brooklyn.

Diversification is key for Foot Locker going forward.

Foot Locker said on its earnings call that going forward, no vendor in its stores will account for more than 55% of total vendor spend from Q4 2022. That’s down from 65% from last year.

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