Foot Locker’s Nike Deal, New CEO in Spotlight Ahead of Investor Day – Sourcing Journal

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All eyes are on ’s newly minted CEO Mary Dillon and the strategic plan she will outline for Foot Locker next week at the company’s investor day and fourth quarter earnings announcement.

Dillon, who got cheers from Wall Street when she joined the retailer from Ulta in September, will unveil “long-term strategic priorities, growth initiatives and financial objectives” at the presentation. Notably, she’ll be flanked by a refreshed executive team, which includes new names in the chief commercial officer and COO roles. This quarter also marks Andrew Page’s last as CFO.

A new strategy and an update on the company’s relationship with Nike will be the main themes of meeting, analysts predict. Last year, Foot Locker said the amount of Nike product in its stores would be significantly less as the Swoosh accelerated its shift towards DTC sales. While this move initially caused the retailer to post a bleak outlook for 2022, Foot Locker still managed to churn out better-than-expected results for the third quarter, the first period in which the diminishment of Nike product was meant to be be felt in stores.

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But Nike allocation was stronger than expected in Q3. And Dillon noted in November that the company expects to end the year with a higher mix of Nike sales than initially anticipated. According to UBS analyst Jay Sole, this increased allocation was likely a result of Nike pushing product into Foot Locker to clear through inventory excess. The shift will likely continue into Q4.

“Any update on this will be critical to understand how this might help bolster sales,” Sole wrote in a Wednesday note. “If Foot Locker is going to establish that it will make Nike its No.1 focus, the market is likely to be receptive to that. We doubt the market will turn bullish if FL’s message is that it has an exceptional portfolio of strong branded partners, of which Nike is one.”

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Some analysts are hopeful that under Dillon’s stewardship, this partnership could be restored to some of its former glory.

“Since Dillon came aboard last August, the tone of the Nike-Foot Locker relationship seems to have become warmer, and it’s possible that they strike a positive tone on the business with Nike,” wrote Wedbush analyst Tom Nikic in a Tuesday note to investors. He also suggested that the timing of the meeting — the day before Nike reports its quarterly earnings — could signal a discussion regarding the “renewed strength in the relationship.”

The hopeful outlook comes as other analysts point out the growing momentum in Nike’s wholesale business as compared to its oft-lauded DTC channels.  In an earnings preview for the Swoosh this week, Williams Trading analyst Sam Poser said growth in the sneaker giant’s direct business “is not sustainable” and a renewed focus on its wholesale arm might be a necessary next step in 2023. (Nike reports earnings for the third quarter on March 21.)

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“We are looking for specific signs that Foot Locker’s relationship/allocations with Nike can improve (not just while Nike is clearing inventory), given Nike’s moves to prioritize direct and other retailers which have embraced digital/loyalty integration,” wrote Baird analyst Jonathan Komp in a Monday note. He highlighted other preferred Nike vendors, such as Dick’s Sporting Goods and Hibbett Sports, who have managed to maintain a strong flow of product from the Swoosh.

Foot Locker raised its outlook for Q4 and the full-year in November and expects total sales in Q4 to be down between 8% and 10%, partly as a result of foreign currency pressures. Q4 EPS is expected in the range of $0.45 to $0.53. For the full year of 2022, Foot Locker anticipates sales to be down between 4% and 5%, upgraded from a previous guidance of down 6% to 7%. EPS is expected to land in the range of $4.42 and $4.50.



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