Nike’s earnings earlier this month signaled a longer turnaround timeline for the activewear giant, but one of the retailer’s biggest problem areas could deal damage to its wholesale partners’ prospects as well.
The Jordan brand is a crucial piece of the puzzle for Foot Locker’s turnaround. But the most recent quarter made clear that Jordan will require more time to get healthy.
While Jordan brought in $8.7 billion in fiscal 2024 for Nike, the iconic brand is down about 20% from that benchmark. In Nike’s latest quarter, Jordan revenue fell in the mid-teens, and CEO Elliott Hill said the company would be pulling back on retro Jordan launches to correct for an oversupply.
“We’ve discussed it with our wholesale partners,” Hill said earlier this month. “Together, we will restore balance to the marketplace to create a foundation for more profitable and sustainable growth.”
In the meantime, though, that means more pain for Foot Locker, which saw comps fall 3.6% in Q2. Parent company Dick’s Sporting Goods, which bought Foot Locker for $2.4 billion last year, already drastically lowered Foot Locker’s full-year outlook in August. The retailer now expects Foot Locker comps to be flat or fall as much as 2%, compared to previous expectations of up to 3% growth.
A pullback on Jordan retro products complicates that picture further, analysts say, pinning Foot Locker’s exposure to Jordan at roughly 25% of revenues.
“If Jordan is down 30% next year, [Dick’s] has a hole to fill at Foot Locker, which we don't think can be replaced by other brands due to the [average selling price] differential,” BNP Paribas Equity Research senior analyst Laurent Vasilescu wrote Monday.
Specifically, Vasilescu estimates Foot Locker will take a roughly $550 million sales hit starting in the spring of 2027 unless it finds replacements for the Jordan volume.
Foot Locker is the largest wholesale partner for Jordan, with the basketball brand doing an approximate $1.85 billion for the retailer, Vasilescu estimates. While Foot Locker could flex up with partners like Vans and New Balance, the lower prices of those products will require Foot Locker to sell a higher volume.
BMO Capital Markets’ analyst Kelly Crago similarly flagged concerns about Foot Locker’s upcoming financials, including a cautious view of Foot Locker’s “ability to comp positively in FY27.” Crago estimates the Jordan pullback will have a 250- to 550-basis-point impact on Foot Locker’s comps that year.
“Given expected [Foot Locker] weakness, we believe [Dick’s] may need to rethink FL's cost structure,” Crago wrote Monday.
That could include shuttering Foot Locker’s European business, which accounts for about 20% of Foot Locker’s sales but is a roughly $115 million drag on profitability. Or, Crago suggested, the company could sell WSS or close down Champs.
“Whatever [Dick’s] chooses to do, we see a smaller [Foot Locker] as a further incremental risk to [Nike],” Crago said.
