Nike just wiped out more than $900 million of Foot Locker's market value

Brian Sozzi

·Anchor, Editor-at-Large

Fri, February 25, 2022,

Nike (NKE) just stuck a size 12 basketball shoe into the groin of trusted vendor partner Foot Locker (FL) as it seeks to bank even more money from its $150-plus pairs of sneakers.

Shares of Foot Locker crashed nearly 35% on Friday — wiping out about $950 million in market value — as the sneaker retailer warned on lost business from its large customer this year. Foot Locker said no single vendor (in this case Nike) is expected to represent more than 60% of its business this year, down from 70% in 2021 and 75% in 2020.

"This change reflects Nike's accelerated strategic shift to direct-to-consumer and Foot Locker's ongoing brand and category diversification efforts," said Foot Locker CFO Andrew Page on an earnings call.

Added Foot Locker CEO Richard Johnson, "There was a concentration into some very specific styles that Nike certainly drives through their direct-to-consumer [business] and that's where the allocation pressure will be. We still have access to all of those products, we'll just see different quantities flowing our way."

AMSTERDAM NETHERLANDS - JUNE 27: A man points at a sneaker as a woman looks on as they stand in front of sports sneakers, including brands such as Nike, Adidas, and New Balance, displayed inside a window of Foot Locker at Kalverstraat, a shopping street, on June 27, 2020 in Amsterdam, Netherlands. (Photo by Yuriko Nakao/Getty Images)

The shift put a spotlight on a mixed end to the year for the sneaker seller.

Here is how Foot Locker performed compared to Wall Street estimates for the fourth quarter:

• Net Sales: $2.34 billion vs. $2.33 billion

• Same-Store Sales: +0.8% vs. +3.8%

• Diluted EPS: $1.67 vs. $1.48

Foot Locker outlined cautious guidance for the year, in large part reflecting the shift in thinking by the team at Nike.

The company outlined full-year earnings of $4.25 to $4.60 a share, well below analyst forecasts of $6.56 a share. Sales are seen down 8% to 10%. Analysts were looking for a slight sales increase.

"We continue to be a strong strategic partner of Nike's and we are working on building complementary strategies to their direct-to-consumer growth. They are supportive of us in specifically basketball, kids and sneaker culture continues to be elevated. So, again I feel great about the relationship. We have ongoing dialogs with them as we plan our business. And this has been something in process for a while," Johnson added.