Good news from athletic retailer Foot Locker looks like it’s good news for shoe giant Nike as well. Both companies stocks rallied on Monday (Aug. 10) after Foot Locker reported an 18 percent spike in second-quarter comparable store sales, attributing the gains to pent-up demand and U.S. government stimulus payments amid the pandemic.
Morningstar Equity Analyst David Swartz told PYMNTS that Nike has a significant relationship with Foot Locker, so strong numbers from Foot Locker certainly bode well for the shoe maker. So does recent good news from sporting goods retailer Hibbett Sports, which also reported that it expected comparable store sales to rise more than 70 percent for Q2.
Swartz said Nike has doubled down on working with retailers like Foot Locker even as shoemaker considers withdrawing its wares from other chains.
“Foot Locker is one of the retailers on which [Nike] has put more emphasis,” he said.
By contrast, Nike has “openly discussed” dropping certain retailers and wholesale partners it doesn’t consider “tier one” partners because they don’t promote or showcase Nike enough, the analyst said.
In a July 29 research note, Swartz wrote that Nike is “reducing its exposure to undifferentiated retailers while increasing distribution through a small number of retailers like narrow-moat Nordstrom, no-moat Dick’s Sporting Goods and Foot Locker that bring the Nike brand closer to consumers and allow it to control the brand message.”
That’s apparently why Foot Locker’s good news helped push Nike stock up 3.5 percent to a $105.41 close. The stock is up 75.68 percent since a March $60 intraday low.
Foot Locker shares likewise rallied 7.8 percent Monday closing at $29.63 on the news. Alongside its comparable sales results, Foot Locker also reported that it expects non-GAAP Q2 earnings to come in between 66 cents and 70 cents per share when the firm formally reports numbers on Aug. 21. That ties or beats the 66 cents in comparable earnings per share that Foot Locker reported in the same quarter last year.
“As we continued to reopen stores throughout the quarter, we saw a strong customer response to our assortments, which we believe was aided by pent-up demand and the effect of fiscal stimulus,” Foot Locker Chairman and CEO Richard Johnson said in an announcement. “This fueled our in-store sales and also drove continued momentum across our digital channels.”