How Nike Benefits from Its Wholesale Partnerships

Nike (NKE) has a number of stores-within-stores, or exclusive standalone stores, partnering with retailers. These include Field House stores with DICK’s Sporting Goods (DKS), the Track Club with Finish Line (FINL) Fly Zone for young athletes, and the House of Hoops with Foot Locker (FL)[1. Refer to the previous part of this series]. These stores exclusively retail Nike gear.

Foot Locker operated about 127 House of Hoops stores in fiscal 2014. This is a shop-in-shop basketball gear retailing concept. House of Hoops is a partnership with Nike. The concept retails basketball footwear, apparel, and other gear exclusively from Nike. A key sales driver for basketball remains NKE’s exclusive deals with FL for retailing limited-edition marquee footwear models.

DICK’s Sporting Goods (DKS) is an important wholesale customer for Nike (NKE) and its peers Under Armour (UA) and VF Corporation (VFC). Nike (NKE) and Under Armour (UA) are the two largest suppliers for DKS. NKE and UA represented 18% and 11% of DKS’s merchandise purchases, respectively, in the fiscal year ending January 31, 2014.

NKE, UA, and VFC together constitute ~4.6% of the portfolio holdings of the SPDR Consumer Discretionary Select Sector ETF (XLY).

DKS had 285 brand shops partnering with Nike (NKE) and 238 with Under Armour (UA) as of January 31, 2014. DKS also had 90 North Face brand stores. The North Face is a VFC-owned outdoors and sportswear brand.

DICK’s Sporting Goods (DKS) beat earlier guidance for both sales and earnings for the fiscal year ending January 31, 2015. Same-store sales were up by 3.8% in 4Q15. In November, DKS had indicated an increase of 1–3%.

Excluding hunting and golf, DKS store comps rose 6%. While Golf isn’t a major category for Nike, its golf segment also reported declines in the last two quarters.