Nike Faces a Slam-Dunk Quarter on Its Wholesale Retailer Results


Mar. 18 2015, Updated 3:05 p.m. ET

Analyzing quarterly results at Nike’s wholesale channels

Nike (NKE), the world’s number-one sports gear firm, will report its 3Q15[1. The quarter ending February 28, 2015.] earnings on March 19. The wholesale channel is an important sales driver for NKE. The company derived ~79.2% of its revenue from the channel in fiscal 2014.[2. The year ending May 31, 2014.] The wholesale channel includes sales through other sporting goods retailers (XRT), like Foot Locker (FL), DICK’s Sporting Goods (DKS), and The Finish Line (FINL).

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Foot Locker (FL), DICK’s Sporting Goods (DKS), and The Finish Line (FINL) together constitute 2.8% of the portfolio holdings of the SPDR S&P Retail ETF (XRT). Results for these retailers are significant for Nike’s competitor Under Armour (UA) as well. UA derived ~68% of its revenue from wholesale channels in fiscal 2014.

Foot Locker (FL) results outperform

Foot Locker (FL) operates a chain of ~3,423 stores worldwide. It’s one of the largest retailers of athletic footwear and performance wear globally. The company is also the top wholesale channel of athletic footwear for Nike (NKE). In fiscal 2014, the company purchased ~68% of all athletic products from Nike (NKE).

FL had an outstanding 4Q15 and fiscal 2015.[1. The quarter and year ending February 1, 2015.] The company reported a 10.2% jump in same-store sales in 4Q15. Sales for fiscal 2015 rose by 9.9% to $7.2 billion—a new record for the company. The rate of store comps increases also rose, from 4.2% in fiscal 2014 to 8% in fiscal 2015.

Basketball is one of the top-selling footwear categories for Nike (NKE). NKE has a market share exceeding 97% in basketball in the US.[2. The Jordan and Nike brands combined. Sources: Morgan Stanley, Sportscan.] Basketball is also the largest footwear segment for Foot Locker. Nike and Foot Locker have a partnership in a store format for basketball, the House of Hoops. The next article in this series elaborates.


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