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Nike is still ‘the dominant brand’ in footwear, analyst says

Stifel Sports & Lifestyle Brands Analyst Jim Duffy joins Yahoo Finance Live to discuss the back-to-school season, rising inventory, athletic footwear trends, sneakers from Nike and Under Armour, consumer spending, and the outlook for retailers.

Video Transcript

BRAD SMITH: The busy back to school season for stores has arrived, as retailers grapple with rising inventory. And Nike reaping the benefits in the footwear category, scooping up seven of the top 10 most preferenced and referenced popular styles, according to a new back to school survey from Stifel. Joining us now to discuss we've got Stifel Sports and Lifestyle Brands Analyst Jim Duffy.

Jim, always a pleasure to get some of your insights here. Why Nike? Why is everybody gravitating towards it, at least for seven of those top 10 positions? And what are some of the specifics of what is really leading this trend?

JIM DUFFY: Yes. Thanks for having me on. What we're talking about here is the Stifel Sports and Lifestyle Brands Athletic Footwear Survey. This is a survey that my team and I have been doing for more than 10 years. It's become a great data set to track how consumer style preferences change over time and between seasons.

What we're seeing is what's popular is more of the same in recent years. However, in-stocks are in much better supply. Nike continues to be the dominant brand, referenced as most popular and 92% of checks. That's about flat year to year. As you mentioned, seven of the top 10 most popular styles.

Adidas has really fallen from relevance in recent years, lacking newness there. The Ultraboost and NMD styles are the styles referenced for Adidas. Those first emerged on the scenes in 2018. What we're seeing is very popular with kids going back to school this year is retro styles, the Air Force One, Jordan retros. And so that's really been a common trend for each of our last checks both in February and back to school last year.

BRIAN SOZZI: I really like that Nike blazer. I think I can pull it off, right?

BRAD SMITH: Yeah, absolutely.

BRIAN SOZZI: OK, I dig that. That's pretty cool. So Jim, is there an inventory? We've heard a lot in recent weeks from the retail space, a lot of apparel inventory. What is the inventory vibe out there as it pertains to sneakers right now?

JIM DUFFY: Yeah, great question. The apparel situation is definitely a little bit heavier. But there is some excess in footwear as well. Retail stores are better-stocked. So consumers are returning to stores. But we have seen an inflection to sharp promotion. And so some pockets of excess in athletic footwear as well.

Nike being the biggest player in the category, they have too much inventory coming out of the Vietnam factory shutdown situation and given supply chain delays. They've been trying to catch up. And Nike's days forward inventory is about 20% above where it typically is.

BRAD SMITH: OK, so are we largely just focusing in on retail? And where does resale sit? Because we've seen even more of the inventory come online for the resale markets where people are looking for some of the retro shoes, the retro Jordans, or any of those. And so if we start to see a pullback in that side, what does that tell you more broadly about where the consumer sits and the dollars that they're willing to spend, regardless of the brand?

JIM DUFFY: Yeah, it's a good question. This survey is concentrated on the volume portion of the business, which still happens through stores and e-commerce sites, not the resale market. The resale market is really more concentrated to that sneakerhead consumer, so a smaller portion of the overall business.

BRIAN SOZZI: Jim, we're always looking for data nuances here at Yahoo Finance. And two things stood out to me in your report. One, Under Armor is not even on the list. What's going on there? And then secondarily, it looks like popularity has increased in the Hey, Dude brand which is now owned by Crocs. What's happening with that brand?

JIM DUFFY: Yeah, some really good questions. Under Armor has faded from relevance as a back to school brand. If you were talking about cleats or basketball shoes actually used on the court, I think Under Armor still does have relevance with that consumer, but it's not a popular style for wearing every day back to school.

And then the Hey, Dude brand, they first showed in our checks a year ago. It is regional. We saw that popularity with Hibbett and Academy Sports, which tends to be concentrated in Texas and the Southeast. So Hey, Dude has emerged as a brand that's relevant for back to school.

BRAD SMITH: As all of these brands have instituted more of a direct-to-consumer play to really securitize some of their own margins and have that relationship directly with their consumers and their buyers, what does that mean for the retailers? Which retailers are set to still benefit, even in an environment like this, when you've got a rating coming out saying Nike may be leading, but Puma is also on the list, and Hey, Dude is coming about, and Crocs still has got the gibbits that may be attractive. Which retailer is best-positioned?

JIM DUFFY: Well, what we saw this year was consumers definitely going back to stores because in-stock positions in stores improved. So it was a better experience for them. The last couple of years, it was all about brand digital.

The retailer that's getting the best shift in terms of allocation is Dick's Sporting Goods. They've partnered very closely with Nike, including doing some data sharing and app membership sharing. And so Nike's getting better allocation of these products, like the Air Force One, like the Blazer, like the Jordan retros. That's really improved their relevance as a back to school shopping destination.

BRIAN SOZZI: Real helpful research here. Stifel Sports and Lifestyle Brands Analyst Jim Duffy, good to see you. Have a good week.

JIM DUFFY: Good to see you as well. Thanks so much.