Why Foot Locker's new NBA partnership could be a big win
Foot Locker (FL) shares jumped on Wednesday after it raised its full-year sales guidance after a Thanksgiving boost —but eyes remain on the retailer, as it is not completely out of the water.
Janine Stichter, BTIG Consumer Retail and Lifestyle Brands Analyst and Managing Director, joins Yahoo Finance live to weigh in on possible changes and growth opportunities for Foot Locker, despite concerns over consumer spending and inventory levels.
Stichter notes that shoes brands including Nike (NKE) are being “more judicious” in distribution in order to prevent over-production. At the same time, Stichter expects the retailer's marketing partnership with the NBA will allow it “...to go deeper into basketball,” which will be another potential growth catalyst.
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Video Transcript
- We have one of our faithful viewers who chimed in and I think he made a very good point in tweeting at us during the show, talking about some of the inventory and what this could potentially spell through for some other earnings. And notably Nike here too. Is there any pullthrough from what you've seen on the inventory front and the discounting, the promotions that Foot Locker has implemented that could impact even a company that's typically reporting later on in the season and where overproduction might have taken place in some instances here?
JANINE STICHTER: Yeah. Well, I think we've heard it from Nike already that what they're talking about is where they got over inventory last year, they're being much more tighter in their distribution to the market. So I think we'll see them continue to return to a more full price cadence. We heard a bit from them when they reported their last quarter. And I think we'll continue to hear that, where they will be reducing the amount of inventory they put out into the market and just being a little bit more judicious in their distribution as they think about where they put their product.
- Janine, some of the new partnerships or plans for growth are looking more international. They have a plan to operate in India next year when it comes to the building on the relationship with the NBA. Now Foot Locker is going to be a marketing partner here in the US. How big of a catalyst do you see maybe those two partnerships being here for Foot Locker when we're talking about this turnaround plan and the transition that's taking place under Mary Dillon?
JANINE STICHTER: Yeah, I think the NBA partnership is particularly important. They already have really high brand awareness. Everyone knows Foot Locker. But this kind of serves to elevate the brand awareness further. And I think what it does for them is it allows them to go deeper into basketball. And as they think about the strategy for next year and the years beyond, it really hinges on continuing to become the go to source for the basketball category, which is really their bread and butter. It's their sweet spot. And this kind of further reinforces that relationship.
With the India entry, it's interesting. I think it's not particularly meaningful right now, but I think it potentially reflects a broader strategy where they have opportunity to expand internationally. And the important thing here is that it's a license agreement. So it's not capital intensive. They're putting their capital into refreshing their stores in the US. But there's still an opportunity to leverage the brand awareness they have, leverage a growing footwear market internationally without having to put a lot of capital outlay towards it.
