honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser

Posted on: Saturday, September 20, 2003

Nike, Foot Locker patch feud

By Andria Cheng
Bloomberg News Service

A consumer browses a window display at the Niketown store in Beverly Hills, Calif. Some popular Nike shoes, have not been available at Foot Locker stores because of a marketing dispute. But Nike and Foot Locker are starting to reconcile their differences.

Associated Press

BEAVERTON, Ore. — Nike Inc. Chief Executive Officer Phil Knight's hardball stance with Foot Locker Inc., the shoemaker's largest customer, is starting to pay off.

U.S. orders for sneakers with the Nike "swoosh" increased last quarter for the first time in more than a year and profits topped estimates, the company said Thursday. Shares of Nike, the world's biggest manufacturer of athletic shoes, rose as much as 8.7 percent yesterday, the largest gain in three years.

Orders picked up after Foot Locker CEO Matthew Serra flew to Nike's headquarters in Beaverton, Ore., in July to seek an end to a year-long feud. Nike had stopped shipping some of its most popular shoes to Foot Locker this year after the retailer cut orders for higher-priced footwear that wasn't meeting sales targets. Teenagers looking for retro Air Jordan or sought-after $100 Shox NZ sneakers were forced to head to other stores.

"Foot Locker needs them more than they need Foot Locker," said Lynn Yturri, who manages the $500 million One Group Equity Fund at Banc One Investment Advisors.

Shares of Nike jumped $4.37 to $61.62 in New York Stock Exchange composite trading. New York-based Foot Locker fell 1 cent to $17.

Orders from Foot Locker, which have declined since autumn of 2002, are expected to rise next quarter, Nike's Chief Financial Officer Don Blair said.

Foot Locker's Serra said last month that the retailer will receive more of Nike's popular Air Force I shoes this holiday season. The two companies also will launch an exclusive line of $80 to $100 retro-styled shoes called 20 Pack.

Serra said then the retailer is "on track" to receiving some of Nike's marquee shoes. Nike, however, said Thursday its distribution strategy hasn't changed and the company hasn't decided when it will give Foot Locker certain items, including the Jordan retro and Shox line. The increased orders from Foot Locker have been for products in the mid-priced range, Nike said.

"We continue to have a dialogue with them," Nike Co- President Charles Denson said on a conference call with analysts and investors yesterday. "The dialogue is much healthier today than it was a year ago."

Co-President Mark Parker said nine out of the top-10 selling shoes in the industry came from Nike in July. Shoes such as $100 Air Zoom Spiridon and $120 Shox Ride running shoes, both of which it introduced in July, have sold well along with the Shox NZ line released in January, he said.

Foot Locker's sales dropped last quarter after declines in the U.S. while rival retailer Finish Line Inc., which has received more of Nike's marquee shoes, posted a 21 percent gain.

Patching the relationship with Foot Locker, the largest U.S. specialty athletic retailer, is just as important for Nike, investors said. Foot Locker has about 3,600 stores, compared with about 510 Finish Line outlets and 437 Footaction locations.

"It's a symbiotic relationship," said John Miller, who helps manage about $9.2 billion in assets at AIC Ltd., including Nike shares. "Nike realizes they (also) need Foot Locker."