Adidas is scoring big with key customer Foot Locker after competitor Nike decided to sell fewer goods to Foot Locker.
Adidas and Foot Locker announced a new, long term partnership Thursday that will generate €100 million in incremental revenue for Adidas in 2022 alone.
The new deal will nearly triple retail sales of Adidas at Foot Locker by 2025, the two companies said in a joint statement. By 2025, Adidas is expected to generate $2 billion in retail sales at Foot Locker banners in North America, EMEA and Asia Pacific.
Other pieces of the deal:
- Adidas will become the lead basketball partner for Foot Locker led by Fear of God Founder and Designer Jerry Lorenzo spanning the lifestyle and performance categories.
- The partnership will also focus on key Adidas Originals franchises such as NMD, Superstar and Stan Smith.
- Foot Locker will also expand Adidas franchises across women’s, kids’ and apparel.
- Foot Locker said it will rely on Adidas to help accelerate its push into apparel.
- Foot Locker will have a prominent role in the launch of Adidas’s new sportswear product division aimed at lifestyle consumers.
- Adidas will create a dedicated team of employees to work on the Foot Locker partnership to create an elevated consumer experience.
- The two brands will focus on product development, exclusive Foot Locker positioning, increased product allocations, shared marketing spend and an elevated premium presence across all of Foot Locker’s banners.
- Lastly, the two companies will roll out the Adidas partner program at Foot Locker to provide customers with a seamless journey on and offline.
What’s interesting about the last point is that Nike previously has said it wants to link loyalty programs with key retailers, something Nike is currently doing with Dick’s Sporting Goods.
Nike and Foot Locker – The Backstory
Foot Locker is still a Nike customer, however Foot Locker executives said in February that Nike is cutting allocations to Foot Locker this year. That reduction in Nike allocations was one of the components that led Foot Locker to predict an 8% to 10% comp decline in 2022.
Foot Locker has been dependent on Nike for a long time. In 2020, 75% of the company’s merchandise purchases across all banners came from Nike. In 2021, that number was 70%.
During an earnings call in February, Foot Locker CEO Richard Johnson said they learned of the change during planning meetings with Nike in January where they work together to map out the year. That’s when they found out they would not be getting the same number of “high heat” styles in Q4 2022 that they would usually receive. Foot Locker will still have access to those products, but different quantities, Johnson said.
As a result, the concentration in Nike product will decline “meaningfully” in Q4 of 2022 to 55%, and that lower level will continue into 2023. That compares to Nike accounting for 65% of the product mix in Q4 2021.
Foot Locker executives tried to put a positive spin on the issue, saying they have wanted to diversity their product mix for a while now and that consumers want choice.
They also said their business with other brands is growing – non-Nike comps grew 30% in Q4 2021. He specifically called out strength in Adidas, New Balance, Puma, Timberland, Crocs and Ugg.
However, in response to a question, Johnson also acknowledged that the other brands don’t turn as fast as Nike.
“There’s nothing like a retro Jordan launch that comes in on a Friday and sells out on a Saturday,” he said. “It’s a tough dynamic to overcome.”
For the full year in 2022, Nike should account for 60% of Foot Locker’s product mix, the company said on the earnings call in February.
