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Marketplace Morning Report

Foot Locker profits jump, thanks to basketball and Nike

Kate Davidson Aug 22, 2014
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Today, Foot Locker reported its fiscal second quarter profits jumped 39 percent. And ‘jumped’ is the operative word, because those figures have a lot to do with basketball shoes and Nike.

Foot Locker’s net income for the quarter was $92 million. Equity analyst Sam Poser with Sterne, Agee & Leach says the company is doing a lot of things right.

Plus, he says, “athletic shoes are on fire. Basketball shoes specifically.”

Nike, he says, controls 95 percent of the basketball shoe business. The buzz largely surrounds its marquee names: Air Jordan. Kobe. LeBron. Kevin Durant.

The buzz persists, says Morningstar equity analyst Paul Swinand, because athletic companies and especially Nike, “do a fantastic job of limiting who gets what colors, what sizes and how many pairs.”

He says Foot Locker is a valuable partner to Nike, so it gets the most popular styles … in moderation.

“That ensures that supply is not quite meeting demand,” he says. “And it means that if the shoes are popular, they’re gonna be a little bit rare.”

Swinand says the two companies need each other … but Foot Locker might need Nike a little bit more.

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