(Bloomberg) -- Foot Locker Inc. is planning to expand its Home Court basketball sections developed with Nike Inc. in stores worldwide, part of an effort for the longtime partners to mend their frayed relationship.
The multibrand areas, with digital walls to test sneakers’ performance in vertical jumps and 3D scanning technology to help with fit, will be rolled out to 100 shops globally by 2026, Foot Locker executives said. The first debuted in August in the retailer’s reimagined flagship in New York.
“Basketball culture is a really key part of our overall strategic history,” Mary Dillon, Foot Locker’s chief executive officer, said in an interview. “That’s key to all of our brands — especially Nike and Jordan.”
The scale of the collaboration signals that the partnership is being repaired after Nike in 2021 deprioritized its retail partners in favor of its own stores and website. This contributed to a lengthy sales slump for Foot Locker.
It’s a welcome sight for investors who’ve grown concerned about the relationship as Dillon works to turn around the sneaker chain by renovating stores, opening new shop formats and pushing a loyalty program. Foot Locker’s shares are down about 20% this year. The company reports quarterly earnings on Wednesday.
“We believe brighter days are ahead for Foot Locker, largely due to a change in direction from their largest supplier, Nike,” Tom Nikic, an analyst at Needham & Co., wrote in a note to clients. “Nike plans to start increasing allocations of their best products to Foot Locker.”
Nike’s previous CEO John Donahoe drastically reduced the quantity of the company’s products sold at Foot Locker as he terminated or curtailed tie-ups with hundreds of retailers. That left Foot Locker racing to fill shelf space with other brands. Nike products once accounted for about 75% of Foot Locker’s total purchases, but that number dropped below 60% in 2022.
“Clearly, there was a shift in priorities and that affected us,” said Dillon, who was hired in 2022.
Earlier this year, Nike acknowledged it made a mistake and began reinvesting in those relationships. In April, Donahoe admitted in an interview with CNBC that “we had over-rotated away from wholesale a little more than we intended.”
After Donahoe was ousted from the top job at Nike in September, Foot Locker’s top executives Dillon and Frank Bracken, the chief commercial officer, told their employees that they have “great trust in Nike’s future and the strength of our partnership,” according to an internal memo seen by Bloomberg News. They congratulated the new Nike CEO Elliott Hill and wished Donahoe “the best of luck in his retirement.”
Throughout Foot Locker’s 50 years, Nike sneakers have been a critical part of the retailer’s sales. The two companies have had rifts in the past, including a 2003 feud over sneaker prices, but have always managed to eventually reconcile. In 2007, they teamed up on House of Hoops, a basketball chain filled exclusively with Nike products, which has become a longstanding tie-up.
Though Nike’s marketing and visual merchandising teams worked with Foot Locker for about a year on the new Home Court sales areas, Nike has agreed to let them feature competitors, including Adidas AG, Puma SE, New Balance Athletics Inc. and Under Armour Inc., right next to the Swoosh and Jumpman.
And as its crucial holiday shopping season begins, Foot Locker is turning to basketball to hype its shoes. Its ads include NBA stars Anthony Edwards, an Adidas athlete, and LaMelo Ball, who’s signed to Puma.
Nike is still working to rebuild relationships with its wholesalers. It hired former executive Tom Peddie out of retirement to lead the process earlier this year, then elevated him to vice president and general manager of its North America division. Executives have hosted summits with retailers to give them a look at upcoming products.
Foot Locker’s Dillon said her company is now looking to “continue to build” on the long-term partnership with Nike.
She said Foot Locker is working with Nike to figure out how to “plan multiple years out and leverage the strengths that we have in common.”
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