The dispute between the two biggest kids on the block appears to be softening a bit as both Nike and Foot Locker find new ways to help each other achieve their respective goals without compromising the stand each took in their now nine-month old spat over the re-distribution – and management – of the Nike brand.

If comments made by Foot Locker executives are any clear indicator, the two may start to do more business by the fourth quarter, and even more by next spring.

As reported here a couple of weeks ago (SEW 0332), Nike had indicated that recent FL futures orders had helped pump up the company’s order backlog a bit since their initial fiscal year-end report in late June. Nike intimated at the time that they did not see a shift in the relationship with Foot Locker.

For Nike’s fiscal 2003, Foot Locker represented less than 10% of Nike’s total business for the first time in a long time, after producing 11% of Nike’s sales in fiscal 2002 and 12% in fiscal 2001. Foot Locker said they have recently had “more encouraging” discussions with Nike that they “hope will lead to a stronger partnership” that will benefit both parties.

FL plans to launch new Nike product to be sold exclusively in the U.S. stores this Christmas. The new collection, called 20-Pack, is expected to be priced between $80 and $100 and will include basketball, running, and cross-training. CEO Matt Serra said it is “going to be a very meaningful program” with a “potential of being a million minimum to 2-plus million pair of shoes a year”.  FL said Nike had also increased Air Force 1 allocations for Q4.
The other increases will come in the Jordan brand product, with product priced in the $100 range, but we heard no indication of a shift in the re-distribution of the important Jordan retro product or new Marquee shoes.

But might there be a Carmelo Anthony opportunity with his shift to Jordan?

The warming waters now has Foot Locker estimating that Nike will represent between 38% to 40% of 2003 purchases for the retailer in 2003, up from the estimated 32% to 38% previously forecasted. Nike was 47% of sales in 2001 and 44% in 2002.

Nike has not commented on the moves.

We do not see the changes here as a shift in Nike’s stance on better Marquee product. Apparently, Nike was able to move the allocations of those goods to Finish Line, Footaction and urban accounts and that shift seems to be intact.

The change comes in the mid-tier product that Nike had to find a home for after Foot Locker pulled the plug on those goods when Nike yanked the better product. This is the product that is not first on the order pad, but works as filler to get to sales plan numbers once Marquee goods are booked. Nike had to find a home for much of this product at sporting goods retailers, mid-market department stores and family footwear chains, a tactic that apparently fell short of plan. And FL needs more Nike on the wall to drive traffic.

As human nature requires, people are already rushing to pick winners and losers in this ongoing saga. The increased pairage from Nike will need to come from somewhere, and will clearly replace a number of products that were added in an attempt to replace the Nike gap.

While FL has been quite complimentary of its relationship with Reebok, the stores may not need millions of pairs of both the AF1 and I3 Pressure. The Reebok / Foot Locker relationship goes far beyond the Pressure product and Iverson, RBK and ATR will still clearly play a large role in the retailer’s basketball presentation. FL is also enjoying mall exclusivity on S.Carter and 50 Cent product. Less evident is the impact to others like adidas and Converse that moved to fill the basketball void. FL has spoken quite positively about the relationship with Converse, but the tension with adidas has been obvious as some product failed to sell through and cancellations increased.

We’ll keep an eye on this piece in the months ahead.