Designer Brands reported that Nike would return to DSW’s selling floors in October following its exit from the retail chain in fall 2021 and following recent moves by Nike to repair relationships with Macy’s and Foot Locker.

Designer Brands announced its restored Nike partnership while joining several other retailers this spring, reporting first-quarter results that came in slightly below expectations and trimming its outlook for the year.

Designer Brands attributed the shortfall to lackluster consumer spending and a promotional environment while noting the impact of unfavorable weather on sandal sales.

Nike’s streamlining of wholesale accounts was part of its 2017 “Consumer Direct Offense” strategy, which envisioned the company growing its sales through its own physical and digital direct-to-consumer channels and in partnership with 40 “strategic” retail partners while exiting “undifferentiated” wholesale outlets. At the time, Nike estimated that 40 percent of its distribution was in what it termed “differentiated” spaces, and Nike planned to increase that percentage to 80 percent over the next five years.

On Designer Brands’ quarterly analyst call, Doug Howe, who succeeded Roger Rawlins as CEO on April 1, said the return of Nike was part of its “editing and amplifying” strategy that included narrowing its focus to key national brands. The company expects the return to complement DSW’s bigger push into athletics and casual offerings, marked by the recent acquisitions of Keds, Le Tigre and Topo Athletic.

Howe told analysts on the call, “We are excited to build on our partnership with Nike, which strengthens our position as a leader in the footwear and athletic space. This plan will elevate in October this year. Our partnership with Nike will allow us to provide an athletic offering across men’s, women’s and kids that gives our customers a premium physical and digital assortment.”

Nike accounted for less than 5 percent of DSW’s total sales in 2019 and grew to just over 7 percent in 2020 due to the shift during the pandemic that resulted in a significant decline in dress and seasonal footwear sales at DSW.

In the Q&A section of the call, Howe declined to estimate whether Nike would return to previous sales levels at DSW, but he expressed enthusiasm about the renewed relationship.

“They’ve been great partners,” said Howe. “We’ve had ongoing dialogue for the past several months, and we’re super excited to be able to bring that back across men’s, women’s and kids. That will happen in Q4.”

Howe called the partnership a “big opportunity” for Nike, too, noting that DSW ranks third in market penetration in women’s footwear in the U.S. Howe inferred that the DSW customer would decide the ultimate mix of Nike products. He said, “The customer will vote, and we’ll continue to evolve our portfolio with them and other partners as well, but we’re obviously very excited about that.”

Last week, Macy’s announced that Nike apparel would return to its product mix, also starting in October, after Nike’s apparel was pulled from the chain, also in 2021. Nike footwear has continued to be available at Macy’s through Finish Line in-store shops.

Speaking on the retailer’s first-quarter earnings call, Macy’s chairman and CEO Jeff Gennette said Nike’s apparel is “one of the most important brands for our customer. We had lots of customers that were disappointed that we didn’t carry it over the past year.”

Foot Locker earlier this year said it had “renewed” its relationship with Nike, with allocations expected to return to traditional levels. In early 2021, Foot Locker announced that Nike was reducing its mix as low as 55 percent by the fourth quarter of 2022 from 65 percent in the fourth quarter of 2021 and 75 percent in the fourth quarter of 2020 as part of Foot Locker’s wholesale marketplace reset. Also at the time, Foot Locker said it would receive reduced allocations of marquee products from Nike.

Mary Dillon, Foot Locker’s CEO and president, said during an Investor Day in March 2023 about the repaired partnership, “I have spent a great deal of time with Nike revitalizing our partnership, developing a shared vision of the future marketplace and aligning on growth plans in key strategic areas like basketball kids and sneaker culture. We’ve reestablished joint planning as well as data and insight sharing so that we can better serve customers, and the fruits of our renewed commitment to one another will begin to show up in holiday this year as we build increasing momentum to 2024 in the 50th anniversary of Foot Locker.”

Nike recently indicated it had ended its efforts to reset the wholesale marketplace. Exited U.S chains over the past several years also included Belk, Big 5 Sporting Goods, Bob’s Stores, Boscov’s, City Blue, Dillards, Dunham’s Sports, EBLens, Fred Meyer, Olympia Sports, Shoe Show, Urban Outfitters, VIM, and Zappos.

Nike’s return to selling to some exited wholesale accounts comes as the company, like many retailers, saw inventories swell last fall as late spring 2022 and early fall 2022 orders arrived simultaneously. Nike has since been aggressively marking down products to rebalance inventories, although it no longer has access to many of its traditional wholesale partners to clear product.

Before the inventory build-up, Nike faced inventory constraints due to pandemic-related supply chain issues.

Wholesale growth for Nike has revived in recent quarters—up 19 percent in the fiscal second quarter ended November 30 and 18 percent in the fiscal third quarter ended February 28—largely reflecting the improved inventory levels.

“We’ve been starving the wholesale channel for six to eight quarters because of supply constraints,” said Matthew Friend, Nike’s CFO, on its quarterly analyst call in December. “We were prioritizing adequate inventory levels within Nike Direct and, so, we’re seeing strong demand as we go back into our wholesale partners with available supply.”

Digital again led the growth in the recent FYQ3, up 24 percent year-over-year, but Donohue called out the benefits of wholesale in customer acquisition and reach. He said, “While Direct, led by digital, remained strong and would continue to drive our growth, our wholesale channel continues to be an important part of our strategy as we access key consumer segments and achieve distribution scale across the marketplace.”

Nike’s inventories in the latest quarter remained elevated, but progress came in the latest quarter. In North America, Nike inventories were up 16 percent year-over-year at the close of FYQ3 after being up 54 percent in FYQ2 and 65 percent in FYQ1.

Photo courtesy DSW