Are Foot Locker And Finish Line's Problems All Nike's Fault?

Were Foot Locker, Inc. FL and Finish Line Inc FINL's devastating second quarters largely due to Nike Inc NKE's fall from grace?

Nike's struggles are well noted, and retailers heavily dependent on the brand have been getting crushed lately. Nike accounted for a whopping 71 percent of Finish Line's sales in 2016. Are the retailers struggles due to Nike’s decline or is it indicative of the industries weakness as a whole? The answer is a bit of both.

“We firmly believe that this downturn in the category is product driven, and it starts and ends with Nike,” said Canaccord Genuity analyst Camilo Lyon.

There are brands in this space that are growing, like Adidas AG (ADR) ADDYY and Puma SE NPV PMMAF, but the problem is that the retailers aren't adapting their product strategy quick enough to accommodate the volatility of fashion trends.

Shoe retailers are now playing catch up knowing that they need to respond to the market quicker.

Morgan Stanley analyst Jay Sole noted that Foot Locker was hurt by Nike’s poor trends, but isn't benefiting from "Adidas’ strength as much as anticipated."

This could be likely due to the over abundance of Nike products that proliferate in the store. Sole highlighted the theoretical negative case that Nike has lost Foot Locker’s core sneaker customer to Adidas.

As far as the industry as a whole, Sole highlighted that fashion trends have moved so far away from performance footwear, “that it will take far longer for the trends to work back in Foot Locker’s favor.”

Sports Industry analyst Matt Powell told Benzinga he doesn't expect performance running to come back until next year.

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