Foot Locker's stock price drops after the retailer announces that it anticipates lower sales in 2022 due to reduced demand for Nike products.

• Nike is no longer Foot Locker's top vendor, which is projected to cause a decline in revenue for the company in 2022.
• Nike is increasingly focusing on selling its sneakers and apparel directly to consumers, according to Foot Locker.
• This year, Foot Locker expects to surpass the spending period when consumers had additional stimulus funds.

On Friday, the retailer's stock price tumbled almost 30% after it announced that it anticipates revenue to drop in 2022 due to its inability to sell as many products from its top vendor.

In the fourth quarter of 2022, Foot Locker announced that no single vendor will account for more than 55% of its supplier purchases, compared to 65% in the previous year. Additionally, the company stated that Nike's annual purchases will not exceed 60% of total purchases in 2022, down from 70% in 2021 and 75% in 2020.

Nike is accelerating its direct-to-consumer sales, prompting Foot Locker to increase its own direct-to-consumer efforts, including launching private label brands in clothing.

Nike and other sneaker brands have made it clear that they are working to decrease their dependence on wholesale partners. In order to achieve higher profit margins, these brands are selling directly through their own physical stores and online platforms. As a result, wholesalers like Foot Locker and Finish Line have had to increase their own brand lines.

Foot Locker management announced during a call with analysts that the company will focus on strengthening its partnerships with brands such as New Balance, Puma, and others.

On Friday, Foot Locker's stock reached a 52-week low of $26.36 and closed at $29.07. Its year-to-date decline is approximately 33%.

The net income of Foot Locker for the three-month period ended January 29, 2021, was $102 million, or $1.02 per share, compared to $123 million, or $1.17 per share, in the same period a year earlier. Despite this decline, the company's earnings per share, excluding one-time items, were $1.67, which surpassed analysts' expectations of $1.44, based on a Refintiv survey.

Sales increased by 6.9% to $2.34 billion from $2.19 billion the previous year, surpassing predictions of $2.33 billion.

With apparel revenue significantly outpacing footwear, same-store sales rose 0.8%, it was stated.

The footwear retailer's outlook for 2022 was more concerning to investors, as Foot Locker expects sales to decrease by 4% to 6% this year, with same-store sales projected to decline by 8% to 10%.

According to Refinitiv, analysts were seeking a year-over-year revenue growth rate of 2%.

This year, Foot Locker expects to surpass the spending period when consumers had additional stimulus funds.

The company announced on Friday that it plans to launch a cost savings program to reduce expenses by approximately $200 million annually. Additionally, the board approved a new $1.2 billion share repurchase plan.

Find the full financial press release from Foot Locker here.