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Even before the pandemic,
Nike
sought to better control its brand and how its products got into the hands of consumers. These efforts are paying off in the age of Covid-19, and the company is looking at this strategy.
Susquehanna analyst Sam Poser writes that his research shows that Nike (ticker: NKE) is closing the wholesale accounts of a number of multi-brand retailers. This includes the usual suspects like department stores (Belk’s and
Dillard’s
[DDS] among them), but also sports channels like City Blue and the big online player Zappos.com.
The move is “positive for Nike as it takes more control of its own destiny,” writes Poser, who has a positive rating and a price target of $150 on the stock. The stock is trading around $112 early Tuesday morning.
He also thinks it could be a tailwind for retailers still selling Nike products, including
Dick Sporting Goods
(DKS),
Hibet Sports
(HIBB), and
shoe carnival
(SCVL) – especially in places near department stores that will no longer sell Nike. The decision is also good news, or offers a potential break, for other retailers calling Nike, such as
wedges
‘(CAL), Famous Shoes and Designer Brands’ (DBI)
DSW
,
and
Foot locker
(FL), says Poser.
It’s no surprise that Nike is looking to limit its partnerships with other outlets. Even before the pandemic hit, Nike had found success investing heavily in improving its online sales and selling directly to consumers.
Given the prominence Covid-19 has placed on e-commerce, it’s clear that Nike would like to double down on its digital presence, especially as consumers have demonstrated that they’re still willing to spend money, by especially for health and well-being. The company sees equal value in reaching consumers directly in-store and online.
Direct-to-consumer business models have become hugely popular, not just in retail, but across the spectrum. The theory is that this not only allows companies to control the narrative around their products, but also to limit discounts and preserve brand value, and of course collect data from shoppers buying online.
Nike stock is up 10% year-to-date compared to the
S&P500
gain of 6%. Barrons reported that Nike may be one of the few retail winners to benefit from this bizarre back-to-school shopping season.
Write to Teresa Rivas at [email protected]
