What's going on?

Foot Locker, America�s largest sports apparel chain, said it made more profit than expected in its most recent quarter – and that trendy sneakers helped drive sales! But there might be some storm clouds brewing�

What does this mean?

We�ve reported quite a bit about how the environment has got tougher for sports apparel brands like Nike and Under Armour: the growth of their sales has been declining and their stocks have sold off significantly this year. Foot Locker�s sales have also been slowing down, but it�s not suffering as much as the brands it sells. One reason is probably that Foot Locker can sell many different brands – and thus as consumers� tastes shift (as they have from athletic footwear to �lifestyle/trendy� sneakers), it can adapt more easily to those changes and still sell products.

Why should I care?

For the stock: Despite some good news, Foot Locker could be on a slippery slope.
Foot Locker has done better than most sports apparel chains over the past decade by, essentially, doing the basics well (inventory management, marketing, optimizing store locations, etc.). But declining sales growth could be a warning sign. Shoppers are still moving online, and Foot Locker continues to rely heavily on physical stores. Couple that with overall weakness in the athletic apparel market and there are certainly headwinds for investors to be aware of.


The bigger picture: Brands can be powerful, but there�s still risk.
Companies like Nike and Lululemon can create premium products, charge comparatively high prices and even sell them through their own channels (e.g. online or in dedicated stores). But brands, of course, are vulnerable to changes in consumer tastes � which is one big factor that�s hurting the athleisure space.