Nike Inc. shares are climbing in midday trading — up nearly 2 percent as of 2 p.m. ET — on the heels of a report that the athletic giant could be expanding its digital presence by becoming a wholesale dealer on Amazon.
According to a Reuters report, a new Goldman Sachs client note, distributed by analyst Lindsay Drucker Mann, suggested that Nike is moving closer to formally selling its wares on the website. Drucker Mann said that such a move could boost Nike’s revenue in the U.S. by $300 million to $500 million, or 1 percent of its global sales.
As it stands, Nike sneakers and other products the athletic giant offers are already available on Amazon from dealers not affiliated with the brand. According to Susquehanna Financial Group LLLP analyst Sam Poser, if Nike does go through with a potential Amazon partnership, it could help the firm rein in control of its distribution on the platform.
“Nike wants full control of the way its brand is presented, and wants to protect itself from counterfeits — there are currently 72,143 Nike listings on Amazon Marketplace (third-party sellers), and Nike has no control over brand presentation or price,” Poser writes. “We expect that Amazon will rapidly clean up its third-party Marketplace in order to partner with Nike. Since there is no control over pricing, premium Nike and Jordan footwear styles are selling on Amazon Marketplace at all prices. In other words, Nike does not want to permit the ‘wild, wild west’ of retail when it comes to its products.”
Watch on FN
Shares for athletic retailers are taking a hit as investors are likely grappling with concerns that Nike will pull premium product from other sellers in order to sell such items on Amazon.
As of 2 p.m. ET, shares for Foot Locker Inc., Dick’s Sporting Goods, The Finish Line Inc. and Hibbett Sports were all in the red. Foot Locker’s stock shed nearly 7 percent, Finish Line was down almost 5 percent, Hibbett declined more than 6 percent, and Dick’s fell more than 5 percent.
Despite the fallout, Poser said he believes Nike will continue to value its retail partnerships — particularly with Foot Locker.
“Nike will not sell premium product to Amazon, as it would hurt the key Nike franchises, which includes, but is not limited to, Brand Jordan, AirMax, Air Force 1 and Signature Basketball,” he wrote. “Foot Locker does a disproportionate amount of its sales in cash, so those cash customers are in-store customers … Nike continues to invest in Foot Locker through House of Hoops shops, Flight 23 shops, Kick’s Lounge, Fly Zone and Jordan stores.”
Among the benefits for Nike stemming from an Amazon partnership, Poser suggested that the brand could potentially recoup lost revenues from sporting goods sector bankruptcies such as those of The Sports Authority, Sport Chalet and MC Sports. He also noted that Nike could “strategically attack Under Armour” — which has a large presence on Amazon and is sold directly by Amazon and on the Marketplace.
Nike — which also announced June 15 that it will have to cut 2 percent of its workforce to introduce of its Consumer Direct Offense — has been ramping up its digital focus in recent months. The company said that its latest initiative is aimed at better serving its customers personally and at scale by accelerating innovation and product creation, and moving closer to consumers in key cities.