Updated to include comments from earnings call.
The latest playoff pushes by pro basketball stars LeBron James and Kevin Durant aren't sending people off in droves to buy their pricey Nike (NKE) - Get Report sneakers, at least according to Foot Locker (FL) - Get Report .
Foot Locker said Friday that first-quarter earnings rose 10% from the prior year to $1.39 a share, matching Wall Street estimates. Net sales rose a modest 3.7% from a year ago to $1.99 billion, falling short of forecasts for $2.0 billion. Same-store sales badly missed estimates, rising 2.9% compared to estimates for a 4.5% increase. A year ago, Foot Locker saw same-store sales gain an impressive 7.8%.
Foot Locker shares are currently down nearly 7% at $54.53.
"Our team navigated well through a variety of challenges, not least of which were rapidly shifting product category preferences by our customers," said Foot Locker Chairman and CEO Richard Johnson in a statement. Finding an explanation for Johnson's measured comments on the external environment is as easy as looking at Nike, whose basketball sneakers command most of the floor space at Foot Locker and Champs stores.
Sales of basketball sneakers at Foot Locker fell by a mid-single digit percentage during the quarter. Despite strong interest in Under Armour's (UA) - Get Report Stephen Curry basketball sneakers, Nike's Lebron and Kevin Durant lines "proved the most challenging" said Foot Locker. Johnson called out that Nike was starting to "reset the price relationship" on its signature basketball sneakers. In other words, Nike may be lowering some prices on Lebron and Durant styles in order to spur sales. Johnson added Foot Locker was dealt a "body blow" in its signature basketball business to kick off the year.
"Not enough Under Armour, too much Nike," said Jim Cramer, TheStreet's founder and portfolio of the Action Alerts PLUS portfolio, of FootLocker's product line. "Footlocker is a mall store. If it's in the mall, I'm rethinking. I'm not crazy about it."
On a March 22 call with analysts, Nike didn't disclose sales trends in North America for its core basketball business, nor make much mention of its performance during its most recent quarter. Instead, the company highlighted solid demand in North America for the Michael Jordan brand and products for women.
"The Jordan business is exceptionally strong, while the Nike basketball business has been soft. It's an item issue as [offerings from] Kobe Bryant, Kevin Durant and Lebron James did not do as well last year," said Sam Poser, a veteran footwear industry analyst and managing director at Sterne Agee.
Foot Locker's same-store sales are down so far this month, but Johnson is hopeful of a rebound due to the upcoming launch of a key new Jordan style. The company maintained that it sees same-store sales rising by a mid-single digit percentage this year propelled by momentum in women's and kids footwear and new products set to arrive around the Olympics in August.