Foot Locker, Inc.
Thesis
Foot Locker is facing significant challenges as its largest supplier, Nike, shifts focus towards direct-to-consumer sales, which threatens Foot Locker's inventory advantage. Additionally, the average sale prices for basketball shoes, a key revenue driver, are plateauing and declining, compounded by increased competition from brands like Adidas and Under Armour. These factors suggest a potential decline in Foot Locker's market position and profitability.
Did it work?
The pitch was a short based on Nike's DTC shift and basketball-category pressure, but Foot Locker returned +93.6% over the ~9.6 years since the pitch — a decisive loss for the short position. Although the thesis dynamics eventually materialized (Nike curtailed wholesale allocations and Foot Locker's profitability deteriorated sharply late in the period, culminating in a distressed sale), the stock's large net appreciation means the pitch failed as an investment. The fundamental decline arrived far too late, after the price had already more than doubled.