What happened

Shares of Nike Inc. (NYSE:NKE) declined 10.6% in August, according to data from S&P Global Market Intelligence, following painful quarterly reports from two of the country's largest athletic-footwear retailers.

Nike stock fell nearly 5% on Aug. 18 alone -- the first trading session after Foot Locker (NYSE:FL) announced painful second-quarter results. Foot Locker stock, for its part, plummeted more than 20% that day. Then Nike only extended its decline on Aug. 29, when The Finish Line (NASDAQ:FINL) announced its own underwhelming preliminary fiscal second-quarter results.

Nike's Paul George basketball shoes in white with a black and orange swoosh.


So what

It's worth noting that around 70% of The Finish Line's sales are of Nike products. But perhaps most telling were comments from Foot Locker CEO Richard Johnson, who blamed his company's weakness on both "limited availability of new products in the market" and "sales of some recent top styles [that] fell well short of our expectations." Neither seems to bode well for Nike, which any passing consumer can see represents a large chunk of Foot Locker's wall space. 

But during the latest quarterly conference call in June, Nike management also promised that the company would put innovation at the forefront in the coming fiscal year.

Fiscal 2018 "will be a big year for Nike innovation, and we'll bring those stories to life through deeper consumer connections in our key cities around the world," stated Nike Chairman and CEO Mark Parker.

Now what

What's more, Nike is placing greater emphasis on its own direct-to-consumer business, where sales climbed 18% last fiscal year to $9.1 billion -- or more than 26% of its total revenue -- including a 30% gain in e-commerce sales. So while investors are rightly concerned about Nike's exposure to these flailing footwear retail chains, those concerns are hardly indicative of the state of its overall business.

For now, we'll need to wait until Nike's next quarterly conference call on Sept. 26 for more color how deeply it shares the challenges faced by Foot Locker and the Finish Line. But until then, I suspect Nike stock will remain under pressure.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nike. The Motley Fool has a disclosure policy.