Although the rating agency acknowledged that lower Nike sales would impact the retailer’s revenue and margins, S&P Global affirmed Foot Locker’s BB+ issuer credit rating with a stable outlook. S&P also sees volatile fashion cycles combined with long sourcing lead times due to ongoing supply chain challenges as a risk and the continuing trend of brands driving their own DTC sales at the expense of their wholesale partners. However, the agency pointed to healthy consumer demand for other brands and private labels, noting that Foot Locker will also benefit from the ongoing casualization trend, strong basketball footwear and increasing digital penetration. Even as Nike and Jordan Brand’s share of revenues declines from 70 percent last year to 55 percent in 2023, S&P expects Foot Locker to keep its adjusted debt to Ebitda leverage in the high 1x range over the next 12 to 24 months. S&P praised Foot Locker’s expansion strategy and its acquisition of WSS, a large off-mall retailer targeting Hispanic communities that Foot Locker acquired last year, as helping to diversify the company away from its reliance on malls, which still accounted for 79 percent of its store network at the end of fiscal 2021.

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