Nike to Sell Product Directly to Amazon -- 2nd Update

Nike Inc. has agreed to sell some of its products directly to Amazon.com Inc., a person familiar with the matter said, a concession by the sneaker giant that it can no longer afford to ignore the online retailing behemoth.

While Nike sells its shoes and sportswear through department stores and specialty retailers, it has refused to sell directly to Amazon, fearing it would undermine its brand. But with traffic to traditional stores on the decline and chains like Sports Authority disappearing, Nike has been ramping up efforts to sell directly to consumers, especially its own e-commerce efforts.

Both of Nike's biggest rivals, Adidas AG and Under Armour Inc., sell some of their products directly to Amazon, which has been working to add fashion brands and apparel to its inventory.

News of the Amazon deal punished shares of retailers, with Foot Locker Inc. falling 5% and Finish Line Inc. down 4%. Shares of Nike gained 2%.

Nike executives have been in talks with Amazon for weeks about cracking down on counterfeit product and the proliferation of unauthorized third-party sales on the site, this person said. The two companies have reached an agreement where Nike would agree to provide some product directly to Amazon in exchange for Amazon policing counterfeit and third-party sales, this person said.

Nike and Amazon declined to comment, as did Foot Locker and Finish Line.

It wasn't immediately clear when Nike would begin shipping product to Amazon. Last week, Amazon began notifying third-party sellers that they have until July 13 to stop selling certain Nike products.

The agreement between the two companies comes as both are making changes to their strategies. Amazon on Tuesday launched Prime Wardrobe, a service that lets customers try on apparel at home before deciding on a purchase.

Last week, Nike announced plans to eliminate more than 1,000 jobs, or about 2% of its workforce, and scale back the number of sneakers and sportswear it makes. Nike sales have declined in recent months as the sportswear industry grows more competitive.

The changes at Nike, along with the new partnership with Amazon, raise questions about how established retailers will be affected. Foot Locker and Finish Line each identify Nike as their largest vendor in securities filings, accounting for 68% and 71% of merchandise purchased last year, respectively.

"While this certainly wouldn't impact trends overnight, we do think such a development would represent another headwind for a sector that can't catch a break lately," said Charles Grom, an analyst at Gordon Haskett Research, saying it department stores face the biggest risk.

Nike makes and distributes product along different tiers, so retailers like Foot Locker receive a different assortment than that offered at Kohl's or Macy's. It is unclear which tier or tiers of product will be offered to Amazon.

Nearly three-quarters of Nike's sales, or $22.6 billion, came from wholesale partnerships for the year ended May 2016, though the company has put greater emphasis on selling more directly to consumers. The company has launched new sales apps and opened new flagship stores, and is enticing customers to buy popular products like self-lacing shoes by making them available through Nike's sales channels first.

Write to Sara Germano at sara.germano@wsj.com and Laura Stevens at laura.stevens@wsj.com

(END) Dow Jones Newswires

June 21, 2017 18:32 ET (22:32 GMT)