Nike (NKE) might need a Foot Locker (FL) downside.

After Foot Locker slashed its full-year gross sales forecast amid what it described as a “robust macroeconomic backdrop,” there may be rising concern on Wall Avenue that Nike may be caught within the crosshairs.

“We’re decreasing NIKE estimates to replicate indications of slowing U.S. shopper spend and U.S. athletic footwear channel stock imbalances,” Stifel analyst Jim Duffy wrote in a observe to shoppers. “Foot Locker outcomes, commentary, and outlook spotlight headwinds.”

Foot Locker’s first-quarter launch earlier than the bell on Friday has despatched the inventory tumbling greater than 30% by way of two buying and selling classes. It highlighted declining same-store gross sales that might sink as a lot as 9% this yr and “increased than common” inventories within the first quarter.

Nike accounts for greater than 70% of Foot Locker’s gross sales and is now seeing its inventory drop on Foot Locker’s print, with shares down almost 3% on Monday.

Foot Locker reported non-Nike penetration growing to 35% within the first quarter, which equates to mid teenagers decreases for Nike gross sales, largely pushed by weak point in way of life operating, per Wedbush securities analyst Tom Nikic.

Nevertheless it’s not simply concerning the efficiency final quarter. On a name with buyers on Friday, Foot Locker referenced clearing stock and growing promotions by way of the tip of the yr to finally carry newness to its shops.

With sporting items just lately having been the worst performing section in month-to-month retail gross sales, Foot Locker’s outlook has solid a shadow over demand within the sector. In a observe titled “opening draw back 90-day catalyst watch,” Citi analyst Paul Lejuez wrote a shopper slowdown and stock overhang within the North American athletic attire market displays poorly on Nike’s fiscal-year expectations.

“Given the seemingly excessive stock ranges within the channel (in footwear specifically) following a pullback in spending from decrease revenue shoppers, we consider the margin setup might not be as favorable as beforehand thought,” Lejueze wrote.

What a ‘shopper spending slowdown’ means for Nike

Past the stock equation, analysts argue Nike additionally faces points from a basic general slowdown in discretionary spending.

“Athletic footwear manufacturers have been talking about extra stock within the channel. Some have assumed the surplus is from manufacturers aside from Nike,” UBS analyst Jay Sole wrote in a observe to shoppers on Friday. “Nevertheless, with FL’s information on comps and shrink, the market is prone to conclude Nike can be feeling the results of the delicate good shopper spending slowdown which started in March.”

Retail analyst Sam Poser at Williams Buying and selling reduce his ranking on the inventory from Impartial to Promote on Monday. Poser believes the problems transcend inventories at wholesales and stem from a slowdown in direct-to-consumer demand for a few of Nike’s historically fashionable footwear.

The corporate, which constructed its digital model round unique drops and the elevated curiosity in sneaker tradition now could be experiencing shoppers which might be “educated to search for promotions.” Poser suggests StockX and different secondary sellers at the moment are promoting Nike footwear beneath the producer’s steered value and in flip have gotten aggressive to Nike’s personal enterprise.

“Nike, each on-line and in its outlet shops is selling many types which might be made for premium distribution at costs beneath $100 that at the moment are competing with footwear offered within the household footwear channel,” Poser wrote. “Now, household footwear retailers are selling their Nike types, at the least partially as a result of strain.”

Nike is anticipated to offer its newest quarterly outcomes on June 20.

Josh is a reporter for Yahoo Finance.

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