I just got back from my first visit to a running store in quite a while(used to get them for cheap from a family member who worked for one of the shoe companies) and ended up shelling 115$ fora pair. It left me wondering what kind of margins the shop is making and what about the shoe company. Any ideas, in general?...it's crazy how expensive things are these days...
Nike 2014 net profit margin: 9.69%
Footlocker 2013 net profit margin: 6.59%
The answer: neither is making THAT much on a per shoe basis. If Nike sold them directly to you at $97, it would be breaking even on a net basis. For Footlocker to do the same, it would be $107. Note that this does include expenses not directly tied to the making of that shoe (or in FL's case, the selling of the shoe), but realistically if Nike was not spending what it was on R&D, well, it wouldn't be Nike would it... (and FL has overhead it has to cover as well).
Shoes cost what they cost. They basically did not change in price at all from 2007 through 2013 due to the bad economy (prices are sticky on the downside, thus why they stayed where they were rather than dropping under $100), but now that things are improving, the companies are (quite reasonably) beginning to make up for the lost inflation.
50 points give or take.
If a shoe's MSRP is $115, it typically is going to cost the retailer $55-60 in cost, not including shipping.
Letsrun, CFA wrote:
Nike 2014 net profit margin: 9.69%
Footlocker 2013 net profit margin: 6.59%
The answer: neither is making THAT much on a per shoe basis. If Nike sold them directly to you at $97, it would be breaking even on a net basis. For Footlocker to do the same, it would be $107. Note that this does include expenses not directly tied to the making of that shoe (or in FL's case, the selling of the shoe), but realistically if Nike was not spending what it was on R&D, well, it wouldn't be Nike would it... (and FL has overhead it has to cover as well).
Shoes cost what they cost. They basically did not change in price at all from 2007 through 2013 due to the bad economy (prices are sticky on the downside, thus why they stayed where they were rather than dropping under $100), but now that things are improving, the companies are (quite reasonably) beginning to make up for the lost inflation.
You don't know what you're talking about. Retailers mark up running shoes quite a bit. And shoe companies spend very little to make a running shoe. It takes Nike about $10 to make a $100 shoe.
Foolish Dude wrote:
You don't know what you're talking about. Retailers mark up running shoes quite a bit. And shoe companies spend very little to make a running shoe. It takes Nike about $10 to make a $100 shoe.
I didn't say that they don't mark them up a lot. For what it's worth, stores mark them up roughly 100% ($50 --> $100). But their only cost isn't the cost of buying the shoes, they have to pay to rent the building space, they need to pay their employees, they need to pay for warehousing for inventory, inventory-tracking systems, etc. Shoe companies may not have to spend very much to make any one shoe ("marginal cost"), but the time and money spent developing every shoe is massive. Put on top of that many of the same costs I mentioned for the retail stores.
The original question asked about the margins made selling running shoes. I answered it.
Shoe companies could save a bundle then on developing shoes by doing maybe a quarter as much as they do and instead keep modles on the market that people like for a much longer time. That's sort of beside the point here but worth mentioning.
An acquaintance of mine is sponsored by a running store and gets a 50% discount on shoes/clothing.
According to him, the store still makes a profit when selling at a 50% discount.
So much for store markups.
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