Nike stock boosted by Foot Locker´s strong Q4

ANALYSIS_ Nike's share gained on Foot Locker's better than expected fourth-quarter figures. Stock at the latter gained 1.5 percent after the athletic apparel retailer, which largely stocks Nike shoes, published its results for the fourth quarter. Foot Locker (FL) stock was up 8.8 percent after beating estimates,

which in turn encouraged the confidence of Nike's investors. Nike stock has gained over 9 percent over the last month as the company has shown its ability to maintain growth despite pressure in emerging markets, highlight trade insiders.

It is noteworthy that roughly two out of every three pairs of shoes Foot Locker's sells are Nike, as data collected by 'Businessweek' shows. In a recent interview with CNBC, Nike CEO Mark Parker pointed to a consumer-driven "correction" taking place in the retail industry. "Obviously there's a huge appetite from a consumer standpoint for digital products -- e-commerce, digitally based commerce I should say," Parker said during the interview.

"We'll see that continue. This holiday was a great example of how the consumer is shifting, not only to digital but mobile-based digital commerce," he further elaborated.

Both companies have cashed out on this partnership, with Foot Locker reported a 4.6 percent increase in sales, reaching 1.79 billion dollars in the fourth quarter, while profit surged 19 percent to 121 million dollars. Meanwhile, Nike has seen its footwear sales surged 7 percent over the six past months.

Likewise, in the past six months Foot Locker direct-to-consumer sales have increased by 18 percent, boosted by its new e-commerce sites in Japan and Brazil. Contrarily, Nike's wholesale revenue, increased at a slower path (+5 percent).

Analysts underestimate Foot Locker's rally due to Nike´s dominance

Despite the rally seen by Foot Locker's stock, analysts may be underestimating the retailer´s competitive advantage due its close relationship with Nike (NKE), analysts polled by 'Barron' stressed.

"With six dollars per share in cash, we expect further productive capital allocation," wrote Janney analysts Eric Tracy and Michael Karapetian, who have a 'Buy' rating on the stock. Foot Locker's guidance for the current fiscal year looks "solid and achievable". In this respect, Foot Locker CEO Ken C. Hicks highlighted the opportunity to expand store-within-store partnerships with vendors, and promote them more heavily online in an earnings conference call.

Citigroup, which has a 'Buy' rating on the stock and raised its to 53 dollars from 47, also pointed out the benefits of the strong links between the two companies, drawing attention to the strong appeal of designer basketball shoes. "The basketball category continues to grow for many retailers [with] an increasing distinction among those that have access to Nike's most desirable product releases (Foot Locker and a handful of top independents) versus everyone else," wrote Citigroup analyst Kate McShane.