Title of the Titans

Nike vs. Foot Locker

When Nike Inc. re-released its best-selling Air Jordan 3 sneaker last month, Cory Matz dragged his mom to two Sacramento, Calif., malls in search of the shoes. Foot Locker didn't have them.

"I thought they had just sold out," says Mr. Matz, 16 years old, "but then I heard a rumor they weren't getting them anymore."

Mr. Matz discovered something that's roiling the athletic-footwear world nowadays: Shoppers can no longer find Nike's hottest shoes at the world's biggest shoe chain, Foot Locker Inc.

That change is the result of a feud between the two companies -- who played a risky game of trying to see which one needed the other more. Over the last 30 years, Nike and Foot Locker helped create the $16 billion wholesale market for branded athletic shoes. Each grew to dominate its business, using the clout of the other.

The rift began early last year, when Foot Locker Chief Executive Matt Serra got ticked off at the sneaker giant. Angry over the rigid terms Nike placed on the selection and price of shoes it sold to his chain, he announced Foot Locker was cutting its Nike orders -- by between $150 million and $250 million, or 15% to 25%, a year.

Foot Locker executives say Mr. Serra hoped the move would force Nike to re-evaluate the way it was treating its biggest customer. It did, but not in the way Mr. Serra had hoped: Nike responded by slashing its planned 2003 shipments to Foot Locker by $400 million, or 40% of the previous year's level. Though it would still sell some shoes to Foot Locker, Nike would withhold its most-sought-after sneakers.

Today the fallout from the feud is even starker. Nike has managed to replace most of its Foot Locker orders with sales to other retailers. The company has rebounded from a dry spell last year, when a few big basketball-shoe launches bombed and it lost ground to smaller rivals. By putting more emphasis on fashion, and less on the endorsements of high-priced athletes, Nike in recent months has...