> Inventory cost doubles, perhaps now they have to take out higher interest debt to finance that.
I'm pretty sure Footlocker doesn't borrow money to pay Nike up front for inventory. Nike is smart enough to know that there's zero chance their shoes will be sold if they sit in a warehouse, so Nike might as well ship them to retailers and get paid gradually as the shoes are sold to consumers.
The general point is that additional cash is tied up in shoes which cannot do something else. Who bears the burden of the loss of that additional cash changes over time (Nike to Footlocker to consumers) but the burden is bourn.
(And that's before you count the impact of the inevitable reduction in unit sales. There're various kinds of overhead that don't scale linearly units sold, or that have a long lag before scaling, or have a significantly-sized step function in the scaling.)
BTW, where did the cash go? Oh yeah, into the hands of the US federal government. We have a word for that: tax.
I'm pretty sure Footlocker doesn't borrow money to pay Nike up front for inventory. Nike is smart enough to know that there's zero chance their shoes will be sold if they sit in a warehouse, so Nike might as well ship them to retailers and get paid gradually as the shoes are sold to consumers.