When your consumers skew digital and your major vendors go direct to consumer (D2C), the store and mall formats that have worked in the past are no longer enough.
And for Foot Locker, branching out becomes imperative — especially across digital channels.
As has been noted Friday, incoming CEO Mary Dillon comes to the role directly from the top role at Ulta Beauty, and she had focused on building out that firm’s eCommerce ops.
The headline numbers show the pressures in place: Total sales decreased 9.2% from 2021 and increased 16.4% from 2019, marking a rally off of pre-pandemic levels but a slide from previous periods when foot traffic and consumer enthusiasm returned. Comparable-store sales decreased 10.3% year-over-year.
Management, including outgoing CEO Richard Johnson, took note that the company is seeing pressure on lower-income range consumers. Earnings supplementals show that sales should decline by as much as 6% to 7% through the end of the year as inflation and unfavorable FX rates remain headwinds. Same-store comps will be down at the upper end of the 8% to 10% range.
Promotional Activity is Competitive
“It’s pretty competitive out there from a promotional point of view,” said Johnson, though he noted that back-to-school spending has been ramping up.
Chief Financial Officer Andrew Page gave some detail on eCommerce initiatives that should help the company scale its digital initiatives, noting that eCommerce buildouts in Singapore and Malaysia are helping shape a “build once, deploy many” consumer-focused platform approach. The company is also gaining traction with its FLX membership program, and Page said that the loyalty program has paid off: Members spend 10% more than non-members.
Gaining more torque in the digital channels becomes especially important as key vendor Nike has pivoted to grow its own D2C efforts. Management said on the call that Foot Locker remains underpenetrated among all brands excluding its top vendors. Gains in Converse sales, for example, were up 20%, and generally, speaking, spending on non-Nike brands were up high single digits. In another initiative reported Friday, Foot Locker announced a “connected industry” partnership with digital sports platform Fanatics that expands the range of online, licensed offerings to consumers.
The “off-mall” fleet of stores now stands at 26% of the company’s roster (with off-mall stores at 494), up from 21% last year. Management also said that the opening of “power stores” — with a community focus in what Page said is hyper-personalized — is on track to reach 300 locations.
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