Speaking on Wednesday, April 8, at J.P. Morgan’s 12th Annual Retail Round Up, Dick’s Sporting Goods’ management team provided a deep dive into the success of Foot Locker’s Fast Break remodels and why DKS is taking a more measured approach in its rollout of additional House of Sport stores.
Regarding House of Sport, Dick’s management noted on its fourth-quarter call that it expects to open 14 stores in 2026 and 18 next year, bringing the count to 67 at the close of 2027, just short of an initial goal DKS targeted in 2023 of having 75 to 100 House of Sport stores in operation by 2027.
J.P. Morgan analyst Christopher Horvers noted that one concern he hears from investors is whether the Dick’s acquisition of Foot Locker has affected its “capital deployment and management time.” He asked Dick’s management whether the Foot Locker acquisition had impacted the expansion of House of Sport.
“It’s got nothing to do with that,” said Ed Stack, Dick’s executive chairman at the event held at J.P. Morgan’s New York City headquarters. “One of the things that we’re finding now with House of Sport is we’re getting access to real estate that we would have never had access to before. And, so, we’re just being a bit more patient. Some of the access to real estate we have right now is taking a little bit longer to get done.”
Stack noted that “five, six years ago,” Dick’s would not have been able to build a two-level Dick’s store in many malls that needed to accommodate the House of Sport’s over 100,000-square-foot model. However, the House of Sport chain has reached deals to open at Tysons Corner Center in Virginia, The Gardens Mall in Palm Beach, FL; Barton Creek Square in Austin, TX; and Los Cerritos Center in Los Angeles.
Nationwide Malls are positioning House of Sport as the “main new anchor” at many of the locations. Stack added, “So, we’re just being patient. We don’t want to rush. We don’t want to go and hit a number just to hit a number.”
Stack also said rent is not always higher in the more high-profile locations. He noted that some mall developers might be looking to replace a former Sears location or other vacant anchor-type banner and see House of Sport to improve the quality of nearby tenants. He said, “They can bring in better tenants who will pay higher rents, and we can be the beneficiary of that.”
Stack also said House of Sport continues to outperform expectations. “The volume of these stores that we’re going to do we expect will be meaningfully higher than what we had originally anticipated from a House of Sport’s standpoint,” he said.
Lauren Hobart, president and CEO of Dicks, was equally enthused about the progress of House of Sport.
“It’s unbelievable,” she said. “It’s redefining retail. Really experiential. And brands are leaning into that and giving us the newest and the coolest and the best new product because it is rooted in sport. We can tell a brand story head to toe, and it’s just reinvented the entire way with retailers go into market.”
However, the primary topic at the retail roundup was DKS’s progress in turning around the Foot Locker business acquired last September, particularly the potential for Fast Break remodels.
Foot Locker piloted the Fast Break model at 11 stores in the third quarter and expanded the pilot to an additional 10 stores in the Los Angeles area before the NBA All-Star Game. It will roll out the concept to 250 Foot Locker stores in the U.S. and Europe by back-to-school this year.
That’s a small fraction of Foot Locker’s doors. At the close of its latest fiscal year, the Foot Locker business included 1,160 locations in North America and 697 overseas under the Foot Locker, Champs Sports, Kids Foot Locker, WSS, and Atmos banners.
Stack said the major change in the Fast Break concept is visual presentation with better call-outs of brands and trends.
He said prior to Dick’s buying Foot Locker, “if you walked into a Foot Locker store and looked at that wall of shoes, it was merely a run-on sentence — just a bunch of shoes stuck in the wall…You couldn’t tell what was important…You couldn’t tell what the story was you were trying to tell.”
Stack said that with the Fast Break remodels, Dick’s eliminated about 30 percent of the SKUs from the shoe walls and “laid out what was important to the consumer, what was the hot shoes, what story we’re trying to tell, and it had a huge impact on the business in those 11 stores. And we did this across some stores that were lower-volume stores, higher-volume stores, some street stores that you would find here in New York City, some mall stores. We did a real cross-section of those. And we were really more than pleasantly surprised by what went on.”
Apparel offerings, which had been significantly scaled back, also receive a bigger showcase in the Fast Break remodels. Stack said, “We put apparel back in there, and the results were great. Around the NBA All-Star game, we did 10 more of these stores in L.A. and got the same type of result.”
Stack said footwear brands have given Dick’s improved access to product as it has experimented with the Fast Back remodels and overall have been big supporters of Dick’s acquisition of Foot Locker.
Stack said, “The vendors couldn’t have been more supportive of us doing this because they see the potential of what Foot Locker could be for their business. It wasn’t living up to the potential that they thought could help their business. So, the brands couldn’t have been more supportive of this. They helped us with the whole idea of ‘cleaning out the garage.’ They’ve helped us from an allocation standpoint and really want there to be a growing, vibrant Foot Locker. So, they couldn’t have been more supportive.”
He added that beyond the streamlined shoe wall and apparel additions, the stores also place greater focus on the “lease line,” or callouts for shoppers walking by the stores in display windows. Stack elaborated, “The lease line is really the store version of the billboard when you’re driving down the highway and see all these billboards on the highway. The lease line is that billboard with the consumers walking by. You’ve got to get that lease line and make it interesting for them to come into the store. We’ve done that.”
For instance, around Valentine’s Day, several stores carried a themed pack of red, white and pink shoes in their display windows. The executive chairman said, “It was great. It was highly successful.” The launch of the Air Max ’95 in March was also featured heavily in store window displays at select Foot Locker stores and was likewise “highly successful.”
Stack said that in some of the remodels, the House of Hoops sections are being eliminated to improve sight lines and create more room for apparel.
On other topics, Stack said Foot Locker had been too dependent in the past on “high heat” product, and Dick’s will be investing in building a “more of a base business.”
He said, “There will certainly be a high-heat product that is important, whether it’s Jordan Retro fill in the number. That’s still going to continue to be important, but it’s not going to be as important going forward. We’re going to build out this base.”
He noted, for instance, that Foot Locker “pretty much missed the retro run category,” noting that he didn’t see any of the trending models, including the Nike P-6000 or Nike Vomero 5, on his initial trips to Foot Locker’s European stores. He said, “That’s a big miss. So that’s a big part of a base business that we can build back.”
Stack also spoke highly of the kids’ opportunity within the Foot Locker business while noting that significant investments are being made in basketball footwear for kids after hearing feedback from store managers.
Hobart said Dick’s continues to benefit from broader secular drivers that support management’s expectations that the Dick’s business will drive comparable sales growth in the range of 2.0 percent to 4.0 percent for the current year.
“Our consumer is obsessed with sport,” she said. “The country is obsessed with sport. And we sit right at the intersection of sport and culture. And that’s true in footwear, but it’s also true across our entire portfolio.”
Hobart noted that beyond footwear launches, bat launches have become traffic-driving events. She said Dick’s continues to see newness and innovation driving demand across price levels at both the Dick’s and Foot Locker businesses.
“We’ve haven’t seen trade down from best to better and better to good,” added Hobart. “We’ve seen growth across all income demographics, and that’s at the Dick’s side. On the Foot Locker side, we actually very much see that when there is newness and when we have the right product, the consumer also values the category so much that they respond well. So, our consumer is healthy. We just have to keep the right product, the best experience, and that’s how we’re doing that.”
Image courtesy Dick’s House of Sport
