At the JP Morgan Retail Round Up Conference, Mary Dillon, Foot Locker’s CEO, said while Foot Locker expects to resume growth with Nike by holiday 2023, Foot Locker’s position as a multi-brand retailer will be key to capitalizing on the broadening sneaker opportunity.
“Being a multi-branded retailer matters because consumers want choice and they love to shop across brands,” said Dillon.
Dillon, who took over as Foot Locker’s CEO in September 2022 and formerly led the Ulta beauty chain, said trends such as mass casualization have broadened the sneaker opportunity beyond its past urban core.
She said introducing new brands such as Hoka and On to Foot Locker’s mix is driving new customers. Its push to open larger Community and Power stores is also partly due to a desire to carry more brands and broader assortments across men, women’s and kids.
Frank Bracken, EVP and chief commercial officer said, “The category of sneakers is far more democratic, diverse and inclusive than it was in 2010/12. It was predominantly a male and even urban-driven category and industry. And actually, over the last ten years, the fastest-growing demographics have been women’s and kids. So the participation of more consumers at large in the industry and in sneaker culture is a good thing. It’s also part and parcel of again, our strategy and why we have this very intentional sneaker growth map with bigger stores and wanting to provide more choice to more consumers.”
Dillon said the largest stores are also helping reach new customers. She observed, “We’re moving more off-mall and to more places that maybe we haven’t shown up before and we are seeing that we can drive new customer acquisition.”
Dillon offered a recently opened larger and off-mall location in the Dallas/Fort Worth, TX area as an example. She said, “It’s a more upscale demographic shopping in that store today. So, it supports this notion that being in the sneaker category is more than just a demographic. It’s much broader than that, especially if you can show up in different ways and meet the different needs that people have.”
Finally, Dillon said having physical stores and different approaches across banners is particularly key to differentiating against pushes by its larger vendors going direct-to-consumer.
“Most shoppers don’t want to shop in the sneaker category for only one brand in only one way so the role of the physical experience is super important,” said Dillon. “And in fact, that’s another area we excel. We have over 90 percent NPS (net promoter score) in stores, and it’s largely because the stripers that we hire are sneaker experts. They love the category. They love working for Foot Locker. So, I believe the notion is coexisting with the broad way that people can shop for sneakers. And also for our brand partners, showing up and tapping into customers that they maybe don’t reach to their DTC channel.”
The conference came a week after the company outlined an ambitious “Lace Up” three-year growth plan that calls for same-store growth in the range of 3 percent to 4 percent from fiscal years 2024 through 2026. EPS growth is expected to expand at a strong clip, up low- to mid-twenties over those three years.
The gains are expected to be driven by sales of non-Nike footwear vendors expanding at 2x average growth plans as well as the resumption of growth at Nike as part of a “revitalized alignment” between Foot Locker and Nike.
In February 2022, Foot Locker announced that Nike’s portion of Foot Locker’s sales would decline to about 55 percent by the fourth quarter of 2022, down from 68 percent in 2021. The reallocation was driven by Nike’s efforts to emphasize direct-to-consumer sales and consolidate wholesale accounts.
At its Investor Day, Foot Locker said Nike should make up between 55 percent to 60 percent of the sneaker chain’s mix by 2026 while non-Nike footwear vendors are expected to increase to over 40 percent of Foot Locker’s mix by 2026.
Dillon said Foot Locker does not have an “exact formula” on how much Nike versus non-Nike brands would represent with the ratio ultimately determined by demand. She said, “It’s about making sure that we are working with our brand partners to offer and represent the best of sneakers and to really show up at all the places where our customers want to shop. Over time, that balance is about continuing to be very strong with Nike and growing with Nike. They’re the largest part of our mix. But also [growing] with all the other brands continuing to drive growth over time at that 2x level. And that is how we think about balancing out the mix. It’s about just satisfying consumer needs. Our best guests are buying three different brands over the course of the year at least. And so that multi-branded opportunity is quite strong for us. It’s about how do we help each brand achieve their goals that are distinct and separate from each other and then, ultimately meet the consumer goals”.
For the current year, comparable sales are expected to be down in the range of 3.5 percent to 5 percent as the continued re-allocation of Nike products until the second half as well as due to the repositioning at Champs Sports.
Dillons said about Nike, “It’s about revitalizing that relationship, which we’ve done, and setting ourselves up for after this reset period of time to go back to growth with areas where we have very specific common strategic strengths—basketball, kids and all things sneaker culture.”
Photo courtesy Foot Locker/Forbes
