Since taking over as CEO of Foot Locker in June 2009, Ken Hicks recognized that he had to strengthen the retailer’s position with the leading athletic brands. Partnerships had become “a little frayed” over the years, he admitted, when speaking last week at the Bank of America/Merrill Lynch Consumer Conference in New York City.
“Over the past year-plus, we've worked very hard to strengthen those partnerships, and many of the things that have happened — exclusives, launches, advertising, and things like that, have been as a result of that strengthening relationship,” said Hicks.
Those partnerships in particular helped Foot Locker broaden its assortments deeper into the running footwear and classic sneaker categories, as well as in apparel. Hicks said basketball, still its core category, “is a very good and big business. But it also can be cyclical, and you're dependent on one element.”
Hicks particularly highlighted Foot Locker's recent success in lightweight running styles from Nike, Adidas and Reebok. The chain is also carrying lightweight models from New Balance and in a few months will be stocking a version from Asics. Hicks said consumer research indicated customers expected a heavier presence in the category. He added, “It's not that we didn't participate, we just didn't have that as a focus.”
Building a more credible apparel business is also seen as important since the category drives traffic and people buy more apparel than footwear in general. Apparel also particularly helps differentiate the company's banners, another emphasis for the company in a bid to avoid direct price competition between each of its chains with the mall.
Regarding banner positioning, Hicks said Foot Locker is “really sneaker central,” Footaction aims at sports fashion, Lady Foot Locker focuses on women, and Kids Foot Locker, which had sold product for young women, is even more focused on kids.
Developing major brands such as Nike, Under Armour, Reebok and Adidas has been key to its recent improved momentum in apparel.
On the women's side, the Actra performance brand has been introduced and is “off to a good start.” He noted that it will take a “little bit longer” for private label apparel to become meaningful.
Hicks said the deeper assortments has helped to broaden the reach of its customer base and bring in new customers. He noted that “a lot of those new customers, quite frankly, were old customers that we walked away from as we focused on basketball and left behind some of the other parts of the business.”
Still, Hicks said the company is benefiting from the bounce-back in basketball and continues to benefit from good access to marquee shoes. Providing a spark has been Adidas, which “really entered the basketball business this past year,” with its Derrick Rose and Dwight Howard lines. Reebok also has regained ground in the category with its Zig models backed by John Wall. Foot Locker has also had “some success” with basketball shoes.
“Nike continues to really be the leader there, and we're working very closely with them on new ideas that'll help keep basketball on a steady footing, and that was quite frankly one of the things that hurt the overall business,” added Hicks. “Basketball fell off a little bit. Now it's back, along with running, so that creates a pretty nice situation.”
Regarding House of Hoops, its format with Nike, a new store will be opening across the street from the Empire State building in NYC in late March. FL currently has 20 HOH stores and sees room for over 100 internationally. Hicks said Foot Looker is finding House of Hoops generally work best within an existing Foot Locker location. Said Hicks, “Interestingly enough, it actually helps the store's basketball business, because you get more of that customer in, but it also helps the other parts of the business because it takes some of the pressure off of basketball and puts it in the House of Hoops, and so you can have a better display and more clear display of running, or the classics.”
At its traditional banners, one big effort is to make the stores “exciting places to shop and buy.” Part of that involves the chain better capitalizing on the fact that Foot Locker is one of the few places in the mall that provides customer service. Visuals, such as putting NBA shops in Champs, is also seen as key to its effort as well as making bigger in-store statements around launches such as Air Attack. Other initiatives include better connecting the online sites of its banners to the physical stores. One way is providing online purchases to pick up at stores.
One concern going forward, Hicks mentioned, is inflation.
“Whether a pair of shoes is $88 or $92, or a performance-T is $22 or $24, isn't going to stop the person from buying it,” said Hicks. “What will stop them from buying it is they had to pay $100 more a month in gas, or that their electricity bill went up, or that the food got more expensive. That's the thing that we've got to watch and keep a close eye on, because we're a discretionary item. And while I believe that we will win amongst our competition, I'm always worried about what happens to the consumer.”
