After years of challenges partially attributed to retailers’ frantic attempts to drive more business through more promotional efforts, the athletic footwear business appears to be heading back to past levels of energy, sales, and profitability. Gone are the days when BOGO’s and TwoFer’s dominated the talk in the market, talk that has been replaced with discussions of the consumer’s move to performance footwear, broader adoption of the euro sportstyle looks in athletic footwear, and the resulting rise in average selling prices. While it is probably impossible to identify one defining event that has caused this end of the market to reenergize so quickly, there are clearly a number of trends and realities that have contributed to the apparent shift back to the glory days.

First and foremost, it would be impossible to have this conversation without looking at the one year spat between Nike, Inc. and Foot Locker, Inc. and the subsequent reality check that created an opportunity to resolve the mess. According to some, the issue started with actions by the Foot Locker to promote more heavily in the mall to drive sales in a market that had become over-retailed. Since Nike stuck to its guns and took the hit to support their position, the market is now far healthier today then when the issue started in late 2002. To now hear Foot Locker talk about increasing ASP’s and the growth in their marquee business only serves to strengthen the rest of the market.

Secondly, the Shox effect cannot be under-estimated here. While the talk of a return to performance has been getting all the headlines, it has really been a move back to running as a category that has driven the market. The impetus for the increase in running sales in the mall can be largely attributed to Shox (and more recently, Impax). The success of the product at The Finish Line had to have a major impact on Foot Locker’s decision to move towards Nike’s position in their squabble. Today, the market is full of other running silhouettes from companies asked by retailers for their product with heavy heel viz-tech to address the trend. The adidas a3 product continues to perform well and even Asics, which dominates the running purist market, has added some visible technology in the heel this year.

Puma, best known for their euro-fashion product, has introduced a running silhouette using their CELL technology that is one of the best looking new products SEW has seen in this category to-date.

The other major trend affecting the running category is the emergence of the women’s category in the market. While the urban and mall business is clearly driven by the broad acceptance of the Shox product for women, the growth in the category as a whole on the women’s side can be directly traced to the increase in consumers actually running. Much of this growth has been linked to the sharp increase in women running for a cause such as breast cancer research that has participation figures for 10k’s and marathons at an all-time high.

Puma’s overall impact on the market can not be over-stated in the shift in the market either. The company put its stake in the ground and stuck with its strategy through years of pressure from retailers that wanted to draft off of the success the brand was seeing at the smaller fashion boutique business at the top of the pyramid. The result has been an entirely new category of business that has athletic footwear vendors from adidas and Asics (Onitsuka Tiger) to PF Flyer and Kangaroos making noise with fashion product that is more likely than not sold north of $100 at retail. Now, as Puma moves down the pyramid in its strategy, slowly opening up more channels of distribution and broadening the appeal of the category, the market as a whole starts to benefit from the higher price-points commanded by the brand and others in the category.

Lastly, a shift in fashion influences in the entertainment world is also having an effect as hip-hop artists push consumers toward the “luxe” end of the scale and away from the hard urban looks of the last five to ten years. Artists like Usher are presenting a new look that combines a less baggy look in denim, which certainly has an impact on the type of athletic footwear that is worn with “skinnier” bottoms, with polo’s and striped wovens (see SEW_0509). Classic sneakers still work here, but wider basketball looks have given way to running silhouettes and the narrower sportstyle product.

Yes, the economy is improving and the job market appears to be getting healthier, but those metrics have historically had less direct impact on the athletic footwear market than how the retailer and brands react to them. Even during a recession kids still find the dollars they need for the next cool pair of shoes.

It appears to SEW that the market is on the front end of the return to a healthier athletic footwear business. How Nike, Puma, adidas, and other brands handle the segmentation and allocation of their product in the coming years, and the reaction by the retailer to that process, will determine how long the market can sustain the trend. After all, the Jordan 20 blew out the door last week at $175 at retail. Remember, it was a Jordan product in 2002 that didn’t blow out the first week that had Foot Locker initially talking about the demise of marquee product. Was that shoe too expensive or did Nike just allow too much inventory into the market?

Whatever the answer, the move back to marquee product is not a short term strategy for Foot Locker. They are quickly expanding their Nike commitment and have big plans for the brand to help grow their mall business at all their divisions (see page 5). The mall is a bit different place than it was in 2002, as The Finish Line secured a much more solid position in the business and Journeys continues to expand their athletic mix as a percentage of sales. The family footwear guys haven’t been left behind either, as both Famous Footwear and Shoe Carnival start posting double-digit comp gains, due in large part to the athletics category at both retailers.

February was a particularly bright spot at retail, with the International Council of Shopping Center’s monthly survey of roughly 69 chain stores revealing a 4.9% sales increase for the period on top of a 6.7% gain in the year-ago month. The results were seen as the strongest since May 2004 when ICSC reported a 5.4% increase.

The Footwear Store group led all other sectors for the month, rising 13.5% for the period despite the lack of numbers from Famous Footwear, which has gone to quarterly reporting for comps. Word on the street is that FF’s month would not have been a drag on the sector average that was the largest gain seen since “at least 2001.”

Shoe Carnival got a nice boost from Athletics in both men’s and women’s, posting a comp sales gain in the high-teens for the category in February. The Children’s category, which includes Athletics, was up in the mid-teens for the month. Athletic sales were said to be “robust”, while sales of Spring product were strongest in the warmer, Southern markets. They expect sales of the Spring product to “accelerate” in the Northern market as “the weather gets warmer.”

Total sales for SCVL increased 20.2% to $48.2 million in February and total comp store sales increased 13.3% for the month. Management said that customer traffic led to an increase in comparable-store sales for the second straight month. Total Footwear was up 13.4% for the period as the Women’s business rose in mid-single-digits and the Men’s business posted a double-digit gain for the month. The Accessories business was up in double-digits.


Sales at DSW Shoe Warehouse increased 28.9% for the month to $67.8 million. DSW comp store sales jumped 10.3% for February. The division made up more than 37% of total sales for parent Retail Ventures Inc. in February, compared to less than 32% of sales in February last year. RVI is also parent to Value City and Filene’s Basement.


The Luxury sector again outpaced the Department Store sector as a whole, delivering a 7.2% gain for the month versus 2.8% for Department Stores. Neiman again led the group with a 7.7% increase and Nordstrom racked up a 7.0% gain for the month. Dragging the DS sector lower were poor performances by May Co. (-4.2%), Sears (+1.3%), and Federated (+1.8%). Wholesale Clubs came in above the market as a whole, posting a 5.8% increase for the period, and Discount Stores saw a 4.9% increase for February.

While most eyes were on the month of February, last week also offered the first chance to take a snapshot of the Athletic Specialty business for the fourth quarter as The Finish Line reported their retail sales numbers for the period ending February 26; Foot Locker (see page 5) reported their fourth quarter financials; and Genesco (page 6) provided sales and earnings for the Journeys, Underground Station, and Hat World chains.


The Finish Line saw their comp store sales growth moderate a bit in the fourth quarter, but still posted a high-single-digit gain on top of a 19% increase in the year-ago period. Total sales grew 18.4% to $361.4 million, compared to $305.3 million in Q4 last year. The Consumer Direct business was up 34% for the fourth quarter, adding one point to both the Q4 and full year comp sales increases.

The Men’s Footwear business was up in high-singles on stronger Running and Basketball sales. Women’s and Kid’s were both up in double-digits, driven by the exclusive Maddie Max program. Average selling prices improved 5% for the quarter. Merchandise margins were said to be “above plan”. Inventory will be up 9% to 11% at year-end and was reportedly “on plan”. Aged inventory is less than 1% of total.

For the full year, comps increased 9.0% on top of a 20% increase in the prior year. Total sales also increased 18.4% for the year, exceeding the billion dollar milestone for the first time to $1.17 billion, compared to $985.9 million in the prior year.

Due to the Q4 sales numbers exceeding plan, FINL sees the leveraging of SG&A costs leading to higher earnings for the period. They now expect to report EPS in the range of 54 cents to 56 cents per diluted share for the quarter, about two cents higher than earlier projections. Full year earnings are also seen increasing to a range of $1.22 to $1.24 per diluted share, again about two cents higher than previous guidance.

For fiscal 2006, FINL sees total sales of approximately $1.33 billion generating EPS in the $1.43 to $1.47 per share range. Comps are projected to grow just 2.0% in that scenario. First quarter comps are also projected to increase 2.0%, generating $294 million in sales and delivering 24 cents to 26 cents per diluted share for the period.

Foot Locker, Inc. pointed to increased allocations of marquee footwear product — particularly at Champs — and renewed strength at its Lady Foot Locker unit for a 15.1% increase in sales to $1.54 billion for the fiscal fourth quarter ended January 29. Excluding the benefits of currency fluctuations, Q4 sales were up 12.9%. Comparable store sales increased 2.5% for the period. (see Full Story page 5)

The company had a “small negative comp” in November and recovered the last couple of weeks of December to post a low-single-digit gain for the month. January posted a high-single-digit increase in comp store sales.

The Foot Locker USA business, which includes the Foot Locker, Lady Foot Locker, and Kid’s Foot Locker units in the U.S., was up in low-singles for the quarter, with the strongest performance coming from LFL. The Champs business was up in very-high-singles for the quarter, a gain that was due to a broader selection of marquee goods. The Europe business comped down in low-single-digits, but “improved noticeably” in January. The DotCom business, which includes the footlocker.com and Eastbay units was down in low-singles, due primarily to a decline in the licensed apparel business.

Journeys continued to expand it mix of athletic product in the fourth quarter, with the category representing 42% of the total versus 37% of the total in Q4 last year. Comp store sales on a dollar basis increased 4% for the period, a metric that is still impacted by declining ASP’s. Unit comps were up roughly 6%. Men’s footwear represented about 49% of total sales, while Women’s made up 41% and Accessories delivered the balance. (see Full Story page 6)

Journeys Kidz is becoming a success story as improving ASP’s and increased traffic drove same-store sales up 24% for the fourth quarter. Footwear unit comps were up 20%. Total sales for the 41-door unit were up 28% to $7.6 million.

Underground Station is taking the lead in the division it still shares with some remaining Jarman stores as Station comps increased 5% for the quarter and total division comps rose 3% due to Jarman’s 2% comp sales decline. The Station gains were said to be driven by a 5.5% gain in ASP that management said was “across the board”. Third quarter ASP was up 4%.

Fashion athletic continued to increase as a share of total sales, growing to 25% of sales in the fourth quarter versus 21% in the year-ago period. Apparel and Accessories also grew faster than Footwear, increasing to 14% of sales versus 12% of the total in Q4 last year.


Hat World continues to be a strong and consistent contributor for Genesco, posting another strong quarter that saw total sales increase 17% to $81 million. Comp store sales increased 6% on top of a 16% gain in the year-ago quarter.