Foot Locker to shift off-mall, expand new formats, close underperforming stores
Foot Locker’s new plan to move the company forward includes some major changes in its store portfolio.
As part of its new “Lace Up” plan, the athletic footwear giant is transforming its real estate footprint by shifting to off-mall locations and opening new formats. It also plans to close some 400 mall-based stores by 2026, including 200 locations in C and D malls and 200 underperforming stores in A and B malls. The store closings include some 125 underperforming Champs Sports stores, which will shutter in 2023.
The stores scheduled to go dark across North America account for nearly 10% of Foot Locker’s total sales, Anthony Aversa, Foot Locker senior VP of store development, told analysts during the company’s investor day.
In recent years, Foot Locker has debuted several new concepts, including its community-oriented “power” store concept and Kids Foot Locker’s “house of play” concept. The company expects to expand its new store concepts from 120 locations to 400 locations by 2026.
Foot Locker is also developing a new “store of the future” concept, which will open its first location in 2024, in New York City.
In addition, the retailer will relaunch its namesake brand, seek to create more distinction among its banners and “reset” its customer loyalty plan and elevate the customer relationship through enhanced analytical capabilities.
The new plan is the latest move under new CEO Mary Dillon, who took the reins of the company in September. In January, Foot Locker announced the wind down of its Sidestep 80-store banner in Europe in a move “consistent with the company’s broader efforts to focus on its core and growth banners.” It also eliminated a number of corporate and support roles.
"We are proud of Foot Locker's role in influencing and serving the global sneaker community, and next year, we will celebrate the 50th anniversary of the iconic Foot Locker brand,” said Dillon. “We are incredibly excited to introduce our "Lace Up" plan with a new set of strategic imperatives and financial objectives that are designed to set us up for success for the next 50 years."
As part of the new plan, Foot Locker will also overhaul its Asia operations, including closing its stores and e-commerce in Hong Kong and Macau. It plans to convert its current owned and operated stores and e-commerce in Singapore and Malaysia to a license model. It will continue to operates its stores in South Korea and “pursue growth in Asia via license partners,” the company said.
Foot Locker reported income of $19 million, or $0.20 a share, for the quarter ended Jan. 28, down from $103 million, or $1.02 a share, in the year-ago period. Adjusted per-share earnings were $0.97, easily topping the $0.51 per share analysts were expecting.
Sales fell 0.3% to $2.334 billion, ahead of analysts’ estimates of $2.146 billion. Same-store sales rose 4.2%, boosted by increased traffic and improved access to fresh inventory, which lifted sales across brands and regions. Analysts had expected same-store sales to decline 6.7%.
"Our team delivered a great finish to the year with strong fourth quarter results that capitalized on resilient holiday demand and a compelling assortment and inventory position from our brand partners," stated Dillon. "We are entering 2023 with a focus on resetting the business — simplifying our operations and investing in our core banners and capabilities to position the company for growth in 2024 and beyond."
The company is targeting sales growth of 5% to 6% for fiscal 2024 through 2026. It expects same-store sales to grow 3% to 4% over the period, while adjusted EPS is expected to grow in the low to mid-20s.
As of January 28, 2023, Foot Locker operated 2,714 stores in 29 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 159 franchised stores were operating in the Middle East and Asia.