Foot Locker President and CEO Mary Dillon is “looking for ways to simplify the business to make sure we’re focused on the areas that hold the most strategic value and will generate the most return,” she said on a Nov. 18 call with investors. The retailer aims to create a consumer-driven demand engine by growing its ecommerce operations while adjusting its global operations, including halting a planned expansion into Japan.
Dillon highlighted Foot Locker’s omnichannel presence, loyalty program and overall digital marketing strategies as the main areas of focus. The retailer also will bolster the technology platform that powers these aspects of the business while continuing to optimize costs across the company. Omnichannel was called out as the area that could generate a particularly large payoff.
“One of the biggest opportunities we have is to create a richer omnichannel experience, starting with ecommerce,” said Dillon on the call. “Without having a specific target in mind yet, I believe at 16% our ecommerce penetration is below where it should and can be, which means there’s an opportunity to capture more online-only sales, and more importantly, build our omnichannel customer base. Our current omnichannel customers in the U.S. spend nearly 4X the amount of our single-channel shoppers, yet they represent only 6% of our customer base, which leads to a vast opportunity to improve our engagement with customers across our channels and attract more of their spending dollars.”
Enhancements to the FLX loyalty program would be aimed at improving its value proposition, to drive engagement with existing members through personalization while drawing in new customers.
Technological changes include a review of Foot Locker’s “foundational needs as well as making sure we’re building the right tools and capabilities to support those efforts in omnichannel and marketing,” said Dillon. “Having a stronger backbone and technology enablers will be a key priority for us going forward.”
Global Operations Focus on Fewer Banners
Foot Locker had planned to expand its primary banner into Japan in late 2022 but will instead reallocate those resources to the atmos brand, which has already been finding success in the country. Atmos, which Foot Locker acquired in 2021, makes most of its sales digitally — which ties into the retailer’s overall strategy of enhancing its omnichannel operations.
The retailer also is winding down two joint ventures in Europe, one where Foot Locker was a minority partner for stores operating in the Benelux region and another where it was the majority partner for store operations in Eastern Europe. These changes were included along with the recent sale of the Eastbay Team Sales division as moves that will help Foot Locker focus on its most profitable banners, including WSS, which was acquired at the same time as atmos.
“We continue to remain excited about the growth potential we see in our WSS banner serving the Hispanic community,” said Frank Bracken, EVP and Chief Operating Officer of Foot Locker on a call with investors. “We’ve enhanced our distribution network to better serve both our stores and our online customers in our critical U.S. market. And we are simplifying our operations so that we can continue to invest in the banners and regions that generate the greatest return on capital and effort.”
The overall simplification effort could help Foot Locker capitalize on its better-than-expected performance in Q3 2022. Comparable sales rose 0.8% year-over-year for the three months ended Oct. 29, 2022. Foot Locker still expects a full-year comparable sales decline of 4% to 5%, but this is well ahead of the earlier projection of an 8% to 9% decline.
“While the macroeconomic environment remains uncertain, our demand trends and inventory position in high-quality product gives us confidence we can achieve our new range while also remaining flexible to manage through ongoing volatility,” said Andrew Page, EVP and CFO at Foot Locker in a statement.