Foot Locker Inc. is off to a good start in its new fiscal year.
The retail powerhouse reported this morning a total increase in fiscal first quarter sales of 1% to $2.18 billion, although comparable store sales fell 1.9%. With its performance for the quarter, Foot Locker Inc. beat earnings expectations with earnings per share of $1.37 and non-GAAP earnings per share of $1.60.
Company executives – including Chairman, President and CEO Dick Johnson – detailed its victories to start the year today and offered a preview of what lies ahead for the second half of the year. year.
The discussion focused on its store opening and closing plan that will make its focus more hyperlocal, continued expansion of its product and brand assortment (which included wins from Crocs and Puma, and confidence in On and the newcomer Hoka) and plans for secondary market platform GOAT and the FLX membership program.
Here, Johnson dives deeper into Foot Locker Inc.’s strategy for the remainder of 2022 with FN, and reveals the biggest potential challenges and opportunities ahead.
How do you think consumer behavior will change? What trends do you expect to emerge and what do you expect to disappear?
“Our team is doing a very good job of staying close to our consumers. I can tell you that a year and a half ago we didn’t sell a pair of Crocs in our stores, and now everyone has a pair of Crocs. It’s a rapidly changing consumer, but one of the things that has become clear is that the consumer wants choice. As we looked at the amount of space available in the Nike open-to-buy, we weren’t giving them the choice they were looking for. They really had to go hunting. Now, when we talked about putting on Adidas or New Balance or Crocs or whatever, there can be a real display that allows the consumer to have the choice to create their own expression.
We are seeing a great run in basketball right now. At the same time, the running silhouette and that laid-back and comfort that really COVID has given us is here to stay. I think about those things, I think about the excitement that we see new brands like Hoka and On, but at the same time I look at old classics like Converse Chucks and the kids are still there. Sneaker culture is certainly expanding. The consumer, men and women, has a very high adaptability curve. They are ready to try things and they will act quickly. I’m no trend guesser, I’ll leave that to our team who work hard in stores and stay connected with our consumers both digitally and in stores, but the behavior that I think is here to stay, a few -ones: classic comfort, people want to be comfortable on their feet in the way they dress, and the ability to switch between choices and try different things.
It looks like you are doing the right things in a difficult climate. What are you most worried about?
“There is cause for concern. We have never been in a position where we have seen this kind of accelerated inflation. And if the unemployment numbers change, you’re concerned that if people are unemployed, how inflation will weigh on them. But this choice, this expanded supplier portfolio gives us a wider price range. It allows our consumers to choose. And I believe they use our product in our segment, our category, if you will, like this accessible luxury. Even when the world is on fire around our primary consumer, there’s nothing they like better than putting on a fresh pair of Js. [Air Jordans] or a new pair of kicks or a brand new Yankee hat – whatever it is. This kind of signal to their friends and the rest of the world: “Hey, the world is bad, but I’m fine.” I really believe it. That’s historically what we’ve seen and I don’t think that’s going to change as we fight some of these things.
What types of consumers do you expect to attract with some of your new brands?
“We haven’t done a great job of serving a performance runner, and I think we’ll have the ability, certainly with Hoka and On and Brooks and Asics, to do that a bit better. But they all understand that their brand isn’t just about running. It’s also about the casual interpretations of that. We can also broaden the spectrum with that casual person looking for a comfortable running shoe. I think it’s really a enlargement, I think there is more choice for our existing customers, which helps increase conversion.
What confidence does the success of Adidas and Puma in your stores, as well as the growth of New Balance, Crocs and Converse give you as the Nike mix evolves?
“I’m confident about it. We have the proof points. We talked about this on the Q4 of 21 call. We saw our non-Nike brands grow significantly, just like we did in the first quarter. It’s not that we’re not going to have Nike – I have to keep repeating this – and we’ll work with our product flow. It is not that there is a definitive cut. We continue to produce ebbs and flows. The fact that we are having success in giving our consumers more choice is what gives me confidence. Consumers didn’t say, “Oh, you’ve done so much less Nike product” or “The Adidas product is in front of the store, I don’t want to go in there. They keep coming in, they keep shopping, and there’s more crawl going on now than there ever was in their store — both digitally and physically. This is the thing that excites me a lot.
You talked a lot on today’s basketball category results conference call. Why are you optimistic and who is the Foot Locker basketball consumer?
“Basketball is a style of shoe that goes into fashion, goes out of style, depending on what bottom you’re wearing, whether you’re wearing a running silhouette or a basketball shoe. One of the things that gives me a lot of confidence around basketball is watching a brand like Puma sign an asset like LaMelo Ball, make a deal with us, and we suddenly have an interest in basketball. I look at the work that Adidas is doing with Jerry Lorenzo and Fear of God and him leading Adidas basketball, I think it’s starting to roll. New Balance has Kawhi [Leonard] which doesn’t sell a ton of shoes, but it does add a really positive halo around New Balance’s basketball effort. Styles come and go, and I just think we now have the ability to be more than just Nike basketball. We can be the basketball for many different consumers. Basketball hasn’t been hot as an entire category, but when you think about the products that turned up the heat in 2021: Air Force 1s, AJ1s and retros, that’s ultimately where the culture sneakers started, these are products like that. Our team truly believes there is an upward cycle in basketball ahead, we believe providing more options in basketball will help fuel that cycle.
What has Foot Locker learned from GOAT since its investment in 2019? And how will these learnings play out in the next offer and promotion test?
“We have learned the importance of the secondary market for our consumers. And we know that there is a lot of crossover between the primary market and the secondary market. As we try to structure the clearinghouse in FLX and connect it to product offerings on GOAT, we’re still working on the mechanics of the test, but I think this will only strengthen our belief that the sneaker ecosystem is getting wider and wider, and the connection with the sneakerhead who buys one to rock and one to sell is an essential part of what drives things forward. I’m really excited to start commercial testing, I just don’t want to get too far ahead until we have the parameters and really figure out the final details.
What do you think is responsible for the growth that Foot Locker has experienced with its FLX program? And how does Foot Locker intend to foster this growth?
“We’re going to support it with a more robust redemption center. The whole point of FLX was to accumulate points so they could use them on experiences and things that we really couldn’t do during COVID. As we start to come out of COVID and are able to create more experiences, I think we’ll see an even bigger increase in our FLX numbers just because people find out there’s some cool stuff out there. they can do or see or places that they can’t do without some connectivity. It was really difficult during COVID. There wasn’t a ton in the redemption center so you didn’t have a lot of good talking points. But now our marketing teams are using it as an offensive weapon, and that’s really what’s fueling growth. »