Dive Brief:
- Foot Locker is kicking up its store strategy, with plans to accelerate investments in its “reimagined” store concept, CEO Mary Dillon said on an earnings call Wednesday. The company is moving swiftly to expand the format, the first of which opened last April, with plans to open or convert 80 stores to the concept this year and maintain or accelerate that rate over the coming years. That’s up from the eight it currently runs.
- In addition, the athletics retailer expects to complete hundreds of smaller-scale store refreshes in 2025. The athletics retailer is revamping 300 stores this year, on top of 400 locations that were upgraded last year.
- Nevertheless, sales continued to slide in Q4, with total revenue down 5.7% to $2.2 billion. Comps in the quarter were up 2.6%, which marks a return to positive comps for the company. For the year, revenue fell 2.2% to roughly $8 billion.
Dive Insight:
Foot Locker will have a “new baseline” of stores by the end of 2025, according to Dillon, after a sweeping overhaul that has seen the retailer close more than 20% of its global stores since 2019.
That includes plans to shutter 400 mall-based stores, as well as the recent winddown of multiple banners and exit of several international markets. Going forward, Foot Locker will operate a “tighter, stronger store base, with reduced exposure to lower-tier malls,” Dillon said.
Since 2019, Foot Locker has steadily moved away from underperforming malls and currently has 20 points more of penetration in A and B malls than it did at that time, CFO Mike Baughn said on the call. That movement has come at the same time that Foot Locker has worked to revamp its store fleet. By the end of 2025, Foot Locker will have refreshed 800 stores over a two-and-a-half-year period. In addition, Foot Locker is targeting other locations to convert to its reimagined concept. Those are mostly stores that are in good locations but would be costly to revamp, Baughn said.
The response to reimagined stores has been “extremely positive,” according to Dillon, and the company’s investments will now shift from revamping stores to accelerating that format. The reimagined stores generate $4 million to $5 million in sales in their first year, and cost about $1 million to $1.2 million to build, according to an investor presentation. At the same time, investments in back-end technology will take a backseat for the moment. Dillon added that consumer-facing technology investments, like developing new apps across its portfolio, are still a priority.
While the retailer is making progress on its key turnaround efforts, the larger macroeconomic environment has gotten more complicated. Tariffs, which have been a rollercoaster ride over the last month or so, are expected to modestly impact Foot Locker. Baughn noted the retailer has exposure to China, but the products manufactured there account for a low-single-digit percentage of sales at the business overall. Consumers, meanwhile, are feeling more uncertain and staying cautious in their purchase decisions, according to Dillon.
“Our customers are young — by definition they’re more limited in their discretionary budgets,” Dillon said. “This is for sure a category that they prioritize in their lives, but we’re watching as they’re thinking about overall cost of living, plus some uncertainty about tariffs.”