Foot Locker still lags de­spite its promis­ing steps

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE -

FOOT Locker has made some progress in stomp­ing out its prob­lems.

The ath­letic shoe and ap­parel re­tailer re­ported Fri­day that its com­pa­ra­ble sales fell 2.8pc in the first quar­ter from a year ear­lier. That’s a far-from­stel­lar per­for­mance, but the de­cline was not as steep as the ones in the pre­vi­ous three quar­ters.

In a press re­lease, CEO Richard John­son said he ex­pected that mea­sure to re­turn to growth later in the year.

And, im­por­tantly, Foot Locker’s in­ven­tory de­creased 7.1pc on a con­stant-cur­rency ba­sis from a year ago, a sign that the com­pany is do­ing a bet­ter job of clear­ing slow-mov­ing mer­chan­dise.

A third bit of good news comes with an as­ter­isk. John­son in­di­cated that part of the rea­son for the bet­ter-than-ex­pected per­for­mance was that Foot Locker was able to se­cure a bet­ter line-up of pre­mium run­ners styles from some key sup­pli­ers.

This is an im­por­tant change from Au­gust, when the com­pany de­liv­ered grisly second-quar­ter results and at­trib­uted them in part to “lim­ited avail­abil­ity of in­no­va­tive new prod­ucts” and “ab­sence of suf­fi­cient depth and breadth of ex­cit­ing new styles”.

In other words, last year it was es­sen­tially blam­ing its prob­lems on Nike and other brands’ fail­ure to de­liver cool, cov­etable shoes. To­day, it is chalk­ing up much of its im­prove­ment to them step­ping up their game. And that serves as an in­di­rect hint of the chal­lenge Foot Locker has on its hands as it tries to adapt for the fu­ture.

The chain is heav­ily de­pen­dent on Nike — in the lat­est fis­cal year, it pro­vided some 67pc of Foot Locker’s ath­letic mer­chan­dise.

But an im­por­tant pil­lar of Nike’s long-term strat­egy is to get more of its sales from its own Nike stores and web­site. That’s why it is load­ing up its Nike­plus mem­ber­ship pro­gramme with more perks and ac­cess to ex­clu­sive mer­chan­dise. It wants to give con­sumers more rea­son to shop and en­gage with Nike di­rectly.

Nike clearly still thinks of Foot Locker as an im­por­tant re­tail part­ner and is com­mit­ted to nur­tur­ing that re­la­tion­ship even as it pulls back from some other whole­sale part­ners. But Foot Locker has not yet demon­strated it is ready for a world where Nike loy­al­ists have such com­pelling al­ter­na­tives for ob­tain­ing the brand’s best goods.

Foot Locker needs prove that its in-store ex­pe­ri­ence is dis­tinc­tive and en­gag­ing enough to keep lur­ing shop­pers as brands — es­pe­cially Nike, but also Un­der Ar­mour — ven­ture deeper into sell­ing di­rectly to con­sumers.

And even though Foot Locker closed 147 stores in its lat­est fis­cal year and 37 more in the first quar­ter, it still hasn’t done enough to prune its huge network.

Foot Locker made strides this quar­ter. But it must do more to in­su­late it­self from chang­ing dy­nam­ics in the ath­letic ap­parel busi­ness.

Foot Locker shares plunged nearly 28pc on the day last Fri­day it re­ported th­ese results. Bloomberg

Foot Locker closed 147 stores in its lat­est fis­cal year and 37 more in the first quar­ter

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