Friday 09 Jun 2023
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(March 20): Foot Locker Inc’s new chief executive officer has unveiled a turnaround plan for the shoe retailer that hopes to break US$9.5 billion in annual sales by 2026.

Mary Dillon, who took the top job in September, and her senior executives told investors and analysts in a presentation on Monday that they will open new store formats away from shopping malls, push a loyalty program and pump investment into technology.

The sales target is about 9% higher than the US$8.7 billion in revenue the company recorded in its latest fiscal year. The US$9.5 billion goal is more ambitious than Wall Street’s estimates, with analysts projecting a more modest pace of sales gains in coming years.

Foot Locker enters the new year with a “focus on resetting the business”, said Dillon. The company expects comparable-store sales to fall between 3.5% to 5.5% in fiscal 2023 before increasing 3% to 4% through 2026.

Management looked to alleviate concerns about Foot Locker’s business with Nike Inc as the world’s biggest sneaker maker pulls back from its retail partners to boost its own direct-to-consumer business. Chief merchandising officer Chris Santaella said Foot Locker has “revitalised” its relationship with Nike and will have access to more styles in lines from LeBron James and Kevin Durant.

Foot Locker aims to reduce its reliance on Nike goods, which represent about 70% of sales. Executives want to get that down to 55% to 60%.

The retailer is also expanding its assortment in other brands to reach consumers in a more “inclusive” sneaker culture.

As part of the revamp, Foot Locker is restructuring its business in Asia by closing its stores and e-commerce operations in Hong Kong and Macau. It will convert existing stores in Singapore and Malaysia to a licensed model and seek out growth in the region through partnership deals.

There will also be major changes to its real estate portfolio. Foot Locker’s Champs brand will also undergo a shift, with plans to close 125 underperforming stores this year. Across brands, the company will trim about 10% of its total store network, or about 400 shops. Atmos, Kids Foot Locker and WSS are among the other brands in the Foot Locker portfolio. The company is also planning a relaunch of House of Hoops, which focuses on premium basketball gear.

The shares slipped 1.8% at 11.36am in New York trading, erasing an earlier gain. The stock had risen nearly 12% this year through Friday’s close.

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