Foot Locker Inc. today gave shareholders a first look at its five-year plan and offered deeper insight into its recent string of investments in entrepreneurial firms such as Pensole Footwear Design Academy and Rockets of Awesome.
“All our investments revolve around creating a platform to empower and inspire our communities tied to sneakers, kids, women and creators,” Jake Jacobs, CEO of Foot Locker North America, told investors of the company’s recent decision to put millions behind GOAT, Super Heroic and other startup brands. “The relationships not only enhance new connection points but also provide invaluable data to know, engage and create inspiring product and content.”
To that end, company CMO Jed Berger today introduced a new innovation and incubation operation within Foot Locker Inc., dubbed Greenhouse.
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“Tactically, Greenhouse is a development platform to build and cultivate new relationships, new initiatives, new brands and new ideas, all while looking at what they could be in the future as opposed to what they are today,” Berger said of the enterprise — the internal home for the brands Foot Locker has recently invested in. “We created Greenhouse as a separate unit that sits outside of our walls, both figuratively and literally. We did this purposefully to allow the team to take on industry challenges while being progressive, disruptive and responsive to perpetually evolving consumer and culture.”
The Greenhouse internal architecture encompasses three new facets: collaborations, concepts and a think tank — all aimed at feeding new ideas into the organization.
The specialty-athletic retailer — doing business under eight distinct banners including Foot Locker, Champs and Eastbay — also revealed today that it expects to produce top-line compound annual growth rates in the mid-single digits over the next five years. From 2019 to 2023, EVP and CFO Lauren Peters said the company expects to see sales per square foot in the range of $525 to $575 with high-single-digit net income margin rates and earnings before interest up low double digits.
Chairman and CEO Dick Johnson told investors that the firm has recalibrated its previous five-year strategic objectives — revealed in 2015 — and is now focused on four imperatives: elevating customer experience; investing in long-term growth; driving productivity; and leveraging the power of its talent pool, which comprises 40,000 employees in 27 countries. It also ditched its previous vision and mission — “being the leading global retailer of athletically inspired shoes and apparel” — for a new mandate to “fuel a shared passion for self-expression” and “create unrivaled experiences for customers.”
“Our goal is to build authentic relationships with our customer at the hyperlocal level — we want to provide experiences that truly differentiate us and resonate with the consumer,” Johnson said of the first imperative. “We do this by engaging the people they admire — local artists, athletes, influencers. And we do it by incorporating local elements into the design of both their physical and digital connection points with us and by partnering with local businesses and organizations that serve their community.”
Jacobs, meanwhile, pointed to Foot Locker’s recently unveiled Power Stores as evidence of the experiential strategy taking hold. (Foot Locker opened its first such door in Liverpool, England, last fall with subsequent executions in London, Hong Kong, Detroit and Philadelphia.)
“Each store showcases unique features, including locally designed exterior and interior artwork, locally sourced store and marketing teams, and locally sourced brands,” Jacobs noted. “Each store also features dedicated space, merchandised with footwear, apparel and accessories for women and kids. Activation spaces highlight new partnerships like Xbox gaming, local hairstylists and a consistent cadence of community activations.”
Foot Locker said it expects to open about 200 Power Stores over the next five years.
On the digital side, Johnson said the company is focused on leveraging data analytics and technology to empower customers “with new pathways to participate, share and engage with us” as the firm continues to work toward meshing physical stores with its online presence in a more seamless way.
To that end, the company announced today a new membership program, called FLX, which sees the brand move away from individual loyalty programs for each banner to a more fluid experience across its store brands.
“We’re moving to one global program focused on delivering awesome connected experiences and benefits,” said Berger. “FLX will unite our ecosystem, and it will incentivize our consumers to earn points across the entire portfolio and then spend those points in a central redemption center.”
The redemption center, added Berger, will feature early access to product movements, banner gift cards, donations to causes and free shipping, as well as other “incredible experiences” and “special benefits” from brand and marketing partners. The free program has launched in Lady Foot Locker and Foot Locker Netherlands, and will roll out globally this year.
Regarding other paths to long-term growth, Johnson said the firm is eyeing the Asian market in particular — where it sees an opportunity to expand its geographic reach through an elevated customer experience.
“We know that our stores in Europe and in North America plus our customer service reps online regularly field questions about when we will open in many of the Asian countries — so we know there’s demand,” explained Lewis Phillip Kimble, CEO of Asia-Pacific. “The Asian consumer is one of the most digitally connected global customer groups today. The growing middle class across this region is fueled by an appetite for digital content. They engage heavily with brands and each other, absorbing and sharing on Instagram, WeChat, Facebook, Twitter, among others. The impact of the social media is driving an increased appetite for premium, innovative sneaker culture products within this region.”
After a brief shortfall in 2017 — which the company had blamed on lackluster athletic product among other factors — Foot Locker last year experienced renewed momentum and growth. This month, it announced fourth-quarter results that topped forecasts across the board, with adjusted profits up 37 percent to $1.56 per share and well ahead of analysts’ $1.40 forecast. Total sales for the period rose 2.8 percent to $2.27 billion, handily topping analysts’ bets for sales of $2.19 billion.
Last month, Foot Locker announced it had put $12.5 million toward children’s apparel company Rockets of Awesome, serving as the lead investor in a Series C round worth a total of $19.5 million. The move came less than three weeks after it said it was making a $100 million strategic investment in GOAT Group, which operates sneaker marketplaces GOAT and Flight Club. Within the last 14 months, the company has also thrown financial support behind three other businesses. In February, it made a $2 million strategic investment in Pensole Inc. and $3 million toward a Series Seed II investment round in children’s lifestyle brand Super Heroic. Additionally, it contributed $15 million in Series A funding toward Los Angeles-based women’s luxury activewear maker Carbon38 last January — and added another $10 million to that this year.
