I’ve been doing a lot of analysis on the sneaker brands. The majority of my discussion has been on the push of each individual brand to gain more traction with DTC sales. I’ve also discussed how the brands are adjusting and adapting to the shift in the sneaker buying habits of the masses. What I’ve overlooked and what many sneaker heads probably aren’t thinking about, considering I always take a business approach to the kicks, is how are the shoe stores doing that sell footwear. I had this interview session with www.housakicks.com
In this video I was talking about Memphis and the closure of shoe stores. In my analysis I brought up the discussion on Sports Authority going bankrupt and Finish Line closing stores. It seems that not only Mom and Pop stores/small accounts are closing down, Nike is affecting larger chains as well.
Well it’s affecting everyone except Footlocker Inc. which appears to have a GPS for success. As Sports Authority is going out of business and Finish Line is trading at a paltry 24.01, Footlocker is kicking ass at 68.25 and has earned it’s way onto several lists as a “Buy Now” stock. What exactly is Footlocker doing that the other companies aren’t? Why is it that Footlocker, who traditionally was linked at the waist with Nike hasn’t seen any slow down in its growth with Nike making such a strong push to DTC?
- Gross profit margin ticked higher, indicating that Foot Locker did a good job of selecting, stocking, and pricing inventory… Overall, the retailer produced a solid 7% boost in net income. And due to stock buybacks — management spent $350 million on dividends and stock repurchases over the last six months — that translated into a 12% spike in per-share earnings. Foot Locker’s $0.94 per share of profit beat consensus estimates calling for $0.90 per share. http://www.fool.com/investing/2016/08/19/what-happened-in-the-stock-market-today.aspx (Foot Locker Inc did a round of buy backs, but they also seem to be very good at utilizing Nike’s RTV system to their benefit. When a shoe hasn’t sold at FTL/FTA/Champs/Eastbay they have been able to return to vendor and price accordingly. I’ve seen personally the adjusting of prices on a daily basis at some stores. While the associates hate changing those tags, the constant price adjustments have saved the store. In contrast a store like City Gear has resorted to “Buy One, Get One for a 1.00” tactics and a poorly designed online sales system that has just begun to take shape.)
- With strong brands supporting sales, the company has seen double-digit same-store sales growth and continues to open new stores. http://www.fool.com/investing/general/2011/10/05/is-foot-locker-the-perfect-stock.aspx (This is an old article, but it speaks directly to the fact that in this last quarter the market has opened up due to adidas and Under Armour’s growth.) When you analyze the growth that FTL is currently experiencing their ability to not tie their business solely on Nike has enabled them to shift with the quickly changing taste of sneaker heads.)
- The women and young athletes demographic segments saw the greatest sales traction in fiscal 2015. Both segments grew sales 15% in reported terms to $5.7 billion and $4.3 billion, respectively. In constant currency terms, revenue from the women and young athletes segments rose 20% and 19%, respectively. http://finance.yahoo.com/news/nike-fastest-growing-demographic-segments-150612275.html (As I said above the fast changing demand of sneaker lovers controls the market. FTL seems to have one of the best group of buyers in the country. Last year in 2015 the majority of shoes I sold where women’s huaraches and I saw a spike in GS or kid’s shoes. Most stores failed to have a strong selection of women’s shoes. As a matter of fact stores like Okuns (sold to Jimmy Jazz) had killed off women’s shoes altogether.)
- The last two months have been a story of two different shoe retailers. Finish Line (NASDAQ:FINL) shares have plummeted, while Foot Locker (NYSE:FL) has moved higher. http://seekingalpha.com/article/2552615-foot-locker-and-finish-line-a-tale-of-2-tapes (what exactly does this mean? In the video above I talked about FTL closing several stores locally. My thought was Footlocker must be struggling. Since the video they have closed another location, and they will close another location in a few months. But here is the catch, they opened a large Kids Footlocker with a FlyZone in Memphis. They opened this location in a mall that has high end anchor stores. Anchor stores are important so it should be noted that the places where the stores closed were in locations that did not have foot traffic. Foot Locker was smart enough to hitch their success on basketball as opposed to running.)
Foot Locker’s GPS is basically their decision to close poorly performing stores and shift their growth into high foot traffic areas. FTL has clearly realized that the online experience must be tied into the brick and mortar experience. I honestly think their use of the Foot Locker blog and social media has been instrumental in developing a similar experience online and in store. Their stores aren’t just a bunch of stuff on the wall. Each store is staged in a manner that delivers the story of the shoe being pushed. An example before I close this out, this week the Kyrie 2 Schoolbus released. When the shoe dropped it was merchandised at Kids Footlocker with the tee shirt and displayed in the center of the store. The display was eye catching and gave the shoppers something to connect to. If you add this to their consistency online, the GPS is clear. The other stores need to take notice.
