Foot Locker Confident Volume Can Be Shifted to Digital Channels

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Convinced that the promotional environment will be lower in the fourth quarter than in the last two periods yet uncertain how a surging pandemic could fuel more store closures or shutdowns, Foot Locker senior executives think the retail behemoth has tools in place to migrate more sales volume to its digital channels. In the third quarter, FL’s Direct-To-Consumer sales rose 52 percent, more than offsetting flat store results. The retailer’s comparable sales rose 7.7 percent as merchandise inventories dropped 8.5 percent year-over-year. Third quarter gross margin declined 120 basis points to 30.9 percent. During the period, FL added “Buy Online, Pick-Up In Store” (BOPIS) functionality to its apps and established dedicated pick-up areas in 700+ stores for customers to receive their online orders.

“We’re committed to great digital storytelling and our customers have noticed how much their experience has improved,” Foot Locker chairman and CEO Dick Johnson told analysts after confirming more than 10 percent of the retailer’s global store fleet is currently shuttered to comply with government-mandated lockdowns and restriction and hinting more may be on the horizon.

Foot Locker executives remain encouraged by growth in the retailer’s loyalty program customer base that topped 11 million in the U.S. in the third quarter. FLX members shop more frequently and spend an average 40 percent more than non-members. In the fourth quarter, the retailer’s former annual “Week of Greatness” has been renamed the “12 Days of Great” for exclusive product drops on Fridays and Saturdays over six weeks from Adidas, Puma and Nike.

The Footaction banner, with a strong double-digit comp gain, paced North American results in the third quarter. Champs Sports was also up double-digits on a comp basis, followed by a high-single digit increase at Foot Locker. Within footwear, women’s produced a double-digit comp gain due to ongoing strength in classic basketball and court style. Men’s was up high-single digits, paced by a double-digit gain from men’s basketball, “very strong” boot and seasonal business, flat running sales and a double-digit drop in court and casual styles.

“Right now, the heat is really coming through from the basketball silhouettes,” commented Johnson. “And we’re seeing great product from Nike, Jordan and we’re seeing secondary strategic vendor partners coming into basketball with Puma and New Balance.”