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Retail Update: Foot Locker, Amazon, Kohl’s, Walmart, Target

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Foot Locker is seeing higher average spend among its FLX reward program members, which grew to 25 million in Q2 from 20 million at Q1 end. Member Average Order Values (AOVs) were said to be approximately 10 percent higher than those of non-members as they shopped the retailer’s banners more frequently.

“The fact that we added five million more members in the quarter continues to show that the (FLX) program is doing what we wanted it to,” FL Chairman and CEO Dick Johnson told analysts on Friday. “It’s increasing our connectivity with our consumer; it’s increasing that engagement.”

FLX is a free rewards program where members can earn XPoints and redeem them for unique rewards including: sweepstakes, products, head starts for hot launches, events, and more across all of Foot Locker’s family of brands.

Overall in Q2, Foot Locker produced a 6.9 percent comparable store sales increase, fueled by fuller price selling and disciplined expense management. Kids Foot Locker led banner gains in North America, rising over 20 percent, that was followed by a low double-digit comp increase for Champs Sports. Foot Locker banner comps rose mid-single digits and comps at Footaction, a banner that is winding down, saw comps dip low double-digits. Foot Locker intends to close or re-banner 190 Footaction stores in 2021, including 130 door closures and 50 conversions in H2.

On the acquisition front, Foot Locker sees “a path to approximately $1 billion” in annual sales from WSS over the next five years due to the banner’s differentiated consumer concept that it can bring to new U.S. markets and favorable future demographics in the U.S. marketplace. The retailer intends to help the WSS business with private label apparel design and sourcing. As for Japan-based Atmos, which generates approximately 60 percent of its revenues from digital, Foot Locker is eyeing low double-digit annual sales growth from the business over the next five years as it adds the banner to select U.S. markets.

Meanwhile, in supply chain, Foot Locker is forecasting approximately $10 billion in annualized cost synergies from the acquisitions by leveraging its supply chain and operating capabilities. In the more immediate future, Johnson told analysts the COVID-19-related shutdown in Vietnam “will have a longer-term knock-on effect” since FL is good shape inventory-wise for the Back to School and holiday seasons. The retailer, whose Q2 end inventory was down 9.5 percent, is forecasting 490-510 basis improvement in its gross margin rate this FY due to “a more rational promotional environment.”

In other retail news:

Amazon, according to a Wall Street Journal report, intends to open physical retail doors in the U.S. that are like department stores. The first will be situated in Ohio and California and about 30,000 sq. ft. in size. It’s unclear what types of products might be featured in the stores beyond “well-known consumer brands.” The newspaper said Amazon declined to comment on the report.

Kohl’s mission to make Active and Outdoor a larger part of its overall topline continues to move forward with sales gains in both footwear and apparel. In Q2, Active/Outdoor represented 24 percent of the retailer’s overall sales, or an implied $1.01 billion, up from 20 percent of Q2/19 revenues. KSS, which wants to take Active/Outdoor to 30 percent of its overall business, says it’s focused on “reigniting growth” in the women’s portion of the business. With the Eddie Bauer brand set to be introduced this fall, the retailer says customer demand and sales have remained high for its national active brands that include Nike, Adidas, Under Armour and Champion as it has expanded its assortment of Columbia sportswear and is exceeding sales expectations with the Land’s End label. Converse and Vans have also helped drive sales growth. Meanwhile, on the supply chain front, Kohl’s says it’s “managing (it) very aggressively,” by shifting production where possible to navigate temporary factory closures and “prioritizing POs” to make sure seasonal items or event-driven products reach doors on time.

Walmart, which generated U.S. comp sales growth of 5.2 percent and a transaction increase of more than 6 percent in Q2, is chartering vessels and securing capacity for Q3 and Q4. But with inventory up 20 percent across segments at Q2 end, the retailer said it was in “good shape” heading into H2/21.

Target CEO Brian Cornell acknowledges the retailer faces a “challenging environment” for its supply chain but insists TGT will not face shortages for the holiday season. Target’s inventories were up $2.5 billion at Q2 end.

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Aug 25, 2021

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