Foot Locker to close 100 stores this year, and it's okay

Dive Brief:

Foot Locker will shutter about 110 stores this year, part of a $230 million capital program for 2018, executives told analysts on Friday, according to a conference call transcript from Seeking Alpha.
That plan also includes opening about 40 new stores, significantly down from the 100 or so the retailer usually debuts, according to CFO Lauren Peters. "We continue to prune the fleet of under-productive stores and open a few select high-profile stores," she said.
The news comes as the retailer reported a 3.7% fourth quarter same-store sales decline that is within its guidance (on the lower end), which had been based on promising November same-store numbers. Direct-to-customer same-store sales rose 4.3%, and in the quarter accounted for 16.1% of total sales, up from 15.3% a year ago, Peters also said.

Dive Insight:

With this store-closure announcement Friday, Foot Locker set off a wave of "retail apocalypse" headlines of the type that dominated industry coverage last year.

At first blush, that's understandable, considering that store closures across the board were devastating in some areas. There have been a number of reasons for the swiftly changing brick-and-mortar landscape: Macy's is working through a massive correction of its turn-of-the-century expansion, Sears' has continued its years-long sales decline, J.C. Penney has sought to clamp down on under-performers, and a rash of brands were left diminished, folded or converted to online-only in the face of bankruptcy.

But while Foot Locker is grappling with significant market turmoil in its sector, it's on the right track, according to NPD Group Vice President, Senior Industry Advisor Matt Powell, who in recent months has warned that sports retailers and manufacturers have flooded the sneaker market in particular without much regard for consumers' emerging preference for leisure styles.

"Footlocker has been closing about 100 stores each year for the last decade. Nothing to be concerned about," Powell told Retail Dive on Wednesday.

Sports leisure footwear sales' in the U.S. overall rose 2% to $19.6 billion last year, according to a report emailed to Retail Dive from the NPD Group. Unit sales also grew by 2% and average selling price remained flat at $58.16, according to the report. The women's market grew the fastest, with sales up 5% year over year, while men's (the largest segment) and kids, each grew sales by 1%. On the performance side, running shoe sales fell 7% and training sales declined 15%, while leisure styles grew 17% and captured $9.6 billion in sales in 2017. Overall, performance sales declined 10% to $7.4 billion, a rate that has accelerated for the last two years, according to NPD.

Footwear sales dragged Foot Locker down in the quarter too, at a time when apparel performed better. Similar to the third quarter, apparel delivered a same-store sales gain at the high-end of mid-single-digits, the seventh consecutive quarter with positive comp growth for the category, according to Peters. But footwear declined in mid-single-digits, and footwear same-store sales were down low-single-digits in men's, mid-single-digits in kids' and double-digits in women.

Meanwhile, e-commerce is adding a level of convenience to shopping that renders some stores superfluous. To adjust to the new landscape, retailers must rationalize their physical footprints not just by shuttering stores, but also by taking care that the remaining locations offer personalized, elevated experiences, Powell said.

"Retailers must develop their own 'muse,' or an iconic customer that represents the core of their business," he wrote in comments emailed to Retail Dive last month. In creating that muse, what Powell also calls a North Star to lead them, retailers must "illustrate a clear point of view in their product assortments," through curation and approach stores with that customer in mind.

Foot Locker executives outlined plans for store openings that seem to follow that dictum. In just a couple of weeks, the company opens a new Champs Sports flagship store in Times Square, opposite its other new Times Square property, which includes a Foot Locker, Kids Foot Locker and SIX:02. Footaction, in partnership with Jordan, will soon open the latest Jumpman store in Los Angeles. In early summer, the company is opening two new "power stores" in the U.K. in Liverpool and London, plus a handful of locations in Asia. In December, the retailer opened a new West Coast flagship in L.A., with personalized experiences for customers, product drops that include exclusives and in-store events.

Asked whether Footlocker's store strategy meets his North Star criteria, Powell said: "Footlocker has [a clear] vision of their 'muse' for each banner."