Foot Locker Investor Day 2019: Investing in Youth Culture Through Physical and Digital Experiences; 200 Power Stores by 2023 - Coresight Research
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April 1, 2019
Foot Locker Investor Day 2019: Investing in Youth Culture Through
Physical and Digital Experiences; 200 Power Stores by 2023
On March 28, 2019, Foot Locker hosted its investor day. The company focused on its customer-
connected strategic framework, strategic initiatives, international expansion plan, Power Store
portfolio optimization and five-year financial outlook.
During the event, Foot Locker:
• Updated its purpose — “to inspire and empower youth culture.”
• Outlined its customer-connected strategic framework spanning collections, content,
community, connectivity and convenience.
• Said it is investing in physical and digital experiences with the goal of elevating the
customer experience.
• Outlined plans to continue to expand into Asia.
• Provided its five-year outlook — it aims to grow sales at a compound annual growth rate
in the mid-single digits, and it is targeting sales per gross square foot of $525-575.
On March 28, 2019, Foot Locker hosted its investor day. The company focused on its customer-
connected strategic framework, strategic initiatives, international expansion plan, Power Store
portfolio optimization and five-year financial outlook.
Foot Locker opened the day with progress against its 2015 long term strategies and financial
results
Management opened the investor day with an overview and background of the overall Foot
Locker market and the company’s progress against 2015 long-term strategies. The company’s
seven strategies in 2015 were described as: “Core Business,” “Kids,” “European Expansion,”
“Apparel,” Digital,” “Women’s” and “People.”
Deborah Weinswig, CEO and Founder, Coresight Research 1
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
Copyright © 2019 Coresight Research. All rights reserved.
April 1, 2019 Figure 1. Foot Locker Five-Year Financial Result Source: Company reports In 2015, Foot Locker set a long-term sales target of $10 billion; the company’s sales in 2018 were $7.9 billion. In 2015, Foot Locker set a long-term target of sales per gross square foot of $600; the company’s sales per square foot in 2018 were $504. Foot Locker updates its purpose: “to inspire and empower youth culture” Management highlighted that its mission is “to fuel a shared passion for self-expression.” Its vision is “to create unrivaled experiences for its consumers”. Its positioning is “to be at the heart of the sport and sneaker communities.” The consumer is changing, moving faster and using social media as social currency The customer is changing, moving faster and is digitally connected. Management commented that technology is changing how today’s consumer interacts with the world and how they engage with brands. Customers demand authenticity and newness from brands – and at faster- than-ever speeds. Figure 2. Shifts in Consumer Behavior Source: Company reports Deborah Weinswig, CEO and Founder, Coresight Research 2 deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2019 Coresight Research. All rights reserved.
April 1, 2019
Social media has become a source of social currency for customers as they seek to share
moments and their personal style from concerts, festivals and culinary experiences. The Foot
Locker customer uses sneaker choices and clothing choices to tell a story about who they are.
Youth culture is at the forefront of changing customer dynamics
Management commented that youth culture is at the forefront of changing trends, brands and
product – accelerated by technology. This change is helping the company to think about Foot
Locker in new ways, “as a place to inspire and empower youth culture.”
Figure 3. Youth Culture is at the Forefront of Change Trends, Brands, and Products
Source: Company reports
Foot Locker outlined its customer-connected strategic framework including collections,
content, community, connectivity, and convenience
Foot Locker outlined its customer-connected strategic framework which the company created
to focus the Foot Locker team on the customer.
Figure 4. Foot Locker Customer-Connected Strategic Framework
Source: Company reports
• “Collections” leverage vendor partnerships, internal talent and capabilities and external
investments to create unique and powerful assortments that elevate the sneaker
business.
Deborah Weinswig, CEO and Founder, Coresight Research 3
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
Copyright © 2019 Coresight Research. All rights reserved.
April 1, 2019
• “Content” storytells around the product and builds an emotional connection with
consumers across multiple channels. Foot Locker is using key influencers, celebrities and
new initiatives to drive excitement and build shareable moments.
• “Community” taps into consumers’ passions and interests, and delivers innovative
experiences around them. The goal is to build authentic relationships with the customer
at the local level.
• “Connectivity” enables today’s consumer to connect outside the physical store.
Consumers do not distinguish between a physical and a digital experience. The company
is leveraging data analytics, digital technology and a team of people to empower the
customer with ways to participate, share and engage.
• “Convenience” helps meet expectations around speed, product, content and experiences
– delivered on the consumers’ terms.
Foot Locker is investing in physical and digital experiences to elevate the customer
experience
Foot Locker is investing in physical experiences with the goal of “driving community across key
commercial cities” across the globe. The company said it seeks to engage and serve its
customers to develop authentic and meaningful relationships.
As part of this initiative, the company has opened Power Store formats. The Power Store
includes unique features such as locally designed exterior and interior artwork, locally sourced
store and marketing teams and locally sourced brands. Each store also features dedicated
space, merchandised with footwear, apparel and accessories for women and kids. There are
activation spaces within the Power Stores that highlight new Foot Locker partnerships,
including Xbox gaming, local hairstylists and community activations.
The company’s first Power Store opened in Liverpool, England, with subsequent stores in
London, Hong Kong, Detroit and Philadelphia.
By 2023, Foot Locker expects to operate a total of 200 Power Stores. Currently, there are five.
The company expects its net store count to be up by a low-single-digit percentage as Foot
Locker offsets new store investments with some closures. As Power Stores scale, there is an
opportunity to optimize store portfolio performance through an improved balance of malls
versus off-mall stores – approximately 80% of the company’s stores were in malls in 2018
compared to less than 70% projected by 2023.
Figure 5. Foot Locker Investing in Experiences
Source: Company reports
Deborah Weinswig, CEO and Founder, Coresight Research 4
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
Copyright © 2019 Coresight Research. All rights reserved.
April 1, 2019 Foot Locker is investing in digital experiences: On average, over 80% of web traffic originates from mobile devices or apps. The company is investing in re-platforming its North American websites to make them responsive to different form factors and mobile devices, and the new platform has improved navigation and increased page load speeds, which drives higher conversion rates. In 2019, the technology team will take the platform to Europe and Asia Pacific. Figure 6. Foot Locker Investing in Experiences: Digital Source: Company reports Foot Locker will continue to expand into Asia In 2018, Foot Locker began expanding across Asia with an omnichannel activation strategy. The company finished 2018 with three stores and an ecommerce site in Singapore, one store in Malaysia, and one Power Store in Hong Kong. In China, the company also entered into a partnership with Tmall in to understand the Chinese consumer. Figure 7. Foot Locker Asia Expansion, 2018 Source: Company reports Deborah Weinswig, CEO and Founder, Coresight Research 5 deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2019 Coresight Research. All rights reserved.
April 1, 2019
Management reported Foot Locker will evaluate the company’s opportunities in these targeted
countries and begin to expand in metro areas and cities, leveraging its leadership teams in Asia.
Foot Locker expects five-year growth ranges of sales in mid-single digits and sales per gross
square foot of $525-575
Foot Locker reiterated its guidance for the full year, calling for mid-single-digit comp gains and
further indicated that the company expects mid-single-digit comps quarterly. The company
reiterated full year EPS growth in the double digits.
• For the company’s five-year outlook, it projects sales at a compound annual growth rate
in the mid-single digits. The company’s CAGR from 2014 to 2018 was 1.9%.
• The company projects its sales per gross square feet to be $525-$575 for its five-year
outlook. In 2018, the company reported sales per square feet of $504.
• The company projects EBIT to be in the low double digits; in 2018, the company reported
EBIT of 9.4%.
• The company projects net income margin to be in high single digits; in 2018, the company
reported net income margin of 0.6%.
• The company projects its return on invested capital to be in the mid-teens; in 2018, the
company reported a return on invested capital of 12%.
Figure 8. Foot Locker’s Five-Year Outlook
Source: Company reports
Deborah Weinswig, CEO and Founder, Coresight Research 6
deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
Copyright © 2019 Coresight Research. All rights reserved.
April 1, 2019 Deborah Weinswig, CPA CEO and Founder Coresight Research New York: 917.655.6790 Hong Kong: 852.6119.1779 China: 86.186.1420.3016 deborahweinswig@coresight.com Erin Schmidt Research Associate US: 1359 Broadway, 18th Floor New York, NY 10018 UK: 242-246 Marylebone Road London, NW1 6JQ Hong Kong: 2/F, LiFung Tower 888 Cheung Sha Wan Road, Kowloon China: 627 Huaihai Middle Road Huangpu District Shanghai 200000 India: K-Tech Innovation Hub 3rd Floor, Plama Center, Bejai Kapikad Road Mangaluru 575004 Coresight.com Deborah Weinswig, CEO and Founder, Coresight Research 7 deborahweinswig@coresight.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2019 Coresight Research. All rights reserved.
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