Will Foot Locker’s New Omnichannel Strategy Work?

In the realm of athletic gear, Foot Locker has set its sights on a transformation toward omnichannel retail.

“Our digital conversion continues to push towards new highs, and we continue to see room for improvement looking out. In 2024, our focus is on additional improvements in the customer experience, including enhanced search and discovery capabilities, product listing and detail pages, improved storytelling and continued cart optimization improvements.”

 Mary Dillon, president and CEO of Foot Locker, via PYMNTS

This new strategy was announced on the same day as Foot Locker’s fourth-quarter earnings call on March 6. After sharing its lower-than-expected profit projections for 2024, Foot Locker’s shares plunged 27%. The drop in projected profits was primarily driven by plans to increase investments to boost demand, delaying the company from reaching its long-term profit margin targets until 2028.

Despite progress with its “Lace Up” strategy, Foot Locker won’t resume dividend payments, anticipating further investment in 2024. Full-year adjusted earnings are expected between $1.50 and $1.70 per share, falling short of analysts’ estimates. CFRA Research downgraded Foot Locker to “strong sell” due to inconsistent revenue and profit growth. However, Foot Locker predicts steady demand for popular sneakers, projecting 1% to 3% same-store sales growth. Investors await updates on Foot Locker’s strategies to navigate market challenges and regain profitability.

Aiming to revolutionize the customer journey, Foot Locker unveiled plans to ramp up digital sales, pushing them from 19.5% in the fourth quarter of 2023 to a targeted 25% by 2026. Mary Dillon, Foot Locker’s president and CEO, outlined the company’s digital strides during the earnings call, highlighting a surge in customer acquisition and improved net promoter scores across all channels.

The company’s digital evolution doesn’t stop there. With a focus on enriching the customer experience, Foot Locker plans to enhance search and discovery capabilities, revamp product listing pages, and refine storytelling elements throughout 2024. It also intends to release a new mobile app this year in order to provide “a smoother shopping experience and greater connectivity with stores,” according to Dillon.

“These immersive retail experiences bring to life a unique, differentiated store environment with powerful brand storytelling and [are] informed by our customer insights. Elements from these stores will be applied to our 2025 openings and beyond.”

 Mary Dillon, president and CEO of Foot Locker, via PYMNTS

But it’s not just about pixels and screens. Foot Locker is also reshaping its physical footprint. By expanding off-mall locations and introducing new store concepts, the company is diversifying its presence. The goal is to have 50% of its square footage in off-mall locations and 20% in new concept stores by 2026.

In the latest fiscal quarter, Foot Locker showed its commitment to this strategy by opening 29 new stores, revamping 66 existing ones, and shuttering 113 locations. The overhauled stores boast upgraded merchandising and branding, resulting in improved productivity and margins. This development follows the company’s plan to close 400 underperforming stores in North America by 2026 as part of a strategy to reset and simplify its operations.

Foot Locker is poised to unveil its inaugural “store of the future” in New Jersey this April, with plans for three more in the pipeline for 2024, according to Dillon. These innovative retail spaces promise immersive experiences and compelling brand narratives, drawing on valuable customer insights to shape their design.

Despite a modest increase in total sales and a slight dip in comparable sales, Foot Locker remains optimistic about the future. Looking ahead to 2024, the company anticipates navigating sales fluctuations while staying true to its strategic vision. “Our strategies are continuing to point us in the right direction,” Dillon said. “As we continue our investment focus areas in 2024, we’re on the path towards driving sustainable and profitable long-term growth and shareholder value.”