Despite a projected similar consumer environment in H2 in which its typical, younger, and lower-income customers remain “under pressure” due to a handful of economic variables, Foot Locker will maintain the “game plan” it has formulated over the last two years under CEO Mary Dillon.
“We’ve got a lot of levers in our control now that we think are just starting to scale now, whether it’s our loyalty program, our store refreshes or a mobile app we’re launching [in Q4],” Dillon told an audience gathered this afternoon for the Goldman Sachs 31st Annual Global Retailing Conference in New York.
Dillon and her C-suite colleagues, Frank Bracken, the group’s Chief Commercial Officer, and CFO Mike Vaughn, expressed contentment with Foot Locker’s current relationship with Nike and its Jordan brand but also with its decision to broaden its footwear reach to more types of styles, brands and use occasions with the likes of Adidas, New Balance, Hoka, Asics, Brooks, Crocs and others. The retailer’s percentage of non-Nike or Jordan products is currently estimated at 40 percent.
“With the benefit of having seen a few up and down cycles in the industry,” commented Bracken, “I would say this the most complete and diversified I’ve ever seen our brand portfolio and the innovation that’s coming from them. […] There’s all these great case studies of brands that have really stepped up their games and become part of sneaker culture that five or ten years ago had not been.”
Foot Locker is also leveraging and sharing the data and analytics it derives from its younger, multicultural, and diverse consumer base through its online and store sales with its branded partners.
“And then, we figure out ways to grow the business collectively, look for geographies, look for consumer segments where we think that there’s upside for both of us,” added Bracken. “And that’s what helps fuel some of the door expansion and allocation increases that we’ve been experiencing the last couple of years with those partners.”
Except for its WSS banner and apparel business in the EMEA, the retailer is less concerned about the promotional environment in H2 than it was a year earlier when it and the footwear industry were saddled with excess inventory that needed to be moved. Foot Locker says it feels “very good” about its North American margin trajectory and “improvements outside of WSS,” with all banners expected to report year-over-year gross margin expansion in Q3 and Q4, although less than initially forecasted.
In Q2, Foot Locker achieved 24 percent of its sales from loyalty program customers. Loyalty member penetration is forecast to rise to 50 percent by 2026 and eventually 70 percent or higher. The group is also optimistic about its holiday season calendar in terms of the flow of products and quality of product launches, which should serve as tailwinds to the business in Q4.
On the licensing front, including its recent announcements on distribution shifts for certain European markets, the retailer is eying $30 million in total licensing revenue in 2026. Foot Locker is opening its first licensed store in India in October.
