In the past Foot Locker had been opening 50 new retail stores a year in Europe, but in the near future the company plans to open just 6-8 annually. The capital that the American retailer would have spent in Europe is being invested into a new retail concept, a low-to-mid tier family footwear chain, called Footquarters, whose product range will have a 60/40 mix between brown shoes and athletic shoes. Most of the brown shoes will be private label items.
The company plans to open 30 such outlets in the USDA this Spring, before deciding whether or not to expand the network. The stores will be about 4-6,000 square feet in size, carrying footwear with core price points of $30-49. Foot Locker estimates the brown shoe market in the USA to be worth $25 billion. The company also cites the popularity of casual boots as a reason for tapping into the sector.
As previously reported, Foot Locker has been tapping more into the brown shoe market on both sides of the Atlantic Ocean over the past few months by offering more so-called “fusion” footwear in its stores. The company’s management announced the new Footquarters initiative in a recent conference call about its quarterly results where it also flatly denied reports that Foot Locker was looking to be sold.
It could not be determined whether Foot Locker plans to test out the Footquarters format at any time in the future in Europe, where it has been suffering lately. According to company executives, European retail operations contributed a stable profit in the 3rd quarter, ended Oct. 28, but comparable European sales were down. They improved somewhat in October, but the UK market remains a major problem for the group.
The French and British markets continue to be tough, although the overall sales environment in the region has become less “promotional,” the executives pointed out. They said British retailers are promoting so aggressively that they are almost “giving product away,” while rents and real estate prices in the country are among the most “onerous” anywhere. Germany and Spain were said to be “fair” while Italy is doing “pretty good” for the group.
In the USA, meanwhile, Foot Locker opened its first Champs Sports Just Hats store, selling only athletic hats at a mall in Miami earlier this month. This is another new retail concept from the group, although it will be of a much smaller scale than the Footquarters initiative, competing directly with retail shops like Genesco’s Lids and Hat World.
Foot Locker’s net profits were essentially flat at $65 million in the 3rd quarter, compared with $66 million in the year-ago quarter, when the company had a one-time gain of $1 million related to an income tax settlement. Total sales were up by 1.6 percent to $1,430 million. Comparable store sales slid by 0.3 percent.
For the first nine months of the year, the company’s turnover inched up by 0.2 percent to $4,098 million, while comparable store sales increased by 0.4 percent. Profits for the same period dropped to $138 million, as compared to $168 million in 2005, and included an extraordinary charge of $12 million after taxes to write-down assets.
During the 3rd quarter, Foot Locker opened 57 new doors, remodeled or relocated another 49 outlets and closed 16 others. As of Oct. 28, the company had 3,935 stores in 20 countries throughout the globe, and also three franchised doors in the Middle East. At the end of the period, there were 1,369 Foot Locker outlets in the USA and 733 in other countries, as compared to 1,376 and 722 respectively at the end of the 2005 3rd quarter. There were 558 Lady Foot Locker outlets as compared to 549, 333 Kids Foot Locker stores compared with 327 and 566 Champs Sports doors as compared to 557.
Champs Sports had double-digit profit growth in the period, with low-profile and skate shoes driving sales growth. The Foot Locker locations had single-digit sales increases with turnover from basketball shoes up in the low single-digit range. Basketball and cross-training shoes sold well at Kids Foot Locker. Throughout all of the group’s retail chains, Nike’s Air Shox and Jordan products were said to be strong sellers, along with skate shoes.