Footwear Insight

22 • Footwear Insight ~ May/June 2019 footwearinsight.com By Jennifer Ernst Beaudry O nline? In store? As far as Foot Locker's Dick Johnson is con- cerned, it's immaterial. Almost 18 months after inte- grating its digital and in-store operations, and a year into an intensive back-end overhaul to speed up its site, Foot Locker has reaped the rewards of a unified strategy that makes its web, mobile and brick-and-mortar operations faster and more seamlessly connected. It's a correction, Johnson said, that's overdue. Foot Locker ended 2018 with sales of $7.9 billion, energized by a fourth quarter where comp-store sales jumped 9.7 percent and sales hit $158 million — a far cry from the final quarter of 2017, where the retailer saw a loss of $49 million. "We missed a shift in 2017 and we got punched pretty hard, but the truth is that it was a great wake-up call," said Johnson, Foot Locker's president, CEO and chairman. "We have to make sure we're relevant with our consumers, that we've got great connectivity with our consumers and we build engaging retail spaces for them, whether those spaces are physical or digital." That's meant change ups on the in-store piece as well. In January, Foot Locker announced its new Power Store model, which emphasizes connection to the local community and shop-in-shops dedicated to kids and women's product. At the same time, the retailer said it would wind down its women's focused SIX:02 banner, which it debuted in 2012 and had grown to 30 doors even as it struggled to find the right mix to appeal to style-focused women's shoppers. Under Johnson, who's served as president and CEO of Foot Locker Inc. since 2014 (and was named chairman in 2016), the firm also entered a new era of extension: The New York-based company made a slew of invest- ments in the fourth quarter of 2018, re-upping its investment in women's online athletic fashion player Carbon38 with an additional $10 million, taking a $12.5 million minority stake in kids' subscription box firm Rockets of Awesome and a $3 million minority stake in kids' sneaker brand Super Heroic. The firm also put $2 million into a continuing partnership with sneaker design school Pensole, and most eye-poppingly a $100 million minority investment in secondary sneaker market powerhouse GOAT Group, which operates its eponymous sales site as well as Flight Club, one of the first names in the resell market. And Johnson wants to push the envelope even farther in 2019. One example? A new loyalty program that rewards frequent buyers with desirable options like early access to coveted sneaker drops and concert experi- ences. "We have to be more than just a retailer," Johnson told Footwear Insight. "The retail of tomorrow doesn't look like the retail of yesterday." Here, Johnson sounds off on navigating the brick-and-mortar/digital divide, the importance of retail basics and all those new partnerships. The growth in Foot Lockers' same-store sales took analysts by surprise — in a good way — in the 4th quarter. What changed about your understanding of what the consumer wants? "It's taken us a long time to truly understand that our customer's driven by cool — that they don't necessarily buy a brand, they don't necessarily buy a category. With the digital device and the access our consumer has to data and visuals from all over the globe, our consumer's really motivated by whatever is the coolest, [and] they want to see the options presented to them in a great environment, either physical or digital. They want us to be the place that has the best of the best." Getting the company onto a new digital plat- form was a priority in 2018. What made that behind-the-scenes investment critical? "Our core consumer starts their journey with us on their digital device all of the time — their window into our store is however we represent ourselves digitally. The customer didn't really see it, but they saw that the site worked faster and worked better. The 'store' is a combination of how we relate to the consumer digitally and then deliver on their expectations both physically and digitally. There's lots of discussion in the retail industry of what's a digital sale and what's a physical sale these days. If you happen to click the 'buy now' button when you're looking at your phone and you choose to have that delivered to a store and pick it up — the inventory's coming out of the store potentially but the click happened online. So is that a digital sale or is that a physical sale? For me, it's a Foot Locker sale. We all have to remove more friction from the experience — whether it's digital friction or physical friction or delivery friction, last-mile friction, whatever it is. We all need to be willing to remove that and figure out the cost of doing that." During your Q4 earnings call, EVP and CFO Lauren Peters called out a metric that doesn't always get a lot of attention: inventory turns. She was celebrating the fact that, as a com- pany, Foot Locker had surpassed its long-time target of three turns. What made that a priority? "After people, inventory is our biggest asset, Foot Locker president, CEO and chairman Dick Johnson. Q&A Foot Locker Forges Ahead

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