Some of the teenagers in line to enter Foot Locker’s new flagship store in midtown Manhattan on Tuesday morning had camped out for eight hours.
Most said they were not there to check out the glitzy, 13,000-square-foot shop, and were not there to meet New York Knicks player Joakim Noah. They came to buy limited-edition sneakers—and in most cases, re-sell them immediately. And that’s just fine by Foot Locker.
While the customer behavior has changed, the basic concept hasn’t: Foot Locker is a shoe store, though with more digital and social bells and whistles than ever before. The company has thrived by catering to sneakerhead culture, playing up the hype of new sneaker releases and following the lead of the sneaker brands themselves by releasing a Foot Locker Unlocked reservation app.
In the new store, every footwear brand gets its own designated area (such as Under Armour) or, in four cases, a separate store-within-a-store “concept shop.” The four concept shops are: House of Hoops (Nike and Jordan Brand); The Foundation (Adidas); PumaLab; and Six:02, Foot Locker’s women’s apparel store, which has higher price points than Lady Foot Locker and is a standalone retail store everywhere else.
This is the first Foot Locker to house a Six:02 concept shop, and it will be the first place to carry Rihanna’s new Puma collection (other than Bergdorf Goodman) for 24 hours before it goes wide-release on Sept. 7. Nestled inside the Six:02 concept shop is yet another mini-shop called The Collection, which currently features a lot of Ivy Park (Beyonce’s fashion line), and Stella McCartney-designed Adidas gear. “We curate the best stories from our brand partners,” says Foot Locker North American CEO Jake Jacobs. He compares it to “a gallery approach.”
In the past year, CitySports and Sports Authority both filed for bankruptcy and began the process to liquidate all their stores. Vestis Retail Group, which owned the chains EMS, Bob’s Stores and Sport Chalet, filed for bankruptcy. Quiksilver filed for bankruptcy; Aeropostale is bankrupt; Finish Line will close 150 stores.
Foot Locker has bucked the trend. This month it beat expectations with its Q2 earnings of 94 cents per share and revenue of $1.78 billion, both figures up from the year before. The company forecasts a profit in 2017 while many of its longtime competitors are gasping for air. The stock (FL) is up 15% in the last two years, and 235% in the last five.
It’s all because the chain keeps “listening to the kid,” says Jacobs. “The kid is different today than they were in the past… it’s more of a storytelling game.” The new flagship store isn’t as obvious an example of that—it only has one modest area for children’s footwear, because there is a Kids Foot Locker just one block away—but the average Foot Locker brick-and-mortar visitor is between ages 14 and 25.
That age group will appreciate the tech touches at the store, such as a digital content board and a “vending machine” that dispenses prizes for tweets. But online sales are still less than $1 billion of the whole company’s $7.4 billion in 2015. “We continue to connect with our customers often multiple times on their journey to selecting their favorite sneaker,” said CEO Dick Johnson on the company’s Q2 earnings call.
Foot Locker Inc., in addition to more than 3,000 Foot Locker stores, also owns Champs, Footaction, and Eastbay. It has a stated goal of growing from $7.4 billion in revenue last year to $10 billion by 2020, and it will do so with “experiential” stores like the new flagship location and by catering more to women and to brands that want premium attention in Foot Locker stores.
Foot Locker is also contending with the fact that footwear brands, whose products Foot Locker carries, are opening up more of their own official stores. Adidas, which has seen great success among the sneakerhead crowd with its Kanye West-designed Yeezy line, plans to open dedicated Yeezy retail stores. Under Armour, to cite another example, will open a brand store on Fifth Avenue in the former home of FAO Schwarz. For now, the trend doesn’t worry Jacobs. “Kids want to see the best that every brand has to offer,” he tells Yahoo Finance. “This,” he says, gesturing around the store, “is the best of everything. And Nike doing a flagship store, kids go in there and what do they see? Just Nike.”