Foot Locker (FL) Up 34% in 6 Months, Gains on Digital Sales
With the easing of pandemic-led restrictions, consumers are gradually returning to the old normal and are looking to refresh their wardrobes. Retailers such as Foot Locker, Inc. FL are gaining from such trends. The renowned footwear and apparel products company continues to benefit from strong merchandise offerings. This is boosting store sales, as witnessed in first-quarter fiscal 2021. The company’s digital business has been performing well and supporting its direct-to-consumer (“DTC”) channel. Shares of the company have surged 33.9% in the past six months compared with the industry’s rise of 19%. That said, let’s take a closer look at the factors supporting the performance of this Zacks Rank #1 (Strong Buy) company.
Robust Product Offerings
During the first quarter, Foot Locker witnessed favorable response from customers for its merchandise offerings. In fact, management highlighted that the company continued to witness strong demand for athleisure and fitness products. This led to higher inventory productivity and significantly less promotional activity. A strong product pipeline promoted growth across the company’s stores. Foot Locker is likely to benefit in the long run by continually exploiting opportunities in kids’ and women’s business, shop-in-shop expansion in collaboration with its vendors, store banner.com business, store refurbishment and enhancement of assortments. The company will convert nearly one-third of its Footaction stores to other existing banner concepts. This will help the company focus on its iconic banners. The retailer is also exploring opportunities in off-mall retail formats.
Strong Digital Wing
Foot Locker has been actively investing toward expanding its digital presence. During first-quarter fiscal 2021, the company’s digital business increased 43% on a comparable basis and contributed 25% to total sales. The company is on track to bolster omni-channel capabilities by adding new functionalities. In this context, it activated a Shop My Store feature on its website. Foot Locker added Apple Pay and Google Pay to digital payment options for providing greater flexibility as well as convenience to customers. Apart from these, the company is enhancing buy online and pickup in-store capabilities as well as elevating its mobile app experience. Sturdy growth in the online arena and strong omni-channel offerings is fueling growth in the DTC channel. Sales in this channel increased 47% during the first quarter.
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Other Noteworthy Efforts
Foot Locker is focusing on bolstering business internationally. The company is undertaking efforts to expand footing in the Asia Pacific. It is effectively managing inventories and improving supply chain operations to attain greater productivity and efficiency. The retailer is also engaged in strengthening assortments.
The company is progressing well with the FLX membership program, which inspires customers to remain within the Foot Locker portfolio of banners. At the end of the first quarter, FLX program members exceeded 20 million, globally. The company is also on track with technology upgrades. In this regard, it is bolstering the point-of-sale system and launched a drop-ship pilot program with NIKE, Inc. NKE to activate additional inventory on its website.
Encouraging View
Given the strong start to fiscal 2021 and backed by solid market trends, the company expects total sales to increase at a low double-digit to low teens rate in fiscal 2021, year on year. It expects gross margin to expand, largely reflecting a more rational promotional environment.
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