Foot Locker plans to move more stores ‘off-mall’ in new rebranding strategy: CEO

Foot Locker CEO Mary Dillon sits down with Yahoo Finance Executive Editor Brian Sozzi at the 2023 Shoptalk Conference to discuss the company's new rebranding strategy and the outlook for the company.

Video Transcript

BRIAN SOZZI: All right. Joining me now from Shoptalk 2023 is Foot Locker CEO Mary Dillon. Mary, good to see you in person for a change.

MARY DILLON: Thank you so much. It's great to be here.

BRIAN SOZZI: I'm going to try my hardest not to point to your shoes because your shoes are absolutely amazing. I guess it comes with the brand now, right?

MARY DILLON: Thank you very much. It comes with the brand now. I'm unlocking my own inner sneaker head, which we'll talk about.

BRIAN SOZZI: Yes, we will. So talk to us. You're in the business. You're now fully immersed as the new CEO of Foot Locker. What are your observations on the consumer at this point in the year?

MARY DILLON: Well, I've been in the role now almost seven months. It's gone by so fast because I'm having the time of my life. And what I would say is that I had a lot of hypotheses about opportunities for the company. And they've been very much confirmed in the last several months. So we were talking about our Lace Up plan, which is really pointing towards how we're going to drive long term profitable growth for the company.

And it's about simplifying, investing, and growing. And there's four different pillars. It's about expanding sneaker culture, which means more sneakers, more occasions, more people in the category. It's about powering up our portfolio. It's about getting closer to the customer through all things digital and becoming a best in class omnichannel retailer.

BRIAN SOZZI: True story. I read every 129 pages in that investor presentation. I read every single one.

MARY DILLON: Thank you very much.

BRIAN SOZZI: Of course. Well, I came away with the view that there's a rebranding of Foot Locker going on. Better segmentation. Take us through it.

MARY DILLON: Yes. Well, listen, Foot Locker as a brand has over 50 years of authentic heritage in street basketball, in youth culture. I mean, we are the OG in sneakers. And really refocusing on all things sneakers, relaunching the Foot Locker brand, the Kids Foot Locker brand to drive even more top of mind awareness, more inclusion for all members of the family.

And I'm very excited about that. And a central part will be really highlighting and celebrating the role of our Stripers. And those are the folks in our stores who bring the business to life every day who have the customer connection. But the best thing is they are sneaker experts. So it's a very differentiated part of the Foot Locker brand.

BRIAN SOZZI: So the Foot Locker brand sneakerheads. What is the outlook for Champs Sports? How do you reinvigorate that? WSS. How do you think about those brands?

MARY DILLON: Yes. Well, I'm proud about the fact that we're just simplifying and focusing on the banners that we believe will drive that long-term growth as well as differentiating them from each other. So you mentioned-- I won't get into all this because I could do an hour on consumer side--

[INTERPOSING VOICES].

BRIAN SOZZI: It was 129--

[INTERPOSING VOICES].

MARY DILLON: There was a lot. But we have really great insights about different motivations that drive sneaker buying behavior. And we're really doing is positioning the banners to best serve those needs. So Foot Locker and Kids Foot Locker really focus on the sneaker maven and a fashion forward expressionists and active athletes. Champs will be much more focused on the active athlete. And also, WSS we talked about-- that's a brand new business that was bought a year or so ago-- focus on the Hispanic family.

And there's so much tremendous opportunity given the demographic growth in the US of Hispanic shoppers and their buying power. And then Atmos, which is our very special based on all things Japanese culture and sneaker culture headquartered in Tokyo with about 35 stores that we're going to-- really, that's the place that we are at the top of the pyramid as it relates to sneaker culture.

BRIAN SOZZI: Why the 400 store closures?

MARY DILLON: Pardon me?

BRIAN SOZZI: The 400 store closures.

MARY DILLON: We're optimizing. Listen, we're going to be reducing number of stores, but increasing square footage. We're really stepping back and saying, what's the most powerful way for our portfolio to show up? And that's community stores, which do exceptionally well for us. Those are freestanding, full-format stores that really connect into the local community through activation, even celebrating local artists.

There's power stores. And what we're doing with those is moving more off mall. So we'll be closing some underperforming stores in some C and D malls and keeping A and B stores that are doing great and shifting our portfolio over time to be even more off mall.

BRIAN SOZZI: Why off mall? Why is that a focus?

MARY DILLON: Well, I think I saw that before. Just the trends in shopping I think in general. Shoppers are looking for more convenience. So we're used to being able to buy things online and in store. And, sometimes, the off mall kind of low key shopping centers are just super convenient. But there's plenty of malls that are just incredibly strong as well. I just visited one here today in Las Vegas. And when you're in the right malls and you've got a lot of foot traffic, that's also a great place to be. So for us, it's a balance.

BRIAN SOZZI: Talk to us about some of the relationships. Let me tick through them. Nike. Now, there is this view, a lot of the analysts that cover Foot Locker, Nike wants to open up its own retail stores. What does that mean for Foot Locker?

MARY DILLON: Well, listen, to our relationship with Nike is revitalized. We're really looking forward to growing in the future. By the end of this year, we'll be in a position where we're growing again with Nike. I've spent a ton of time with the team. I'm wearing Nike Air Max 97 today.

BRIAN SOZZI: I'm very jealous.

MARY DILLON: The Golden Bullet.

BRIAN SOZZI: I used to have a pair of those.

MARY DILLON: And like every great brand and company, I think wanting a relationship direct with their customers is really, of course, important. But in addition, what Foot Locker brings to our brand partners is something that's really special and unique, access to a young and diverse consumer, access to people who want to shop both online and in person. And that's what we see is a lot of people want to shop in a multi-brand environment. So there's a role for retail. And there's a role for direct to consumer. And we just want to participate in both.

BRIAN SOZZI: So you see there-- it sounds like you're saying that there is a coexistence. Nike can open up their retail stores. And you're still going to get their best product.

MARY DILLON: You know what, we're working with our partners at Nike every day to really build out our future plans. In fact, we talked about we're going to be celebrating the 25th anniversary of the Air Max. The Tuned Air, I should say. We've got a lot of exciting things coming in basketball, running. So absolutely very excited about the future relationship.

BRIAN SOZZI: What other brands are surging in your stores that investors may not know about?

MARY DILLON: Well, I'll tell you what's really hot right now is what we call vintage tech running. So it's a brand like New Balance, really reinventing and bringing back so much demand and heat around interest in wearing New Balance for just comfort and fashion as well as for running. I would say performance running is really on the move as well. Classic basketball. Signature basketball. So again, at Foot Locker, I'm excited about-- we did a LaMelo Ball tie-in with Puma that was signature for us that did quite well. So all of those categories are really hot.

And I would say, for me, it's about how do we unlock the inner sneakerhead in everybody because there's various ways that you can build your sneaker wardrobe, which I hope you're starting to do. I used to be only in the active athlete category because I'm a runner. But now I also see that you can expand your entire sneaker wardrobe and find so many occasions to be more comfortable, frankly, and more fashionable.

BRIAN SOZZI: The Foot Locker customers, they're economically sensitive. I go to my local Foot Locker, and there's a lot of kids there. How are you seeing them shop right now? We're talking about a banking crisis. We're talking about inflation still high. Have you seen any pullback in consumers?

MARY DILLON: Yeah. I'd say it's a balance. I mean, the consumer has been under pressure for a while since even last summer when inflation started to go up. And there's additional current pressures around SNAP benefits being taken away, around other aspects of what people are seeing in their lives. But on the other hand, sneakers are an affordable luxury. And people make choices. So our customers are choosing this as a category that they want to participate in. But no doubt people are being more choiceful about how they spend their money.

BRIAN SOZZI: Your stock price has gone through the roof since you joined, Mary. And I think about it as it's the Mary Dillon premium in Foot Locker based on the magic you worked at Alta. Does that put more pressure on you to you have to deliver on these 2026 targets maybe earlier than 2026?

MARY DILLON: Well, listen, I'm really lucky I've got a great team that has embraced me into the industry and to the business. And we're working together to deliver that kind of exciting algorithm as we go forward. And it won't be easy. '23 is a reset year. We've been very clear about that. But we're investing the capabilities that we need to really build the next 50 years of Foot Locker fame, I'll call it. So I'm very excited about that.

BRIAN SOZZI: What is the difference between what you did at Alta, growing that over the course of eight years, expanding the assortment, opening up a lot of stores, and what you're trying to do at Foot Locker?

MARY DILLON: Interestingly, in some ways, there are similarities. I think beauty and sneakers have similar aspects in terms of engagement as categories. They're categories where you can express your individuality, where newness and innovation all really matter. So in many ways, it's not the exact playbook. But there's many of the similar opportunities to drive great brand partnerships, to really use our data to help drive our brands together with our brand partners, to have a loyalty program that we're going to relaunch and I really believe will be a really key to unlock of some future growth, as well as being even stronger e-commerce marketers. So some of those are similar. I'd say we're just going to get it done faster.

BRIAN SOZZI: I apologize. I left my sneakers in my hotel room. So I'm dress shoes.

MARY DILLON: OK. What is the problem? There are plenty of people with sneakers here I've noticed.

BRIAN SOZZI: I had to tell you.

MARY DILLON: More opportunity.

BRIAN SOZZI: All right. Foot Locker CEO Mary Dillon, I wish you much success in your new journey at the company. We'll talk to you soon.

MARY DILLON: OK. Thank you so much.