Foot Locker leads the pack in the race to capture the biggest share of the global athletic footwear market. The company is a leading retailer of athletic shoes and apparel, with more than 3,470 specialty stores in 20-plus countries across North America and Europe, as well as in Australia and New Zealand. Its 1,870-store namesake Foot Locker chain is the #1 seller of name-brand (NIKE) athletic footwear in the US. The company also operates stores under the Lady Foot Locker, Kids Foot Locker, Footaction, Champs Sports, and CCS banners. In addition to its bricks-and-mortar business, Foot Locker markets sports gear through its direct-to-customer unit, which consists of catalog retailer Eastbay and Footlocker.com.
Foot Locker has stores in 23 countries in North America, Europe, Australia, and New Zealand. The US is the chain's largest market, followed by Europe, where it operates more than 600 stores and rings up about $2 billion in sales.
Through its subsidiaries, Foot Locker operates in two reportable segments: Athletic Stores and Direct-to-Customers. The Athletic Stores segment, which generates 89% of Foot Locker's revenue, is one of the world's largest athletic footwear and apparel retailers with banners Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction, and CCS. Accounting for the remaining 11% of revenue, the Direct-to-Customers segment includes Footlocker.com and other affiliates, including Eastbay and CCS, which sell to customers through websites, mobile devices, and catalogs.
Following fiscal 2013, when Foot Locker's net sales rose 10% to $6.18 billion, the retailer in fiscal 2014 logged $6.5 billion in revenue, representing yet another year of increases, this time by $323 million. Foot Locker attributes the peak revenue to its acquisition of Runners Point Group. Continuing an upward trend in its net income, the footwear chain also saw net income peak at $429 million, a $32 million increase, or 9%. During the reporting period, Foot Locker posted $530 million in cash flow from operations, an increase of $114 million from 2013.
Footwear sales represented 77% of total 2014 sales. Apparel and accessories sales brought in 23% of total sales.
While Foot Locker has met its near-term goal of improving sales and profitability -- as outlined in a strategic plan unveiled in 2010 -- longer term the company is looking to expand its footwear and apparel offerings to attract a more-diverse customer base and grow the business internationally. (Foot Locker is heavily dependent on athletic-shoe-giant NIKE, which supplies more than 60% of its merchandise.) To this end, the company in 2014 rolled out its Eastbay Performance Zone at Champs Sports, which offers customers the full range of Eastbay's elite-level products.
Foot Locker has its eye on becoming the leading global retailer of athletic shoes and apparel. Already about 30% of Foot Locker's revenue is earned outside the US and that share is growing. Foot Locker is expanding in Europe, while continuing to reduce its US store count due to declining footwear sales here. Going forward, the retailer plans to open more stores outside the US. The revised plan aims to grow overall sales to $7.5 billion (up from the previous goal of $6 billion), increase sales per square foot of selling space to $500 from $400, and increase its net income margin to 7% from 5%, all by 2015.
Mergers and Acquisitions
Foot Locker is looking to get a leg up in Germany as it chases after the strongest economy in Europe. To this end, the footwear retailer acquired Runners Point Warenhandelsges, a specialty athletic store and online retailer headquartered in Recklinghausen, Germany, in 2013. The deal, valued at 72 million Euros ($94 million), gives Foot Locker shops in Germany that operate under the Runners Point and Sidestep banners, as well as stores in the Netherlands, Austria, and Switzerland.
The purchase of CCS, a direct marketer of skateboard and snowboard equipment, apparel, and footwear that targets teenage boys, helped boost the company's online presence. CSS also operates more than 20 retail shops, an increase of about 10 locations since it was acquired in 2008.
Sales and Marketing
Foot Locker boasts half a dozen distribution centers worldwide, as well as third-party agreements to supports its operations in the US, Canada, Australia, and New Zealand.
Advertising expenses for fiscal 2014 were $102 million, compared to 2013's $107 million.