A Shoe Retailer that Looks Good to Go
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In a tough economic environment where businesses are finding it a challenge to survive, we have an exception. Foot Locker (NYSE: FL) posted rocking first quarter results and surpassed Street estimates, resulting in an 8% jump in its shares. Let’s see what is working for Foot Locker.
Into the numbers
The athletic product retailer posted a 9% surge in its sales and an astounding 38% jump in its earnings from last year. The company has been consistently performing well, and brought about its ninth consecutive quarter of sales and bottom-line growth. Comparable store sales surged almost 10% and the Direct to Customer division also performed very well, gaining 16.5%. The only division that could not match up with other divisions was its Europe division, the reason being obvious as economic uncertainty took its toll.
Other shoe makers, such as Wolverine World Wide Inc. (NYSE: WWW) and Deckers Outdoor Corp. (NASDAQ: DECK), have faced a similar situation in their recent quarterly results of low sales on account of weak demand in Europe. Wolverine saw its top line dropping and margins shrinking as its European woes caught up with it. The case for Deckers is also nothing to write home about, as Fool analyst Rich Smith says the company appears quite deceptive and it would make sense to wait and watch this one.
Getting back to Foot Locker, the key driver for its eye popping results was the Champs Sports segment, which posted an increase of 20% from last year. So what powered the demand for the retailer’s products? Let’s find out.
Product innovation
Variation in the styles and colors for the footwear and the apparel product lines spurred demand for its products. Nike (NYSE: NKE) needs a special mention here for its new products introduced this year. With the launch of Nike Free, a lightweight running shoe, the company achieved a strong foothold in the tough European market. The magic of colors was evident with the outstanding increase in its basketball business for the quarter. Adding to these were the new colors and styles offered by the Converse brand, which drew customer attention.
Marketing efforts
Foot Locker spent a great deal on marketing their products, which helped them in a big way by attracting more customers and increasing the overall footfall for the stores. Their marketing investment was in excess of $2 million for the first quarter. They would continue to increasingly invest in marketing strategies in the coming months also.
Store expansion
The company laid stress on replacing the non profitable stores with the profitable ones by closing 34 stores in U.S. that were unproductive and opened 25 new stores in Europe where the company foresees profitability. The total store count for Foot Locker has become 3,360 at the end of the quarter. Most of its store expansion efforts were in the CCS skate and Foot Locker International stores highlighting their focus on the international market.
Plans ahead
The footwear retailer plans to open Kids stores in selected markets in the year and also put special efforts to expand its women’s business in general. It targets to spend $10 million on the women’s business segment in the months to come.
Foot Locker will be offering Olympic themed products next month for the London Olympics, which will make the customers increasingly aware of their products. The company also expects a boost in their business with the European Football Championship.
The Takeaway
Foot Locker has been in an active mode with lots of innovation, expansion and marketing efforts. The company did pretty well in the previous quarter and with the way things are going, it seems Foot Locker would keep getting bigger with time.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
