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Foot Locker (FL) Benefits From Favorable Demand, Online Sales

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With the easing of pandemic-led restrictions, socializing and indulgence in outdoor activities is back in the picture. As a result, consumers’ interests in shopping apparel products have returned to normal. Such trends are benefitting the well-known footwear and apparel products company, Foot Locker, Inc. (FL - Free Report) . Strong demand across a range of categories contributed to the company’s performance during second-quarter fiscal 2021. Sturdy digital operations, efforts to elevate brands and supply chain capacities have been supporting the company.

Demand Conditions Look Favorable

During the second quarter, Foot Locker’s top line gained from strength across stores and digital channels, supported by a solid product pipeline and healthy demand from customers. It witnessed solid performance across the women's and kids' footwear businesses as well as robust demand for apparel and accessories offerings. The company’s footwear business rose in low-single digits, while both apparel and accessories businesses were up double digits. The company expects the product categories to keep performing well.

Other apparel products retailers such as Skechers U.S.A., Inc. (SKX - Free Report) and Guess?, Inc. (GES - Free Report) have also been gaining from favorable demand conditions. Industry experts believe that the upcoming festive season is likely to encourage consumers to shop more. This is likely to benefit retailers like Foot Locker. The company continues to expect a more rational promotional backdrop, which is likely to keep supporting margins.

Online Wing Looks Solid

Foot Locker’s online business has been doing well and driving revenue generation. It is investing significantly to reinforce its digital presence. The company is on track to bolster omni-channel capabilities by adding new functionalities. In this context, the company activated a Shop My Store feature on its website. It has 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. During second-quarter fiscal 2021, the company’s digital sales penetration rate was 20.1%, well above the 2019 levels and this trend is likely to continue.

Other Prudent Growth Strategies

Foot Locker focuses on building operational and supply chain efficiencies. Prudent inventory management strategies and efforts to boost seasonal products are helping the company to meet customer demand effectively. During the second quarter, it gained from growth across brands like Crocs, UGG and Birkenstock along with an expanded balkanized offering in Vans and Converse. It has also revealed plans to launch its own brands, like Locker and Cozy. Along with growth in footwear business, the company’s apparel and accessories businesses have also been progressing well.

Strategic partnerships and acquisitions are also helping the company boost offerings across categories. Foot Locker recently completed the acquisition of U.S.-based footwear and apparel retailer Eurostar, Inc. (WSS) for $750 million. The company entered into an agreement to acquire Text Trading Company, K.K. (atmos) for $360 million. The WSS and atmos transactions are likely to drive the company’s bottom line in fiscal 2021.

The company is on track with the conversion of its Footaction stores to other existing banner concepts. The company is also progressing well with the expansion of the FLX membership program. At the end of the second quarter, FLX program members exceeded 25 million, globally. Apart from these, the company is progressing with its technology upgrades. It is bolstering the point-of-sale system and launched a drop-ship pilot program with NIKE, Inc. (NKE - Free Report) to activate additional inventory on its website.

Wrapping up, Foot Locker’s strategic initiatives keep it well placed for growth in the forthcoming periods. For fiscal 2021, management is optimistic about delivering a low to mid-teen increase in comp sales.

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Guess, Inc. (GES) - free report >>