Foot Locker, Inc., through its subsidiaries, operates as an athletic footwear and apparel retailer. The company engages in the retail of athletic footwear, apparel, accessories, equipment, and team licensed merchandise under the Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Eastbay, atmos, WSS, Footaction, and Sidestep brand names. As of January 29, 2022, it operated 2,858 retail stores in 28 countries across the United States, Canada, Europe, Australia, New Zealand, and Asia; and 142 franchised Foot Locker stores located in the Middle East and Asia. The company also offers its products through various e-commerce sites and mobile apps. Foot Locker, Inc. was founded in 1879 and is headquartered in New York, New York. The company is publicly listed on NYSE under the ticker “FL”.
Our considerations
Foot Locker is a sportswear and footwear retailer, in business since 1974, which operates in over 2850 stores in 28 different countries, with the majority located in the United States. The company generates its revenue mainly from footwear sales, while apparel sales account for a smaller portion of total revenue. The company’s purpose is “to inspire and empower youth culture around the world, by fueling a shared passion for self-expression and creating unrivaled experiences at the heart of the global sneaker community.” Indeed, Foot Locker has a loyal customer base which prefers to feel the shoes before buying, rather than buying them online. However, despite strong results, the company faces several competitive and market-related issues that have dumped its shares over the past months.
The first and main issue Foot Locker is facing is that the company cannot be certain that its suppliers will continue to do business with them in the future. In 2021, the company purchased 87% of its merchandise from its top five suppliers, and it expects to continue to obtain a significant percentage of its athletic product from them in the future. Approximately 68% of all merchandise purchased in 2021 was purchased from Nike Inc and, in 2022, Foot Locker has announced that Nike purchases will not be higher than 60% of its total, representing a 8% decrease compared to 2021. Indeed, Nike is shifting its sales to the Direct to Customer model, where it sells its products directly to consumers, thus creating higher income margins, and this is having a bad impact on Foot Locker.
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