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Foot Locker Set to Outperform in 2019 on “Undeniable” Relevance

Acknowledging that investors once questioned the future of the iconic footwear retailer, financial analysts now believe Foot Locker has a solid plan for the future—starting with its investments in data analytics, digital platforms and a new incubator program it calls “Greenhouse.”

At its annual Investor Day conference last week, Foot Locker unveiled its plans for the future, including another year of $10 billion in sales and a greater emphasis on customer experience through a new membership program and stronger brand relationships. The retailer also said it would continue to integrate data analytics into its sales strategies to supplement what has become a wide-ranging assortment.

According to Christopher Svezia of Wedbush Securities, this should be music to Foot Locker investors’ ears.

“A clear message during the Investor Day was Foot Locker’s importance not just to brands, but to global sneakerheads,” Svezia wrote in an email sent to Sourcing Journal. “Over the past few years, Foot Locker has become increasingly aware of how to serve its customers with the merch they want. Store experiences, digital enhancements, speed, and exclusive product by region (Nike Home and Away packs, etc) along with key collabs (Timberland x Champion for example) and data analytics are driving differentiation and relevance.”

Taking that into account, Wedbush reiterated that its expectation for Foot Locker, over both the next quarter and long-term, is that it will outperform its previous outlook, calling its anticipated double-digit EPS in FY19 “conservative.”

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Svezia identified several factors that should lead to this outcome, including Foot Locker’s increased relevance in the minds of sneakerheads due to its strong relationships with up-and-coming brands. Greenhouse, in particular, was designed for just that purpose. Foot Locker has already acquired its first class for the program, a group of eight brands and platforms with a diverse set of goals, including the Pensole Academy, a trade school devoted to educating the next great minds in footwear.

During its Investor Day presentation, Foot Locker said Greenhouse is designed to “fuel the future” for the retailer and that it would serve to put the creators and brands acquired in those deals in a position to grow. In doing so, Foot Locker believes it can tap into the “next generation” of talent, which can then capitalize on new opportunities to tell innovative product stories.

“In our view, Foot Locker is just getting started, which should increasingly elevate its importance in the market,” Svezia explained.

Svezia believes Foot Locker’s improvements in assortment, elevated experiences, engagement, conversion and data gathering should continue to drive its relevance into the future. The analyst favorably compared Foot Locker’s business model with Nike’s successful “Triple Double” strategy—that is, building connections with consumers via an increasingly digital platform and strong merchandise selections.

Continued investment in digital technology and a more robust inventory management platform will enable the retailer to begin integrating RFID, as well, Svezia argues. Combined with its push into Asia and speed-to-market improvements driven by analytics, it is possible that Foot Locker’s margins and profits will only continue to grow.

“Foot Locker is taking many of the right steps to remain a top destination for global sneakerheads (elevating the experience, strong relationships with multiple brands, going digital) as it grows sales and expands margins,” Svezia said.