TheChek News Flow

The footwear retailer also beat fourth-quarter expectations.

Foot Locker and chief executive officer Mary Dillon rolled out a multipronged strategy Monday to help the retailer increase market share and grow sales to $9.5 billion by 2026.

Dubbed its “Lace-Up” plan, the new strategy will aim to grow Foot Locker’s business to more than $9.5 billion in annual revenue by 2026 by diversifying its brand portfolio, relaunching the Foot Locker brand with new store formats focused on an off-mall presence, maximizing its loyalty program and investing in technology to enhance the customer journey.

Dillon also said the business is back on track with Nike, an important brand in the retailer’s overall mix.

“My team and I have spent a great deal of time with Nike revitalizing our partnership, developing a shared vision of the future marketplace,” said Dillon, who called out that she was donning a pair of Nike Air Max 97s during the presentation. She added that Foot Locker and Nike are focusing on key strategic areas such as basketball, kids and sneaker culture, and are sharing data and insights to plan their strategies together.

“The fruits of our renewed commitment to one another will begin to show up in holiday this year as we build increasing momentum to 2024 and the 50th anniversary of Foot Locker,” she said.

Foot Locker chief merchandising officer Chris Santaella added that the partnership is focused on creating a strategy that is “complementary to the Nike direct-to-consumer strategy.”

As the standout brand in the retailer’s portfolio, Nike will make up between 55 percent and 60 percent of Foot Locker’s total sales mix by 2026, Santaella said. Nike made up 70 percent of sales in 2021 and 75 percent of sales in 2020.

The news marks a rapid turn of events in the relationship. Last year, Foot Locker said the amount of Nike product in stores would be significantly less as Nike accelerated its shift toward d-to-c sales. This move initially caused the retailer to post a bleak outlook for 2022, though Foot Locker said it managed to churn out better-than-expected results for the third quarter, the first period in which the diminishment of Nike product was meant to be felt in stores. Nike sales were also higher than expected in the fourth quarter.

Prior to the reversal, analysts were hopeful that under Dillon’s stewardship, the Nike-Foot Locker partnership could be restored to some of its former glory.

“Since Dillon came aboard last August, the tone of the Nike-Foot Locker relationship seems to have become warmer, and it’s possible that they strike a positive tone on the business with Nike,” wrote Wedbush analyst Tom Nikic in a note to investors last week.

In addition to a renewed focus on basketball product, Santaella said Foot Locker and Nike will work in tandem to “develop the next generation of sneaker enthusiasts” by aligning on product for Kids Foot Locker. He also noted that Nike and Foot Locker will continue to partner on celebrating key sneaker moments. This year, both companies will partner to celebrate the 25th anniversary of the Tuned Air franchise. And in 2024, the two will partner on a product concept to celebrate Foot Locker’s 50-year anniversary, which will also celebrate the retailer’s partnership with Nike.

While Nike will remain a key brand partner for Foot Locker, Santaella and Dillon noted the retailer plans to lean into other brands such as Adidas, Puma, New Balance, Crocs, Hoka, On and Under Armour.

“There are more consumers seeking more brands to support their desire to wear sneakers on more occasions,” Santaella said.

In the fourth quarter, total sales decreased by 0.3 percent, beating the company’s expectations from the third quarter, which had sales down between 8 percent and 10 percent. Net income decreased to $19 million. Non-GAAP net income decreased to $92 million. Non-GAAP EPS decreased to $0.97 per share, ahead of analysts’ expectations of $0.51. Comparable-store sales increased 4.2 percent.

For fiscal years 2024 through 2026, Foot Locker expects total sales growth of between 5 percent and 6 percent, comparable sales growth of between 3 percent and 4 percent and adjusted EPS growth in the low- to mid-20s.

The retailer also outlined its guidance for the full fiscal year of 2023, and expects sales to be down between 3.5 percent and 5.5 percent. Comparable sales are expected to be down between 3.5 percent and 5.5 percent. Non-GAAP EPS is expected to be in the range of $3.35 and $3.65.

“We are entering 2023 with a focus on resetting the business — simplifying our operations and investing in our core banners and capabilities to position the company for growth in 2024 and beyond,” Dillon said in a statement.

Here’s a closer look at the four key pillars of the new strategy:

Foot Locker wants to tap into different classes of sneaker consumers — from sneaker mavens to deal seekers — to grow its market share. To do this, Foot Locker plans to capitalize on key sneaker moments and anniversaries while offering consumers a broad selection of brands and styles. Exclusive launches and collaborations will also fuel demand.

Part of this pillar involves reigniting a strong brand partnership with Nike, which will remain Foot Locker’s largest brand by sales.

In addition to a renewed focus on basketball product, Foot Locker and Nike will align on product for Kids Foot Locker and partner on celebrating key sneaker moments, such as the 25th anniversary of the Tuned Air franchise this year and Foot Locker’s 50th anniversary in 2024.

Foot Locker also plans to lean into other brands such as Adidas, Puma, New Balance, Crocs, Hoka, On and Under Armour.

The second pillar focuses on optimizing Foot Locker’s fleet and unique store banners. This involves closing underperforming stores, opening new formats in off-mall locations and positioning the Foot Locker brand as a community builder. Overall, Foot Locker plans to close about 400 locations to focus on higher performing doors.

At Kids Foot Locker, the goal is to “develop the next generation of sneaker enthusiasts” by leveraging the chain’s high-heat assortment of kids merchandise, Santaella said.

At Champs, Foot Locker will focus on serving an active and wellness-focused consumer. WSS will continue to serve the Latine market and capture more demand in that growing demographic. In Japan, the company’s Atmos banner will serve as a ground for innovation while being rooted in Japanese culture.

The Asia business is also getting an overhaul: Foot Locker said it would close all stores and e-commerce operations in Hong Kong and Macau and convert business to to a license model in Singapore and Malaysia. In Indonesia, leading lifestyle retailer MAP Active will take over Foot Locker operations in Singapore and Malaysia and grow the company’s presence in new markets as well.

Foot Locker wants to connect to consumers through a variety of channels, including in stores, digitally, on social media and via events. A key part of this relationship will come from a renewed focus on the FLX loyalty program, which Foot Locker said will win over more members via its integration into the sales journey.

In the long-term, Foot Locker is aiming to have loyalty sales account for 70 percent of total sales, up from 25 percent currently. The company also plans to integrate paths to join FLX and Nike’s loyalty programs as well, further cementing the relationship between the two entities.

Along with its in-store experience revamp, Foot Locker also sees an opportunity to grow the percentage of its digital sales. By 2026, Foot Locker aims to have digital sales penetration be about 25 percent of sales, or about $2.5 billion.

At the same time, the company wants to blend both digital and physical channels into one seamless omnichannel experience. To do this, Foot Locker plans to relaunch its app in 2024 and also plans to optimize certain omnichannel capabilities, such as being able to see a store’s inventory availability in real-time and offering a variety of fulfillment options for online orders.

Germany’s biggest utility makes rare attack on Washington’s attempt to pressure Beijing over alleged human rights abuses

Germany’s biggest utility has attacked a US ban on imports from China’s Xinjiang region, warning that it could “significantly hinder plans to build a green energy infrastructure”.

RWE said on Tuesday that the import of solar modules from Asia was now subject to “stringent checks” after Washington last year enacted a ban on all imports from the Chinese province where there have been allegations of human rights violations.

Germany’s largest power producer, which has expanded aggressively into renewable energy, including in the US, said it had been suffering “considerable project delays” as a result of what it called the time-consuming reviews of solar module deliveries.

“State-imposed restrictions on cross-border trade could also significantly hinder plans to build a green energy infrastructure,” the company said in its annual report. “We see an elevated risk of this being the case in the USA.”

It added: “If the USA continues to impede the procurement of solar panels, then it is possible that our photovoltaic expansion initiatives could fall behind schedule.”

The north-western province of Xinjiang has been an important global hub for the production of goods from cotton to silica-based products that are used in solar panel modules.

Business lobby groups had warned that the Uyghur Forced Labor Prevention Act, signed into law by President Joe Biden in 2021, would pose a significant compliance challenge for western businesses operating in China due to the difficulties of conducting audits of supply chains.

RWE’s complaint makes it one of the only western companies to publicly criticise legislation designed to pressure Beijing over Xinjiang. The UN has warned that crimes against humanity may be taking place against interned Muslim Uyghur and other minorities in the province. China denies the claims.

The criticism from RWE also underlines the tension between the Biden administration’s ambitions to boost renewable energy production and its efforts to upbraid China. The EU also faces a similar dilemma.

In Germany, a new supply chain law came into force at the start of this year that requires companies with more than 3,000 workers to implement systems to check whether or not their suppliers are abusing human rights.

RWE’s intervention came as the company reported better than expected earnings before interest, taxes, depreciation and amortisation of €6.3bn for last year. The group pledged to raise its dividend in 2023 and scale up its investments in renewables.

February figure of £16.7bn is higher than expected

UK public sector borrowing rose more than expected in February, driven by the cost of the government’s energy support schemes.

Public sector net borrowing was £16.7bn last month, the Office for National Statistics said on Tuesday. That was £9.7bn more than in February 2022 and higher than the £11.4bn forecast by economists polled by Reuters.

It was also the highest February borrowing since monthly records began in 1993, largely because of substantial spending on energy support initiatives.

Between April 2022 and February 2023, the public sector borrowed £132.2bn. That leaves borrowing on course to be broadly in line with the £152.4bn forecast by the Office for Budget Responsibility for the full financial year.

Chancellor Jeremy Hunt said: “Borrowing is still high because we’re determined to support households and businesses with rising prices and are spending about £1,500 per household to pay just under half of people’s energy bills this winter.”

DAX:

MDAX:

SDAX: