Foot Locker plans to expand customer base “off mall” with recent acquisitions

Foot Locker laced up its Jordans and is ready to ball. Earlier this month, the footwear chain agreed to two acquisitions that will cater to new geographic and generational demographics.

New shoes: In two separate all-cash deals totaling a cool $1.1+ billion, Foot Locker will acquire WSS, a national shoe retail chain, and Atmos, a Japanese sneaker company.

• WSS’s 93 stores are 100% off-mall, making them an appealing target for mall-centric Foot Locker, Jed Berger, its global CMO, told Retail Brew. The acquisition also allows Foot Locker to make inroads with the West Coast Latinx community and diversify its product mix.
• With Atmos, Foot Locker taps into a whole new market. As of 2020, Foot Locker—which brought in ~$7.5 billion last year—holds less than 1% of market share in the Asia Pacific region. Atmos also carries an exclusive in-house label and has a robust omnichannel presence; 60+% of its sales are online.
• In 2020, WSS and Atmos generated $425 million and $175 million in revenue, respectively. Foot Locker believes the former could be a $1 billion brand in the long term.

“They both gave us an opportunity to broaden our customer base and cater to different aspects of youth culture, which is our mission,” Berger said. “From an Atmos perspective, it’s not every day you get to partner with a globally recognized sneaker cultural brand like that. There is a huge part of sneaker culture that is from Japan, and we want to incorporate that in other parts of our business where it makes sense.”

Collabs on collabs

Foot Locker wants to reach more customers beyond these acquisitions. For example, the company recently partnered with HGC Apparel to better cater to Black customers.

• It pledged $200 million over the next five years to invest in youth-centric, Black-owned businesses.
• Foot Locker and Champs Sports, a subsidiary chain, are hosting an exclusive partnership between Puma and (believe it or not) American fashion doll line Bratz.

“These are all different types of partnerships that we bring into the sneaker creation process that celebrate all different parts of youth culture,” Berger said. “That is one of the places that the sneaker culture has met youth culture in new ways.”

For the kids

Appealing to the youths, especially during the back-to-school season, is vital for Foot Locker. Shoes are one of the most frequently shopped items this time of year; consumers are spending $161 this year on kicks on average, per the National Retail Federation.

• Berger said back-to-school has “been amazing” thus far, mentioning the unrelenting success of Crocs, a relatively new brand partnership. Behind its digital-first strategy, Crocs’s wholesale business was up 112.1% last quarter.
• From a consumer perspective, Foot Locker has seen demand increase as more kids, teens, and young adults want to flex on their classmates IRL this fall.

“We sell an incredible amount of choice of great products from great brands and it has been really, really strong, including apparel,” Berger said. “There is the casualization, which is really great for somebody like us who sells athletic-inspired products.”

• The company’s blowout Q2 earnings suggest as much.

The big picture: Foot Locker wants to grow beyond its namesake stores and expand its e-commerce presence. In 2019, the company invested $100 million in Goat Group, which owns an online marketplace for streetwear and sneakers. Berger said the majority of Foot Locker’s traffic comes from mobile.

“There is a lot of research and discovery that's done on your phone—whether it’s Instagram, TikTok, wherever,” he said. “We're happy to serve you wherever you are, but it is true that the discovery begins on your phone.”—KM