Foot Locker (FL)

After Foot Locker's company-wide operating margin fell to 6.6% in 2006 (from 7.2% in 2005), the company began an initiative to improve efficiency and profitability by changing their store base. This strategy comprised opening new stores, relocating existing stores to optimal locations and closing down unproductive stores. During 2007, Foot Locker closed 157 stores on net (opening 117 new stores while shutting down 274 underperforming locations). The store closings have continued in 2008 as in the first quarter of FY08, Foot Locker closed 60 more stores, while simultaneously opening 33 new locations for a net decrease of 27 stores. The initiative is still incomplete, as management plans on closing about 140 stores during 2008, while opening about 60 stores and remodeling/re-locating around 200 stores. Although this initiative is very costly, once completed, FL's stores will be much more efficient and profitable in the future.

An analyst at Barclays has pinpointed Foot Locker as a company to watch in the near future, due to its identification of many ways to improve its business. Chief among these methods is a decision to focus on running products and apparel, particularly through a running-focused prototype store called Run by Foot Locker in New York. With an increased emphasis on running, the analyst believes Foot Locker can easily meet its plan to reach annual sales of $6 billion and net income margin of 5 percent over the next five years.

In November 2008, Foot Locker acquired Delia's CCS business for $103.2 million. CCS is a direct-to-consumer (internet and catalog) retailer of skateboarding apparel, footwear and accessories, mailing approximately 18 million catalogs annually. The move represents an attempt on Foot Locker's part to appeal to a younger target market, particularly in the rapidly growing action and extreme sports categories as FL's staple high-performance footwear segment declines because of a weakening economy and spending environment.