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Foot Locker: Share price slides on disappointing results

On Friday August 18, Foot Locker announced financial results for its second quarter ended July 29 and they were not what the markets had expected. In fact, they were way short of what the markets anticipated and consequently, the company’s share price plunged. There is a suggestion that product may be at least partly to blame and as Foot Locker is reliant on the goods manufactured by the likes of Nike and Under Armour, the news had a detrimental impact on their share prices too. High-priced products that have failed to capture consumer attention are part of the issue here, as is a struggling sports retail sector in general.

While it may be true that key product lines have not performed as hoped for Foot Locker; that is not the sole issue at play and a look at Nike’s accounts cements that point of view. Foot Locker must take a look at itself and make necessary adjustments if it is to arrest the slide that has seen it lose almost one-third of its share value this year. An improved e-commerce site is the key as the product offering and pricing are competitive already. The company actually operates in the fashion space.

By competing in the fashion space, Foot Locker is going up against a host of companies with strong e-commerce offerings. In the case of ASOS, it is competing with an online-only specialist. In order to be successful in doing so, the company needs a first-rate e-commerce site and at present, it lacks such a weapon in its arsenal.

Some products only have one image for potential shoppers to view, and some of the products are not modelled by human models, making it hard to see how the product fits/hangs on a person. Some products are modelled and even offer a 360 view, but the method of product presentation is inconsistent.

E-commerce is growing rapidly in the United States as improved infrastructure improves delivery times, consumers become more confident on shopping online, and e-commerce offerings improve and broaden. Physical stores are not yet obsolete but Foot Locker is wedded to the idea, opening 24 new stores in Q2 2017 (it did close 19 so the net gain is five). The company needs to re-assess this stance and look at whether improving its e-commerce offering and warehousing infrastructure to shorten delivery times is a better way of securing more custom and cutting costs. Given the direction of e-commerce versus sports retailers in the US, the answer is surely that this is a better path to follow.