Foot Locker Looks to Digital Expansion, Reimagined Stores to Woo Cautious Customers

A common theme in recent earnings calls involving The Home Depot, Lowe’s and Target has been the “cautious consumer” as shoppers are becoming more selective about their spending, often waiting for the right moment to make a purchase rather than buying impulsively.

You can add Foot Locker to that list after its fourth-quarter earnings call Wednesday (March 5).

“Coming out of the holiday we felt really good about the momentum in the business,” Foot Locker President and CEO Mary Dillon told analysts during the call. “As we came into February, we started to see consumer uncertainty pick up. What we’re seeing is they’re coming to buy when there’s a call to action but are cautious in between. We’re maintaining our focus on customer-facing investments.”

This cautious consumer sentiment is shaping strategies across industries, as companies like Foot Locker focus on innovation and customer engagement. While fourth-quarter sales decreased 5.8% to $2.24 billion, comparable sales increased 2.6%, the third straight quarter of positive comp sales. For the full fiscal year of 2024, total revenue slipped 2.2% to $7.99 billion.

Read more: The ‘Cautious Consumer’ Emerges as Sentiment and Savings Take a Hit

Embracing Change

Foremost in Foot Locker’s strategy is its Lace Up Plan, a comprehensive initiative designed in 2023 to modernize both the customer experience and the company’s operations. This multifaceted approach targets store refurbishments, digital expansion and strengthening customer loyalty with the goal of creating a seamless shopping experience.

Another part of the strategy involves Foot Locker shifting its real estate strategy by moving to off-mall locations and opening new store formats, according to a ChainStorage report. The company plans to close approximately 400 mall-based stores by 2026, including 200 in lower-tier malls and 200 underperforming locations in higher-tier malls.

“We made meaningful progress with our Lace Up strategy,” Dillon said. “Our strategies are resonating even as we are navigating an increasingly dynamic external environment.”

The company’s focus on creating “Reimagined” stores has been a key part of this success, Dillon added. These locations are designed to offer a more immersive and engaging shopping experience, combining the tactile nature of physical stores with the convenience of digital integration. Foot Locker has already opened eight of these revamped stores and plans to accelerate the rollout, aiming to open an additional 80 by the end of 2025.

Read more: Foot Locker’s Strategic Overhaul Shows Early Success in Q2

New Mobile App

Another key element in Foot Locker’s plan is its digital transformation. In November, the company launched a new mobile app and revamped its FLX Rewards loyalty program aimed at enhancing the customer experience and driving engagement. The app offers a more personalized and intuitive interface, making it easier for customers to browse, shop and stay connected with the brand. Early responses have been positive as fourth-quarter digital sales rose 12.4%.

“Our digital comps increased 12.4% in the fourth quarter through an increase in traffic, AOV and conversion,” Frank Bracken, executive vice president and chief commercial officer, said. “The new Foot Locker app immediately drove performance gains.”

Meanwhile, the company’s loyalty program has steadily gained in prominence, Dillon said, after changes were made to the enrollment process.

“We’re pleased with the digital adoption by new and existing members through increased frequency of purchase,” she noted. “Forty-nine percent of sales in North America during the fourth quarter are attributed to loyalty program members.”

PYMNTS Intelligence data reveals 41% of U.S. shoppers prioritize loyalty rewards when choosing where to shop, with 35% considering rewards to be very or extremely important.

While uncertain consumer behavior remains, Foot Locker officials are confident in their strategies to drive performance during key shopping moments, even as some customers remain hesitant outside of peak retail periods.

Full-year guidance calls for a sales range of -1% to 0.5% and comparable sales to rise 1% to 2.5%.

“We will continue to prioritize our customer-facing investments, keep our inventories controlled and manage our expense base with discipline to improve our profitability,” Dillon said. “While we expect consumer and category promotional pressures to remain uncertain into 2025, especially within the first half, our Lace Up Plan strategies continue to resonate with our customers and brand partners. We are confident that our strategies and actions will enable us to achieve our growth expectations in 2025.”