Foot Locker, Inc. (FL, Financial) offers good value for the money, in my view, after its 28% stock price decline in the past year.
The sports apparel and footwear retailer is investing in its loyalty program, seeking to strengthen the shopping experience of its customers and increasing its productivity.
Customer focus
The company has rolled out a new loyalty program in fiscal 2020. It combines its previous loyalty programs, which were specific to each of its brands, and encourages its customers to make purchases across its various stores. This could boost the company’s sales prospects, since it contributed to a higher average order value per customer in the retailer’s fiscal 2020 third quarter.
Foot Locker is increasing the amount of personalization used in its marketing material. It tested a new piece of technology in the fiscal 2020 third quarter that uses the data it has about existing customers to make personalized recommendations on which products they may be interested in. This contributed to a fall in the company’s marketing spending and produced greater average sales per customer in its third quarter. As the company rolls out its personalized marketing system, it could have an increasing impact on its financial performance and may help to improve the loyalty of its customers.
Investing for growth
The business is investing in improving the in-store shopping experiences of its customers. For example, in its third quarter Foot Locker rolled out new displays within its European stores that focus on the history of its products. It also increased the amount of space in its stores that display women’s products. This could increase its appeal to female shoppers and broaden its appeal to a wider range of consumers in the future.
Foot Locker started accepting Afterpay as a payment method in its Australian stores in the third quarter. This allows its customers to buy now and pay later. This has resonated with its customers, and could boost its sales performance as it plans to implement similar paying arrangements across all of its stores.
In addition, the retailer launched a new mobile app in the third quarter. The app will introduce the company’s customers to new brands and designers with whom Foot Locker has partnerships. It could act as an additional marketing tool for the company and help it to engage with its existing customers, as well as new customers who may not have previously visited its stores.
Potential threats
The company’s performance in the third quarter was mixed. Its European business and its Runners Point brand reported low single-digit percentage increases in sales compared to the same period of the previous year, while its East Bay brand delivered a high single-digit percentage decline in its sales on a year over year basis. In addition, the number of consumers visiting Foot Locker’s stores continued its decline in the third quarter after a disappointing first half of fiscal 2019.
In response, the company is investing in new technology to improve its efficiency. For example, it is using automation to manage its inventory more effectively and improve its productivity. It also launched a new interactive training platform for its staff in the third quarter that could improve their ability to communicate effectively with the company’s customers. It can be accessed by Foot Locker’s staff via their mobile phone or at a workstation, and may lead to the company increasing its differentiation versus its sector peers.
Future prospects
Market analysts forecast that the company will deliver a 6.5% rise in its earnings per share in the 2020 and 2021 fiscal years. Its price-earnings ratio of 8.4 suggests that it offers good value for money given its growth strategy.
Disclosure: the author has no position in any stocks mentioned.
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