Dive Brief:

• In its first quarter reporting as a combined business, Dick’s Sporting Goods Executive Chairman Ed Stack said it was time to “clean out the garage” at Foot Locker in an effort that will span stores, inventory and other assets.
• For starters, the company is focused on clearing out unproductive inventory across Foot Locker’s business and will close an unspecified number of stores. The company will also rightsize assets “that don’t align with our go-forward vision,” per a release.
• Already, Dick’s is in the middle of an 11-store pilot at Foot Locker to test changes in merchandising and product. Stack said the effort has produced encouraging results and was “pretty capital light,” including adding fresher products and changing the visual merchandising walls around footwear.

Dive Insight:

Dick’s has set an aggressive turnaround timeline for Foot Locker, with plans for the newly acquired business to reach an inflection point by back-to-school next year and be accretive to the company in 2026. 

The retailer also named a head of international for Foot Locker, rounding out its leadership team. In addition to Ann Freeman, a 26-year Nike veteran who is president of Foot Locker’s North America business appointed in September, Dick’s has named British executive Matthew Barnes president of Foot Locker International, effective Dec. 3. Barnes has nearly three decades of experience, including at Aldi and Tesco. He also fulfills a requirement Stack was looking for: to have a European running its European business.

There’s a lot of work to do. While Dick’s itself saw net sales rise 5.9% and comps grow 5.7% in Q3, Foot Locker’s proforma comps declined 4.7%.

“Let me be candid: Foot Locker strayed from retail 101 and did not execute the fundamentals,” Stack said on a call with analysts Tuesday, laying some of the blame at the feet of Nike’s DTC transition as well, which left Foot Locker without the right inventory to be successful. However, having worked with the business now for a number of weeks, Stack added that, “our conviction that we can turn this business around has only grown.”

That conviction is based on the idea that Foot Locker’s problems stem from the core elements of retailing, including inventory management and in-store merchandising. At the 11 test stores Dick’s has overhauled, one of the main changes was to the visual merchandising of Foot Locker’s shoe walls. In other stores, “it’s a run-on sentence of shoes,” according to Stack, whereas the refreshed stores make an effort to segment the product and showcase important styles.

Prior to the acquisition, Foot Locker was on its own journey to revamp its fleet, including refreshing some stores and rolling out new store concepts across its namesake and Kids Foot Locker businesses. Some of the elements of the reimagined stores will be kept, but others “need to be rethought,” according to Stack. In particular, some unproductive areas that were built to foster community will be taken out and replaced with a stronger apparel offering.