Foot Locker and JD Sports Are Taking Divergent Approaches to Growth. Which Is Working Better?
Foot Locker is preaching a "less is more" approach to rebuilding its business.
In addition to moving its global headquarters from New York City to St. Petersburg, Florida, in 2025, Foot Locker said this week it will close its stores and e-commerce operations in South Korea, Denmark, Norway and Sweden. The contraction follows the retailer's decision last year to close 400 underperforming stores, including about 125 underperforming Champs stores. Foot Locker is also shuttering its Lady Foot Locker, Footaction, Eastbay and Atmos brands in North America and its Runners Point and Sidestep brands in Europe.
In its most recent second quarter, Foot Locker remodeled or relocated 14 stores, renovated 67 stores, closed 31 stores and opened five new stores.
“The first principle of our Lace Up plan is to simplify and optimize our business to ensure we can invest and focus on core brands and markets that drive sustainable growth,” CEO Mary Dillon said in a call with analysts to explain the latest decision to close operations in some regions.
Meanwhile, “bigger is better” appears to be the approach for British rival JD Sports, which opened 85 new stores in the first half of the year and recently completed its acquisition of U.S. retailer Hibbett, which added 1,179 stores to its portfolio. JD Sports CEO Régis Schultz said in a call with analysts last week that the retailer’s strategy hinges on making significant investments in the U.S. to help it expand globally.
“Our strategy is very clear,” Schultz told analysts in a call last week. “We believe there is a strong neighborhood market in the U.S. This is a significant investment we are making in the U.S. [to] grow JD into a global brand.”
Willams Trading analyst Sam Poser pointed out these opposing trajectories in a note to investors this week, explaining why Foot Locker should be wary of JD’s growth and potential to grab market share.
“[Foot Locker] cutting back to thrive is not an option, especially as its main global competitor JD Sports continues to invest, expand, and capture market share,” analysts at Willams Trading wrote in a recent note to investors. “JD and Foot Locker stores serve more serious sneakerheads on the periphery. With DTLR, Shoe Palace, and now Hibbett, JD is focusing on the consumers it already serves rather than trying to reach new customers it has rarely served before.”
Poser added that JD’s advancements in digital and omnichannel capabilities make it a more attractive partner for the best brands in the space, especially Nike.
Both Foot Locker and JD Sports have had relatively stable relationships with the Swoosh, but JD Sports gained a significant advantage over Foot Locker when it announced earlier this month that it would offer the Nike Connected Membership program to its U.S. customers. With the move, JD becomes the sportswear giant’s first global partner for the popular loyalty rewards program after successfully launching the program in the U.K. in 2022. Through the Connect program, JD.com’s U.S. customers can now choose to link their JD Status and Nike membership accounts through JD.com’s website or mobile app, giving them access to a curated selection of Nike member-only footwear and apparel.
Foot Locker, for its part, has maintained a close relationship with Nike — this month it partnered with Nike and Jordan Brand to launch “Home Court,” a designated basketball product section, in Foot Locker’s redesigned Manhattan stores.
However, as BTIG analyst Janine Stichter noted in a recent report, Foot Locker has yet to integrate its newly launched loyalty program, FLX, with the Swoosh.
“Foot Locker has been working to enhance its own loyalty program, including launching an upgraded FLX program in the U.S. in June, and has also been preparing for a return to growth with Nike,” Stichter wrote in an early August report. “However, it has yet to integrate its loyalty program with Nike, which is indicative of the increasingly competitive landscape the company faces.”