Jordan Brand

These days, sneakers aren’t just for the gym. They can be seen on red carpets, celebrity events and even in boardrooms.

To capitalize on that ubiquity, footwear, apparel and accessories retailer Foot Locker has recently embarked on a number of investments and collaborations.  

Like the $100 million investment in sneaker platform Goat, a $12.5 million minority investment in children’s apparel company Rockets of Awesome, a $3 million stake in entertainment company Super Heroic, a $15 million investment in activewear brand Carbon38 and a $2 million investment in the Pensole Footwear Design Academy.  

Richard Johnson, chairman, president and chief executive officer of Foot Locker, said these are just “some of the things we are doing to share the excitement and energy of sneaker culture with people around the world.”

There are also stores and the web site that offer hard-to-find brands, such as Air Jordans, Air Max and Yeezy Adidas, in addition to Foot Locker exclusives, including Nike’s Tuned Air silhouette and the Home and Away collection.  

Foot Locker also started offering lifestyle brands like Ugg and Timberland.

And then there are the campaigns, including #BecauseSneaker, launched in the fall in collaboration with fashion designer Jerry Lorenzo and NBA star Lance Stephenson. Or, the Asterisk Collective, a platform launched with Adidas in December that features athletes and artists like rapper Kid Cudi.

Johnson said all of this has been in the works for at least a year and is designed for the “sneaker-obsessed consumer.”

“We believe that by maintaining our focus on bringing differentiated experiences to youth culture, we can continue to elevate our financial performance,” he said in a statement.

That financial performance includes beating top- and bottom-line analysts’ expectations during the company’s earnings report released Friday. Net income soared to $158 million for the quarter ending Feb. 2. That’s after losing $49 million for the same period last year. And sales rose to $2.27 billion in the quarter, up from $2.21 last year, with an impressive 9.7 percent jump in same-store sales.

Shares of Foot Locker surged more than 10 percent during Friday’s trading session as a result, closing up 5.96 percent to $63.07. 

“The strong growth in footwear was fueled by the strength of a marquise business that is more diverse than ever, with a great mix of running and basketball styles,” Johnson said on the conference call Friday morning.

Johnson called investments in smaller companies like Goat a “game changer.”

“Our kid is motivated by the coolest product,” he said on the call. “We’re going to continue to drive heat through cool products.”

In addition, executives on the conference call credited fewer promotions and an accelerated apparel business for the company’s success. Apparel margins surpassed footwear margins during the quarter, with things like branded Ts and NBA merchandise performing the best.  

While Foot Locker is skilled at curating what’s cool in one location, the sneaker trend has actually been happening for a while.

In fact, sales of nonperformance, athletic-inspired adult sneakers grew 17 percent during the 12 months ending April 2018, according to The NPD Group. Men’s sneakers, which comprises more than 60 percent of the total market, grew 10 percent, while the women’s sneaker sales jumped 33 percent.

Still, Johnson said the company has more work to do to improve its accessories business. In 2019, Foot Locker plans to invest $175 million in its store locations, including remodels and opening 80 new stores. Foot Locker also seems to be reevaluating its fleet. The company said it will close about 165 existing stores, mostly in the U.S. and Europe.  

Foot Locker will host its first analysts day in four years on March 29, “which we expect to be a positive catalyst for the stock,” Wells Fargo analyst Ike Boruchow wrote in a recent note.

“Basically, we don’t believe they would be hosting the event if they didn’t have good things to say,” he said.  

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