Despite facing a softer-than-expected retail environment in the third quarter, Foot Locker President and CEO Mary Dillon remains optimistic about the company’s long-term digital strategy, including a new mobile app and revamped loyalty program.
“While our trends in early November landed below our expectations as consumers held back their spending ahead of the holiday season, we saw a meaningful and positive acceleration over the key Thanksgiving week period, especially in stores,” Dillon said Wednesday (Dec. 4) during the company’s third-quarter earnings call. “We’re taking a more cautious view and are lowering our full-year sales and earnings outlook due to a more promotional environment and softer consumer demand outside of key selling periods. We remain focused on unlocking opportunities through our new Reimagined stores and refresh program, revamped digital experience, including the recent launch of our new mobile app, and stronger customer engagement through our enhanced FLX Rewards program.”
Foot Locker is leveraging technology to create a more seamless and personalized shopping experience, Dillon noted, seeking to elevate loyalty program participation and increase customer retention.
“Since the June relaunch of our FLX rewards program here in the U.S., we’ve been very pleased with our members’ response across a variety of KPIs, including a higher pace of enrollments, engagement with first-time redeemers, and higher AOVs compared to non-loyalty members,” she told analysts. “Following an improvement in our signup experience in stores toward the end of October, we’ve seen a meaningful improvement in the sales capture rate in stores as we moved into November. This holiday we’re excited to continue to activate through the program, including the recent addition of members-only events in stores and online across banners. We’re already seeing these events drive value for the program in the pace of new enrollments and lifts in the sales capture rates. We look forward to sharing incremental insights as the program moves toward our 50% loyalty penetration by 2026.”
Improvements in online conversion rates enhanced the customer experience, Dillon said.
“Our digital penetration in the quarter increased 60 basis points year-over-year to 17.6% of sales as we continue to target around 25% eCommerce penetration by 2026. Last month, we were excited to roll out our new and improved mobile app across the U.S. which provides a faster, more modern shopping experience featuring richer content and an improved launch experience. Importantly, the app serves as a hub for our new loyalty program across both stores and online, making it that much easier for our members to track and access their points across channels. While still very early days, the app has already seen a strong uptick in conversion levels, and we’re confident that this improved experience can be a significant lever for us to drive both our digital and loyalty penetration over time.”
Third-quarter comparable store sales rose 2.4% while total sales fell 1.4%.
“While we are disappointed that we did not see as much sequential improvement in the business that we had anticipated three months ago, we are pleased to continue to demonstrate ongoing progress against our Lace Up Plan as we delivered another quarter of positive comp results,” Dillon said. The Lace Up Plan simplifies and optimizes Foot Locker’s operations by concentrating on core banners and key markets and gained momentum in the company’s second quarter.
During the third quarter, Foot Locker “saw consumers remain cautious with their discretionary dollars,” she said. That meant shoppers focused their spending around the back-to-school season in August, and then pulled back in September and October, possibly to save their spending for the holidays.
“Looking to the fourth quarter, we expect our customers to remain cautious with their discretionary dollars and to consolidate their spending over peak periods in the holiday season,” Dillon said. “We also expect the elevated promotional activity we saw in the third quarter to continue through the holiday season.”
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