Catwalks from New York to Milan confirmed the trend this
spring: sneakers have arrived.
Models during the spring shows trotted out the latest designer
fashions footed in all manner of sneaker styles, from basic white
to colorful high-tops.
A look around the office, mall or line at your local coffee
spot says as much. Sneakers are entrenched fashion accessories.
Of course, teens are still the early and most active adopters,
coveting the latest fanciful launches from top brands -- from
flat Converse All Stars to high-tech performance athletic
Teens' penchant for the next new sneaker has been powering
strong results at athletic footwear retailerFoot Locker (
), an IBD 50 stock.
Its core "sweet-spot" customer base skews to people ages 12 to
20, and heavily male, analysts say.
"Teens want brands other kids are wearing," said analyst
Christopher Svezia of Susquehanna Financial Group.
And Foot Locker is delivering. Quarterly earnings have notched
up in double or triple digits on a year-over-year basis for all
but one of the last 15 quarters. Per-share earnings in the first
quarter ending May 3 jumped 22% to $1.11 a share, beating analyst
Same-store sales in the quarter advanced 7.6%, while total
revenue was up 14% to nearly $1.9 billion, also above views.
Foot Locker's customers are going especially wild for colorful
basketball shoes, the fastest growing category in the athletic
)-branded footwear, including the hot-selling Jordan basketball
brand, accounts for about 60% of Foot Locker's sales, analysts
New York-based Foot Locker carries a number of other footwear
brands with sneaker offerings, including Adidas, Reebok,Under
) and Puma.
Nike and the Nike-affiliate Jordan Brand are the top two
basketball brands in the U.S., with Jordan No. 1, according to
the NPD Group.
The research firm reported that U.S. basketball footwear sales
jumped 21% in the 12 months ending in April, making the category
the fastest growing in athletic footwear. The next most popular
basketball brands were Germany-based Adidas and its affiliate
Deutsche Bank Securities estimates that basketball footwear
makes up 40% to 50% of Foot Locker's product mix.
"Think about all those fancy sneakers, whether running shoes
or basketball shoes from Nike or Adidas or whoever. That is why
Foot Locker has been outperforming most of its peers," said
Foot Locker competes withFinish Line (
) and to a lesser extentDick's Sporting Goods (
) and Sports Authority, among others.
The company's core customer, Svezia said, "is looking for
what's next and what's hot -- and having it in stock."
Basketball is especially "critical" for Foot Locker, Svezia
said, adding that the category comes with "some of the highest
prices in footwear," at $125 to $250 a pair.
Foot Locker's ties with Nike and other brands include brand
shop-within-shops such as House of Hoops, Yardline, Fly Zone and
Jordan 23 on the Nike side plus Adi Collective and Originals
shops for Adidas. As of May 3, the firm boasted 1,041 Foot Locker
stores in the U.S., 604 in Europe, 128 in Canada and 92 in the
Asia-Pacific region. It also operated 345 Kids Foot Locker stores
and 241 Lady Foot Lockers, plus 544 Champs Sports and 276
Sneakers have also been fueling sales at Kids Foot Locker,
which has shown mid-teen to 20% growth the past few quarters,
said Deutsche Bank analyst Paul Trussell in a June 13 research
That suggests the "sneaker culture is no fad and likely here
to stay for years to come," he wrote, "as feet grow."
In a recent phone interview, analyst Sam Poser of Sterne Agee
said he expects the largely mall-based Foot Locker to continue to
benefit from the "very strong sneaker trend" through at least
mid-2016 "as a lot of brands continue to innovate and build up to
the (Summer) Olympics."
"Foot Locker has done a great job over the years positioning
itself in basketball," Poser said in a June 11 report on Foot
Locker, which came with a buy rating.
"Arguably, Foot Locker globally owns mind share for basketball
retail," he wrote.
Basketball Beyond Borders
According to Poser, Nike's launch this spring of the Air
Jordan 6 "Carmine" basketball shoe logged $44 million in sales in
the first eight days it was out. He cited data from
Foot Locker's management has told analysts that passion for
basketball is even spreading to soccer-obsessed Europe. They
expect that newfound passion to trickle down to basketball
footwear sales over time. The company did not respond to an
Foot Locker sales in Europe have been strong, thanks in part
to sales of select Nike brands, analysts say.
More Stores Planned
The company is eyeing expansion in Europe. Last year's
acquisition of German athletic retail chain Runners Point Group
gives it more than 200 Runners Point stores and a related
Foot Locker also plans to expand its children's business
through new Kids Foot Locker stores and additional space in Foot
But Foot Locker's women's and apparel businesses have been
sore spots. Apparel fell to 23% of sales last year from as much
as 30% a decade ago, Trussell noted.
The company aims to get apparel back to that level in part
through the sale of more premium branded products. Apparel has
been doing better in stores that have been part of the firm's
ongoing remodeling program, he said.
On the women's side, Foot Locker is testing a fitness concept
called Six:02, which carries yoga pants, work-out wear and other
Six:02 now has nine stores open and an e-commerce site. Many
more stores could roll out as early as next year, Trussell