Footlocker Analysis
Essay Preview: Footlocker Analysis
1 rating(s)
Report this essay
Foot Locker
A case study
Part I
Table of Contents
Table of Contents
Page 2
Performance Assessment
Page 3-4
Financial Analysis
Page 4-5
SWOT Analysis
Page 5-8
References
Page 9
Appendices
Page 10-14
Performance Assessment
Foot Locker Inc. was first introduced to the retail market place in 1974 (1). Since it’s entry into the market it has grown tremendously. It now has close to four thousand stores in the US and nineteen other countries around the world (1). Foot Locker’s focus group is males and females ages twelve to twenty and plans it’s locations around that demographic (1). Foot Locker keeps itself looking attractive to the young people by offering a wide variety of athletic shoes as well as multiple venues to purchase that same variety. Foot Locker Inc. encompasses Foot Locker, Kids Foot Locker, Lady Foot Locker, the Foot Action chain, Foot Locker International, Champs Sports, and the online venues of Eastbay.com and Footlocker.com. These eight different entities make up one of the most widely known and chosen athletic shoe retailers in the world.
Foot Locker Inc. is facing today what every company in the United States is facing. Due to the dwindling economic situation the company has seen a dramatic decrease in sales and is currently trying to restructure itself to be better positioned for the future. With competitors such as Finish Line moving in on its territory Foot Locker Inc. is faced with an ultimatum to change or risk dying out.
Foot Locker is established in the Athletic Shoe business and its main competitor is an organization known as Finish Line. While Foot Locker is much larger than Finish Line as of late Finish Line has been moving in on Foot Locker’s business. Finish Line established a name for itself only a few years after Foot Locker did but did so under another franchise name, Athlete’s Foot. Eventually Finish Line stepped out from its franchise’s shadow and established itself as a major competitor in the Athletic Shoe market. Recently Foot Locker made a move to acquire another large athletic shoe chain known as Genesco for $1.2B and not only did Genesco not accept, but they took a $1.5B offer from Finish Line (3). Due to some legal issues the deal between Finish Line and Genesco never took place but the move goes to show that Finish Line, even though they are much smaller, is moving in on Foot Locker’s turf and is willing to pay big money to do it.
Foot Locker is being successful in certain areas outside of the United States. For example Europe; Foot Locker has plans to aggressively attack the European Market by opening approximately 30 new stores in 2008. The European Division of Foot Locker is currently outperforming the US Division; therefore to help boost sales in the US corporate has decided to promote President and CEO of Foot Locker Europe Keith Daly to President and CEO of Foot Locker US (4). Other plans that Foot Locker intends to help the US Division include aggressively reducing inventory by a major clearance strategy of slow moving product lines. He is also planning on closing several US stores that aren’t performing to standards and cutting losses before they hurt the company too much (4). The ship is rocky right now but with these new changes matched with the US Government’s plans to stimulate the economy could really improve Foot Locker’s standings in the United States.
Financial Analysis
Foot Locker Inc. is not performing fantastically right now, although as far as Apparel Stores in the Service Sector it is right in line. Unfortunately no one likes to be average therefore Foot Locker needs to step it up a bit. As far as financials go Foot Locker is much bigger than its closet competitor Finish Line. Foot Locker’s yearly revenue is $5.61B versus Finish Line’s $1.33B. But a true teller of a company’s performance is their P/E, Price to Earnings, ratio which can be directly compared to Foot Locker. Foot Locker currently has a P/E of 23.10 where its closest competitor Finish Line is at an even 25.00. Now this is not a huge difference but it is enough. If you bundle Finish Line’s bid for Genesco with their lead in their P/E Finish Line seems to be winning the race. When a company out performs you no matter how big they are it can mean trouble. Large corporations were once small and they can fall just as fast as they rose to the top.
As far as stock ratings go neither one of the companies has had better than a Hold rating by any major analyst all year. Foot Locker is currently at Neutral rating and Finish Line has the Hold. Yahoo Finance has a rating of 1-5, one being Strong Buy and 5 being Sell and Both Finish Line and Foot Locker have a 2.8 rating. What this information implies is that big or small your company if in the Service Sector for Apparel Stores, namely footwear, is struggling right now. Looking at the past three years Foot Locker has grown every year but is recently slipping due to a failing US economy where 1400 of its 3800 stores, or approximately thirty seven percent, are located.
SWOT ANALYSIS
Every company has a set of strengths, weaknesses, opportunities, and threats. Even Foot Locker with its dismal situation in the United States still has strengths and opportunities. When doing any type of company analysis these categories need to be considered for they can be a clear indicator if this particular organization has a possible future. SWOT analysis involves specifying the objective of the business venture and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.
Strengths
There are several good points to be made about the Foot Locker organization. First and foremost, they are surviving right now because they are an international organization. They have approximately 3800 stores in more than 20 different countries (1). They diversified their organization to prevent catastrophe in the case that we are currently in, the brink of a recession.
With Daly at the helm the Foot Locker is showing signs of another strength, the ability to cut your losses.