New leadership at Foot Locker
With Richard Johnson retiring, new Foot Locker CEO, Mary Dillon, might be exactly what the sportswear and apparel retailer needs.
In her time as chief executive officer (CEO) of Ulta Beauty, Mary Dillon transformed the US chain of beauty stores into a hugely successful omnichannel retailer. Now she is now CEO of Foot Locker. She has taken over the role from Richard Johnson, who is retiring after nearly three decades with the company. Mr Johnson will stay on as executive chairman and as senior advisor to Ms Dillon until April next year.
The August day on which news of this leadership change was announced was a good one for Foot Locker: shares went up by as much as 25%, the biggest intraday jump the company has experienced in five years. This was in part because of news that its second quarter figures were not as bad as anticipated, but what seemed to take the numbers to that peak was enthusiasm over the appointment of Ms Dillon.
For a company that has suffered from a range of challenges over the last few years (the pandemic, an ongoing decrease in mall traffic, and most recently some rattling of Foot Locker’s relationship with Nike) analysts and investors are placing high hopes on the fresh perspective and new energy Ms Dillon will bring.
Johnson’s legacy
Though Ms Dillon has more than a few “opportunities” awaiting her, Mr Johnson enters retirement at the end of what has been roundly considered an effective and highly regarded career with Foot Locker. His first job with the company was as vice-president of merchandising for Eastbay, which was bought by Foot Locker in 1997. From there, he moved through a number of leadership roles before becoming chief operating officer in 2012 and CEO in 2014. According to the company, Mr Johnson oversaw sales growth from approximately $7 billion in 2014 to $9 billion in 2021.
He also built up the company's focus on diversity, equity and inclusion (DE&I) and environmental, social, and governance (ESG) initiatives. Under his watch, for example, in June 2020 the company launched the Leading Education & Economic Development (LEED) Initiative with a $200 million commitment to the Black community. As of the end of fiscal year 2021, Foot Locker had funded nearly $54 million in related investments and partnerships, with Mr Johnson saying the company’s commitment “goes beyond words and is part of how we do business”.
Niggles with Nike
But this year has also found the company in the news for less optimistic reasons. In February, Foot Locker predicted Nike would comprise just 60% of total purchases for 2022, compared with 70% the previous year, because the brand was upping its focus on direct-to-consumer business.
This made such a stir (Foot Locker shares dropped as much as 35% when the forecast was first announced) that Nike CEO, John Donahoe, soon had to issue a statement reaffirming its faith in the retailer. He said: “To be crystal clear, Foot Locker always has been and always will be a large and important partner of Nike’s. They'll have a very distinct role in our marketplace strategy as a wholesaler, with a particular focus on the culture of basketball, on the sneaker culture and on kids, which is a really big and important opportunity for us.”
Nevertheless in August, when Ms Dillon’s appointment was announced, concerns about Nike were still a big part of the conversation, with one analyst saying, “The big question for Foot Locker is: how they go on without Nike?”
If Mr Johnson were to answer that, he would probably point to several other key deals, acquisitions and investments that Foot Locker has put in place to compensate for any void left by Nike’s reduced inventory. Last year, the retail group spent $1.1 billion on buying athletic footwear and apparel retailer WSS and Japanese streetwear brand Atmos. Then, in May this year, adidas and Foot Locker announced a deal in which, among other plans, the retailer becomes a lead partner in the brand’s basketball category; adidas said in 2022 it expects to generate incremental revenues of up to €100 million as a result of the new partnership.
Most recently, Foot Locker and Fanatics, a global digital sports platform, announced they were partnering to connect their ecommerce inventories, which allows Foot Locker to fulfil online orders through the Fanatics digital sports platform and give shoppers access to a larger selection of licensed merchandise.
It is fair to say that although second quarter results showed sales were down 9.2% year over year and same stores sales were down about 10%, Richard Johnson has left Mary Dillon plenty to work with.
Dillon’s next steps
As for what the next era of Foot Locker will look like, Mary Dillon has shared little publicly about her plans. Some analysts have said Ms Dillon’s marketing background (her impressive resumé also includes serving as global chief marketing officer for McDonald’s) is exactly what is needed for a company that has suffered from the double blow of covid lockdowns and the diminishing popularity in the US of shopping malls. Stores that once stood out for their employees wearing those iconic black-and-white striped referee tops, are now, as Garrett Sheridan of Axiom described recently in Bloomberg, “kind of racks and stacks of shoes”.
A look at Ms Dillon’s time at Ulta might provide the most relevant hints of what is to come. She famously transformed the in-store experience for Ulta’s consumers, so that what had been a busy place that bargain-hunting consumers braved in search of good prices on a big selection of drugstore beauty products became a chic, desirable destination for consumers seeking everything from affordable to high-range cosmetics, fragrances, beauty tools and more. Aesthetic changes to the stores helped, but key was the new inclusion of salon services such as haircuts and facials, playful decisions such as allowing customers to use hair dryers for practice, and more liberally offering samples throughout the store for products at all price points.
Tailored approach
Ms Dillon also took steps to continuously improve upon all aspects of the organisation itself, as described in a 2017 Fast Company article about her early steps with Ulta. Among these efforts was having members of her team go on ‘shop-alongs’ with customers, discussing impressions and experiences. She made the decision to switch to offering discounts and benefits tailored to individual consumers based on data pulled from Ulta's loyalty program, rather than mass-mailing out generic coupons. She also prioritised company culture, seeking to ensure that associates felt engaged and supported by issuing regular quantitative surveys to all staff. Perhaps most importantly, she (as of 2017) took nearly two dozen trips per year to stores around the country to talk with associates and gain insights into details that are easy for a chief exec to miss.
The results of Ms Dillon’s efforts at Ulta? In addition to becoming a much beloved place for consumers and employees alike, the beauty retailer experienced compound annual growth rate of 16% and its market capitalisation tripled.
All of this was accomplished by a woman who was raised, along with her five siblings, by a steelworker and a homemaker in a house with one bathroom, according to a profile by the Wall Street Journal. Now, she is one of only 32 women holding CEO positions at S&P 500 companies.
Transferrable ideas
It’s easy to imagine how her Ulta initiatives could also benefit Foot Locker at all levels, from the in-store shopping experience to its C-suite efficacy. The company gave a nod to Ms Dillon’s nuanced and interpersonal approach when they announced her appointment, saying: “Mary’s experience of leading consumer-driven businesses and building robust brand portfolios, along with her commitment to culture, is deeply aligned with Foot Locker’s priorities and strategy.”
At the time of her new appointment, Evercore ISI analyst Warren Cheng was quoted as saying: “If you’re a retailer looking for a new CEO, she’s almost the best announcement that you could make.”
Mary Dillon, new CEO of Foot Locker.
Credit: Foot Locker
