This Major Mall Retailer Is Shuttering Hundreds of Stores

The footwear retailer wants to open larger, more experiential formats. But where?

Traditional shopping malls have been struggling for years now. But some optimists think the format might experience a rebound as people re-emerge from the lockdowns of the global pandemic.

Foot Locker Inc.  (FL) - Get Free Report is firmly not in that group, however. The footwear retailer recently told investors that it plans to close 400 mall-based stores by 2026, or about 14% of its current store base of 2,800 stores.

The move, which represents about 10% of the company’s total revenue of $8.7 billion, is part of CEO Mary Dillon’s plan to “reset” the business for sustainable growth following three tumultuous years of topsy turvy sales.

"We are entering 2023 with a focus on resetting the business – simplifying our operations and investing in our core banners and capabilities to position the Company for growth in 2024 and beyond,” Dillon said in a statement.

Foot Locker Is Abandoning the mall

A key part of her plan is to revamp Foot Locker’s real estate portfolio. Once a staple in malls, the company is significantly reducing its footprint.

Malls are usually classified as A, B, C, D, depending on the quality of the property, location, and demographics. Over the past decade, retailers, especially department store anchors and specialty apparel shops, have withdrawn from C/D locations in favor of higher quality A/B.

But even A and B malls have struggled. Foot Locker plans to close more than 200 underperforming stores in A/B malls in addition to 200 stores in C/ D malls. The company also will lower its remaining leases in C/D stores to 1.5 years.

Foot Locker Wants Bigger and Louder Stores

Instead, Foot Locker said it will shift its focus to “off-mall” locations, such as lifestyle centers that can host its growing stable of larger sized concept stores that emphasize sneaker culture.

Some of these are known as "Power Stores," or large facilities that wouldn't ordinarily fit in a mall and host a lot more inventory for sneaker devotees. 

“The company’s Power Store format remains an important differentiator,” Coresight Research said. “Power Stores are nearly four times as large as its mall store. We see these Power Stores as centers for sport and culture, which are able to replace several mall-based stores operating under different banners, and to capitalize on local culture (for example, by featuring products from local designers).”

Dick’s Sporting Goods Inc.  (DKS) - Get Free Report -- a top athletic footwear rival to Foot Locker -- is betting on even bigger experiential formats to entertain people and then convert them to paying customers.

Company executives are especially bullish on Dick’s House of Sports concept, calling it the “future of retail.”

The big question is where retailers like Foot Locker and Dick’s Sporting Goods Inc.  (DKS) - Get Free Report will find these prime locations.

Cushman & Wakefield  (CWK) - Get Free Report, a prominent real estate broker, recently reported that the national shopping center vacancy rate in the fourth quarter fell to just 5.7% in the fourth quarter -- the lowest rate since the firm started tracking such data in 2007. Construction of new shopping centers is woefully short of meeting demand.

"Fueled by shoppers’ renewed enthusiasm for the in-person shopping experience and retailers’ optimism about long-term growth, tenants continue to seek out high-quality store locations amid limited supply," the report said.