As the coronavirus crisis ravages the footwear business, top executives have had to make many tough decisions — from closing stores to staff layoffs.
To get answers on how CEOs are best navigating, FN launched a new weekly “Leading in a Crisis” webinar series on Wednesday, featuring Foot Locker president and CEO Dick Johnson as its first guest. FN editorial director Michael Atmore moderated the conversation.
Johnson, in particular, provided insight on what the industry could look like post-crisis. He said he believes the industry will be healthy and consumer spending will return to normal after the crisis ends. However, he said, without having a playbook for the situation retail finds itself in, the decisions his executive peers have had to make to bring about this confidence have been painstaking.
Arguably, the most difficult of all the decisions are about furloughs and layoffs.
“Everybody’s got a different decision-making matrix that they go through,” Johnson said. “But fundamentally there’s little to no revenue coming in — we’ve asked people to stand down as is relates to going out and being in public places, so I think it’s just part of that decision-making matrix that every company has to go through at some point during this discussion.”
Despite his convictions, Johnson isn’t ready to make economic predictions.
“I talk to a lot of people every week about what the sales outlook is, and I ask them the reverse question: ‘Tell me when the crisis is officially over and when we open back up economically and what sort of mindset the consumer’s got, and then maybe we can talk about what the sales future looks like,'” the executive said.
While discussing the decisions others have had to make, he also addressed the toughest ones he’s had to make so far.
“Making a decision to fundamentally close all of our stores across AMEA, in North America, was a really critical decision for us. It is for anybody that runs a retail chain. It’s the lifeblood, that’s the cash flow, that’s what drives the great machine that we’ve got,” Johnson said. “But, ultimately, the decision to think about consumers, our employees, the ability to do it across the board was probably the most difficult decision we’ve made.”
He continued, “And likewise, our decision to continue to pay our employees has been a big decision for us. I’m a firm believer that we have the best team in retail and we continue to support them. Fundamentally, those are big decisions for us from a cash-flow perspective, from a support of our team perspective.”
Foot Locker announced on March 16 that it would close its North American stores from March 17 through March 31. On March 28, it extended the temporary shuttering of doors to April 11.
Despite the massive disruption to the in-office workflow, Johnson highlighted Foot Locker’s ability for senior leadership and corporate employees to seamlessly transition to a work-from-home atmosphere.
“We didn’t have one hesitation and now we suddenly had thousands of people working from home,” Johnson said. “The investments we made over time got us to that point.”
However, leadership is grappling with how to deal with a global situation as dire as the coronavirus in the future.
“We certainly have business continuity plans. We certainly have communication plans. We’ve got crisis management sort of philosophies in a playbook, if you will,” Johnson said. “Unfortunately, we do not have a strong pandemic [page] — I’m not sure that anybody had a strong pandemic page in their playbook. A lot of the things we’re all learning are on the fly and as we react to news.”
The uniqueness of a pandemic, the executive explained, has created a situation no one in retail has seen before.
“This is different from the financial meltdown. This is different from the internet, the dot-com bubble [that] burst back in the early 2000s. In those cases we never said let’s stop the economy, [and] let’s focus on something else other than the economy,” Johnson said.
Foot Locker has 3,129 retail stores in 27 countries across North America, Europe, Asia, Australia and New Zealand. And because of the current ability to only shop online, Johnson believes retail will operate differently after the coronavirus crisis.
“I think that we will come out of this a little bit changed from a humankind point of view. We will adapt accordingly. I think the thing I see going forward will certainly be digital connectivity and how that manifests itself in a physical store,” he said.
In August 2019, Foot Locker teamed up with Nike to create a store concept that connects the digital and physical shopping worlds, which debuted in the Washington Heights neighborhood of New York City. Because of the inevitable change people will go through when forced isolation comes to an end, such a retail execution may provide the blueprint for what Foot Locker’s doors look like moving forward.
“It was not a virus-planned test up in Washington Heights. But the digital inclination, the space that you’ve got in that store, the activation areas, all of the great work that our team — along with the Nike team — put in, makes that the store of the future and what we expect [in] future physical spaces,” Johnson said.
Although business today is drastically slower than before the coronavirus crisis, Johnson ended with an upbeat prediction.
“I do, in fact, believe there will be pent-up demand,” Johnson said. “We are consumers at the end of the day, and people want to be out shopping.”
He continued, “The consumer will absolutely be ready to spend post-crisis.”
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