The biggest news to come from Foot Locker Inc. last week wasn’t its Q2 performance.
On Friday, the athletic retail giant announced Dick Johnson — who earned the CEO title in 2014 after two decades in various roles at Foot Locker Inc. — will retire from the position, effective Sept. 1. His successor is Mary Dillon, the former executive chair and CEO of Ulta Beauty.
Johnson and Dillon are well acquainted with one another, having had a professional relationship through the Retail Industry Leaders Association (RILA). Johnson said Dillon also has spoken to Foot Locker Inc. employees in the past via its women’s employee resource group.
The Q2 earnings results were better than expected, with net income of $94 million, or 99 cents per share. Total sales dropped by 9.2% to $2.07 billion. Foot Locker Inc. cut its fiscal 2022 outlook and now expects total sales to fall between 6% and 7% for the year. Shares surged in premarket trading Friday on the announcement of the transition and a quarterly earnings beat.
With his upcoming retirement now well known, Johnson spoke with FN to offer insight into why he’s walking away and why Foot Locker Inc. is in good hands with Dillon.
Why is now the time to step down?
“We’ve built such a great foundation, and we’ve got so much good going on. Handing the baton to somebody when things are moving in the right direction is the right way to do it. I jokingly said that at 55 I wasn’t ready to retire, but that was originally my plan when I started years ago. I said I’m going to be done by 55, but I clearly messed that up. And then when I turned 60, the next great big hallmark, I had just been in the CEO role for a few years and it didn’t feel right to depart at that time. Then 65 was sort of the target, and I spoke with the board about that. We’ve had an ongoing succession plan that we’ve worked on over the years. Clearly, finding the right person, the right timing is never easy, but this is how it worked out and I’m thrilled with the timing. Having a strong foundation, the work that we’ve got going on to transform the business, knowing that Foot Locker turns 50 in 2024 and there will be a strong leader in place to go into that next half century makes now the right time.”
What are some of your favorite moments working for Foot Locker Inc.?
“There are so many. I’m proud of so many great things that we’ve done, but I think the thing that I reflect most fondly on is the way that we found our voice during the pandemic with the social unrest in early 2020. The formation and the funding of our LEED initiative is something that’s really high on my list.
There have been some great times. Seeing Tuned Air for the first time back in the late ’90s, we visited Nike and we launched Tuned Air — or Air Max Plus, as it’s also referred to as. I roll forward to being able to present the three-point shot trophy to a couple of winners at the [NBA] All-Star Game, and I roll forward to the great work that our team has done around our community-based stores and in driving our engagement with our consumer to be more than transactional, to become part of the communities where we live and work.
I haven’t had a lot of time to reflect, but those are things that come immediately to mind. And ultimately, the great team that we’ve built. Organizations go through changes frequently, but I feel incredibly blessed to have the team around me that we’ve got. I talk about it being the best team in retail, and that starts from our part-time associates in the stores and in the stock rooms and runs right up to my executive leadership team and ultimately extends to our board.”
Shares went up Friday after Foot Locker Inc. reported its Q2 results. What do you attribute this to?
“We reported a solid quarter, so I think there was certainly some positivity. There’s been a lot of negative out in the press around retail in general, but it was certainly a positive quarter. But I think importantly, the choice to have Mary [Dillon] as my successor. The timing is never perfect to have a handover, but this is a good time we’re at on our transformational journey with the work that we’ve done to create a strong foundation. Based on the press that I read over the weekend, it’s clear that there’s a nice, positive impression that Mary has made on the street and with investors, there is some optimism around it. Ultimately, I would say that it’s a combination of both. I would say that a strong business aligned with an announcement about a strong leader coming in, which is a pretty good combination.”
Aside from the Mary Dillon news, Foot Locker Inc. also announced that Dona Young will become the company’s non-executive chair. What does it mean that the largest athletic retailer will soon have two women at the helm?
“We’ve tried to create a diverse culture in our business all along. Our board has done a great job and has been recognized for the diversity and inclusiveness that we’ve created. It’s been one of the hallmarks of my time as CEO, that we’ve tried to find good diverse leaders to lead the company. Our industry has certainly been male-led for a long time, but I look at Heidi O’Neill at Nike, she’s a strong female leader and she’s surrounded herself with a bunch of strong females there. And virtually every company that we work with has got strong female leadership. I’m proud of the fact that Foot Locker is going to have a CEO and a non-executive chair that are both female. More importantly, they’re great people and they’re great leaders, and that’s ultimately what matters. They both believe in a diverse, inclusive culture, and that’s something we’ve built at Foot Locker that I’m incredibly proud of.”
How did inflation concerns impact the Q2 results?
“When we had our Q1 call back on May 20, we hadn’t seen much of a consumer shift in behavior. The Q1 results carried through most of May. Inflation really hit in the beginning of June for our customer. From late May and early June right through to the middle of July, the customer was still wandering into the stores but their buying patterns had changed significantly. As we got into back-to-school, the early markets in mid to late July, with some of the tax-free weekends the consumers were back out. We saw nice traffic, we saw nice transaction numbers again. We’ve got a great relationship with consumers and we want to make sure we’re their first choice when they are out shopping. Whether they can buy as frequently as they did or put as many things in their basket as they used to, we want to have a deep relationship so they always think about us first. We provide an access to them to affordable luxury, our consumer looks at a fresh pair of kicks as something that makes a statement for them. Even if they have to stretch the length in between purchases a bit, we want to make sure that we’ve got a deep relationship with them, a deep engagement with them, so they come to us first.”
Inflation, the supply chain and the uncertain economy remain concerns of the broader industry. How will these impact Foot Locker Inc. for the rest of 2022 and into 2023?
“I wish I had a crystal ball, and still say that my crystal ball is a bit cloudy because of all of the hand sanitizer on it from when I’ve rubbed it. The truth is that the consumer is going to continue to face some duress. But at the same time, we’ve seen gas prices moderate. We’ll have to see what happens with food, because that’s the other one that inflation has really gone up. I think the consumer is going to continue to be active but maybe will be a bit more cautious as it comes around purchasing times, especially when there’s not a call to action for them. Back-to-school is clearly a call to action because people want to send their kids back to school in new kicks, fresh hoodies — whatever it happens to be. When there’s not as much of a buying reason, we have to make sure that we’ve got deep digital engagement with them, that we’re telling good stories, that we’re staying deeply connected so that when they come back out for holiday, they’re going to think about and come to us first. The good news is that people are still working, that’s really important. I’m hopeful that the consumer is resilient — and they proven that they have been.”
As you step away, what makes you confident that Foot Locker will be able to navigate the current uncertain economic climate?
“We’ve got hundreds of years of experience as Woolworth, as Venator and almost 50 years as Foot Locker. There have been economic challenges before, and we’ve made the right moves along the way. The foundation of the work that we’ve done, the pivot off mall into the community stores, the strength of our team, the deep connectivity and engagement that we’ve got in the local communities, all of those things tell me that we are well suited to respond to whatever the economy does. The fact that people continue to be employed and continue to work tells me that there’s a lot of juice in the economy. I’m confident and I think we’re really well positioned. The assortment is right, the choice that the consumer is looking for his right, the engagement with the consumer is right and our overall strength tells me that we’re really well positioned.”
Will we see you return footwear in some capacity? Or are you walking away for good?
“I’ve had a 30-year love affair with sneakers and the footwear industry. I don’t really think that I’m walking away. I happen to be leaving this role, but certainly my passion for sneakers, my passion for the energy in this market segment is something that I’ll hold with me forever. I’m not about to do anything different. I’m about to retire. I certainly don’t expect that I’m going to go buy a bunch of brown shoes in retirement. I’m going to continue to be a student of this industry because I love it. I’m looking forward to retirement. My [wife] Mary, she’s going to have to put up with me full-time now, so we’ll see how that goes. We’re excited. We’ve been blessed in life. I’m here at Plum Lake [in Wisconsin] looking out over the lake on an absolute ideal morning, and we spend the winters in Naples, Fla., so I’m looking forward to a good retirement life.”