1. FOOT LOCKER, INC.
Strategic Management (BUS 491)
APRIL 27, 2016
TAYOUNG NUYEPGA
University of Maine at Farmington

2. 1
Table of Contents
Industry Analysis....................................................................................................................................................2
Economies of Scale ...............................................................................................................................................3
Competitive Analysis ..............................................................................................................................................4
Porter’s Five Forces ..............................................................................................................................................5
S.W.O.T Analysis....................................................................................................................................................7
Elaboration............................................................................................................................................................8
Financial Analysis.................................................................................................................................................11
Strategic Recommendation Analysis...................................................................................................................13
Appendix’s ............................................................................................................................................................15
Strategic Group Map ...........................................................................................................................................15
Financial Ratios...................................................................................................................................................16

3. 2
Industry Analysis
Market size and growthrate
Number of rivals
Scope ofcompetitive rivalry
Number ofbuyers
Degree ofproduct differentiation
Product innovation
Demand-supply conditions
Pace oftechnological change
Vertical integration
Economies ofscale
Learning/Experience
Curve effects
 Foot Locker operates more than 3383 stores in many geographical locations
such as Canada, United States and Europe. Foot Locker operates segments as
well such as Athletic Stores and Direct-to-Customers. The company has an
average of 1796 stores in 23 countries, 971 stores in the United States, 606 in
Europe, and 94 stores in Australia and New Zealand.
 Foot Locker’s biggest rivals are the Finish Line Inc., Sports Authority Inc., Wal-Mart
Inc., Dicks Sporting Goods Inc., Target Corporation, and TJX Companies Inc.
 Foot Locker was classified as the number one seller on brand such as Nike, and have
been competing with their competitors on delivering quality products on reasoning
prices in which their consumers can afford.
 Foot Locker targets consumers from 12 to 30 years old in both fashion and athletic
apparels, and their consumer base is constantly growing in those age group.
 Foot Locker offers different kinds of product lines ranging from men, women’s and
children’s athletic and fashionable shoes/apparel,and these products varies from
inexpensive to expensive items based on the brand and quality.
 Foot Locker as a company is more focused on delivering athletic and fashionable apparels
from different brands to consumers, and are more into selling apparels that are in demand by
consumers.
 Foot Locker is working with major suppliers who can deliver them high quality athletic
apparels and shoes for consumers. Foot Locker is always faced with high demands on
athletic shoes especially Nike brand because of the Air Jordan.
 Foot Locker adopted interactive and touchscreen display used for providing
consumers with information, and they also adopted a mobile website.
 With the otherof their subsidiaries it has allowed Foot Locker in gaining a
competitive advantage in the differentiation.
 Based on the size of the company, Foot Locker has been able of obtaining a cost
advantage due to the higher volume output.
 Due to the high demographic locations, the company has been able in providing
consumers with high quality athletic shoes and apparels, and has created a
broader brand awareness.
As

4. 3
Economies ofScale:
The economies of scale involve companies being able of having the ability in lowering
their units cost by increasing their scale of operations as well. Larger companies are more
economical in operating than smaller companies. Also, the higher the operations of those larger
companies the lower their cost per unit will become which allows them in having a greater
competitive advantage because they have taken the time in putting their economies of scale I
use. As for a company like Foot Locker there are no exception from these because they have
been focusing in expanding their athletic shoes and apparel distribution/stores that leaves them to
be more economical in operating since there is an extremely high threat to new entry in the
industry. In addition, with Foot Locker having stores in Europe, Australia and New Zealand in
gives them an advantage in lowering unit costs being to the fact that they are not opposed in
making separate products for each of those countries in which they are involved in abroad.
Another economies of scale which Foot Locker possess is the advertising of their product
brands which they sale. Investing in advertisement in bigger events on TV such as FIFA World
Cup and Super Bowl that are worldwide watched events is a great way of spreading the word out
to consumers who are watching. Foot Locker is one of the best consumer retailer in athletic
shoes and apparel due to the quality of product in which they deliver and always keeps up with
consumer demand. The company has been able in attracting more consumers towards them by
advertising their new available products brands which they have just gotten and also because of
the type of products they offer which has attracting more customers. With the power of
spreading the words out through advertisement gives Foot Locker a better cost advantage as
compared to many of their competitors.

5. 4
Competitive Analysis
Substitute Products
• Companies such as Wal-Mart offers the same products
for inexpensive price which consumers can afford
without hesitation.
• Sports Authority offers items from the same product
line as Foot Locker but for moderate prices.
Suppliers
• Foot Locker
works with major
suppliers on
delivering high
quality products
at low cost, with
Nike and Adidas
leading as
suppliers.
• Foot Locker
suppliers holds as
much power as
the company due
to the
differentiated
products.
Rivalry among
competing sellers
• Demand is
decreasing due to
the global
economy meaning
consumer base
and demand is
decreasing
• The athletic shoes
and apparel
industry is getting
flat and that leaves
these companies
in competing on
market share
Buyers
• Buyers holds a
great amount of
power in the
athletic shoes and
apparel industry.
• Buyers are very
price sensitive
when trying to
purchase athletic
shoes.
•
New Entrants
• The threat to new entrants is very high in the athletic shoes and apparel
industry due to low cost of capital investment.
• Geographical expansion in also very high in the athletic shoes and apparel
industry.

6. 5
Competitive Analysis – Porter’s Five Forces:
The reason for the five forces is due to the fact that it shows the competitive pressure
based on companies that are in the same industry which in this case in the athletic shoes and
apparel industry. Also, another reason for using the five forces is because since many companies
especially those in the same industry as Foot Locker are known for not having the same strength
and character in competing forces in distributing or supplying consumer products/wants. The
five forces used in distinguishing companies based on their strength in operating are; rivalry
among competing sellers, substitute products, supplier bargaining power, customer bargaining
power, and new entrants. All these shows how competitive strength a company like Foot Locker
holds in their industry. The purpose for the five forces it allows one in identifying the different
companies involved in the same industry and the pressure that comes with the competition. Also,
the forces look at how strong the competitive pressure that is coming from all five forces.
However, based on all the five forces rivalry among sellers turns to be the strongest and
the one that is often looked at the most among all the five forces model. The reason why the
rivalry among seller is the strongest more especially in the athletic shoes and apparel or the
sports industry in general is because of the extremely high competition between the various rival
sellers due to the decreasing demand in the sports industry. The decrease is caused by consumers
becoming more price sensitive due to the economic conditions which we are facing globally.
Also, there is an extremely high number of competitors in the athletic shoes and apparel industry
which has made it harder for consumers to choose from and made it even harder for the
companies themselves in delivering high-quality products for affordable price in this economic
conditions. Due to all that, Foot Locker competitor such as Wal-Mart will be the ones to have the
rivalry among sellers’ advantage in the athletic apparels and shoes industry because they are able

7. 6
in providing consumers with what they want at affordable prices.

8. 7
S.W.O.T. Analysis
Potential Strength & Competitive Assets
• Strong Management Team.
• Brand(retailer) Recognition.
• Strong Relationship with Nike Inc.
• Global Expansion.
• Product information based on
technology
• Strong Website (e-commerce)
• Variety of sport apparel brands.
• Consumer Loyalty.
Potential Market Opportunities
• Target all ages.
• Celebrity Endorsement.
• New Product Offering.
• Expand Internationally (Africa).
• Expansion of Product Line.
• Acquisition.
• Innovation.
Potential Weaknesses & Competitive
Deficiencies
• Poor R&D.
• High Price.
• Overly Dependent on Nike Inc.
• Strong Dependent on Malls
• Less to no Store Brand Products
• Poor Advertising.
Potential External Threats
• High Product Substitutes.
• High Market Entry
• Constant Increase in Competition.
• Wal-Mart Stores Inc.
• Continuous Increase in Fake
Products.

9. 8
SWOT Analysis Elaboration:
 Strong Relationship with Nike Inc.:
Foot Locker retailer as a company with them having a key success in delivering a strong product
line based on brands that consumers are most familiar with can help increase trust among the
company and its consumer because the consumer believes they will always carry such brands.
Foot Locker has always kept a close business relationship with Nike Inc. due to that fact that
Nike keeps on producing new designs of Air Jordan which is what majoring of young consumers
nowadays are looking to purchase, and Foot Locker always carriers the latest designs. Nike Inc.
and Foot Locker has been working hand-in-hand to make sure that they are constantly delivering
attractive products which consumers are searching for.
 Variety of Sport Apparel Brands”
Foot Locker doesn’t just carry one type of brands but are a little bit diversify by having other
brands such as Adidas, Under Amour, and including Nike so as to attract consumers who do not
like a specific brand for sports. Every Athletic has their favorite brand which the prefer on using
and it’s always between Nike and Adidas. Foot Locker has opened themselves in carrying high
profile brands so as to create consumer loyalty towards their stores. Carrying too many brands
would increase their competitive level in the sports industry which is why they prefer on carrying
fewer brands so as to get consumer to quickly decide on which brand they’ll be purchasing once
they visit any of their outlets.
 Expand Internationally (Africa/Asia):
On the other hand, Foot Locker has been able in expanding their market into Canada, North
America, Europe, New Zealand and Australia which is what has made them into becoming as
successful as they are. It is understood that a company has to move into a market that has

10. 9
potential of growth and keeps producing outcomes that will help strengthen the company.
Moving in Asia and Africa would be a great and promising market opportunity for Foot Locker
due to the fact that the company is offering athletic shoes such as basketball shoes and Air
Jordan which could be used as both basketball and fashion shoes. Many people in Asia and
Africa in particular are constantly requesting for Air Jordan because there is a limited market on
these type of athletic shoes in those areas.
 Strong Dependent on Malls:
Foot Locker’s continuous depended on mall is good for a short-term profitability, but on a long-
term in could be very risky for their future profit if they continue to heavily rely on malls for
sales. The reason why it could be a risky move for future profitability is because there is a
constant change in social cultural behaviors among consumers which could affect Foot Locker’s
sales. The highly reliance on malls shows that the Foot Locker needs to do new acquisitions so
that they could increase their sales and not just heavily depend on the sales that comes from
malls. Also, relying just on malls alone could risk them in losing a huge consumer based due to
that fact they are not willing to walk/drive to a mall and would instead visit places like Sports
Authority, Wal-Mart, and any of the TJX companies because they are closer. So acquiring new
stores will show consumers that the company is ready and willing on providing them with their
wants.
 High Product Substitutes:
Based on the availability of high product substitutes leaves Foot Locker at a great risk because
they don’t have the power within them to increase their price on any products since consumer are
more price sensitive now and have no problem in switch to another company that offers the same
products but at a lower and affordable prices. Due to this reason Foot Locker is forced on finding

11. 10
suppliers who are willing on supplying them high quality product but at a lower rate. Foot
Locker has been able of maintaining their price because they have been able of getting suppliers
who are willing on supplying them with quality products at a low cost. Nike Inc. is one of Foot
Locker’s suppliers who are working with Foot Locker in able of keeping customers satisfy so
that they don’t switch to their competitors by offering them products at a price that they afford
and are always willing on coming back.

12. 11
Financial Analysis
Leverage – Debt-to-Equity:
Debt-to-equity ratio shows how much money (short-term to long-term) the company has
borrowed in order of funding their assets. If the company’s ratio is over 1.0 that means the
company is borrowing more money in funding their assets and the company as well. However, if
a company’s ratio is below 1.0 that means the company getting more from investor which
signifies that they have a higher advantage in borrowing money. A company like Foot Locker
would prefer to be below 1.0 so as to save margins from expenses in order of competing the high
competitive athletic shoes and apparel industry. Given these points, Foot Locker had a debt-to-
equity ratio of 0.44 in 2012 and in 2013, their ratio was 0.42. However, in 2014, and 2015, their
debt-to-equity ratio was 0.39 and 0.43 respectively. Finally, in 2016, Foot Locker’s debt-to-
equity ratio was 0.48. The industry ratio in 2016 is 0.70 (70%) which means that Foot Locker is
doing extremely good.
Liquidity – Current Ratio:
Foot Locker’s current ratio indicates if the company was or is able of paying off current
liabilities using their assets which could be converted into cash short-term. In 2012, Foot
Locker’s current ratio was 3.79, and in 2013, their current ratio decreased but was still very good
3.71. In 2014 and 2015, the company had 3.75 and 3.53 respectively. Foot Locker also faced a
big decrease based on the previous three years. And in 2016, Foot Locker’s had a ratio of 3.72
still beating the industry’s ratio again on this area. Foot Locker has been able of maintaining a
ratio above 1.0 which means holds liquidity in which they could use in paying their creditors.
Profitability – Gross Profit Margin
A company’s gross profit margin shows the percentage of the company’s revenue

13. 12
available in covering their operating expenses and also being able of yielding profit. If a
company’s gross profit margin percentage is high that means they are maintaining a low cost of
goods sold. In Foot Locker’s gross profit margin was 0.32 in 2012. However, in 2013, 2014, and
2015, they had a gross profit margin of 0.33. Finally, in 2016, Foot Locker’s debt-to-equity ratio
was 0.34. The industry ratio in 2016 is 0.47 (47%) which means if the company is almost
reaching the industry percentage average. Also, the Athletic shoes and apparel industry gross
profit margin is very low due to the fact that there is a high level to entry in the industry creating
lots of substitute products.
Profitability – Net Profit Margin:
This area is very important when it comes to looking at a company’s financial
performance based on how much profit the company is earning from profit after tax per
dollar(goods) of sales. The net profit margin is what investors mostly look at in order to
determine how much profit the company is earning. For a company like Foot Locker, they had a
net profit of 0.049 (4.9) in 2012, and 0.064 (6.4) in 2013. Also, in 2014 and 2015 Foot Locker
had a net profit of 0.081 (8.1) and 0.072 (7.2) respectively. In 2016, Foot Locker’s net profit is
0.072 (7.2) still over taking the net profit margin of the industry, with the industry having 2.52.
Impressive numbers for current and future investors planning on investing the company.
Liquidity – Working Capital:
The working capital shows how much money the company has in operating their day-to-
day business. Ever since 2012 to 2015, Foot Locker has had enough fund that could cover their
daily expensive. They had a working capital which are represented in billion $1531 in 2012, and
in 2013, they had $1727. In 2014 and 2015, Foot Locker had 1724 and 1760 respectively. In
2016, their daily working capital expenses increased to $321.

14. 13
Strategic Recommendations
Weakness #1 – Poor R&D:
Foot Locker team that is responsible for research and development are not doing their job
to the fullest when it comes to researching new geographic and demographic areas in which the
company can segment their market in based on the consumer demands. Race, education, income
most definitely plays an important part in the segmentation of their market size but in order to
widely and competitively gain an advantage in the sports industry, Foot Locker will have to get
their R&D team very busy because they are many areas abroad and in United States in which
they can expand their market into so as to attract more customers.
Weakness #2 – Less to no Store Brand Products:
Foot Locker Inc. is highly known for carrying other brand names such as Nike and
Adidas which they rely on. Carrying popular brands most definitely gets the company the
customers that they want which helps the company in growing their market size, and financially
as well. Many of these brands are very expensive to purchase which has led consumers to turn to
other alternatives. In order to keep the consumers happy and keeping them satisfy, Foot Locker
should invest in producing their own brands at a lower price which are somehow similar to what
consumers want so as to even attract more consumers to their stores since the company is already
widely popular. Having their own brand name at every outlet will increase their financial
performance and would even give them the opportunity in satisfying consumers based on their
income.
Opportunity – Athlete Endorsement:
In order for Foot Locker to keep their competition in the sports industry at a high, they
will need to endorse a famous athlete who would be able in helping the company spread the

15. 14
words about their product offering to potential consumers. Many people especially younger
consumers are willing on purchasing a product especially shoes if it is being advertised by their
favorite athlete or a famous athlete. This strategy is somehow expensive depending on the athlete
and length of which the athlete has been endorsed for. Foot Locker can get someone like famous
like Stephen Curry or LeBron James for a one-year contract and see how that turns out. If it does
have an increase to their sales, then they might want to start thinking of endorsing highly
respected and known athletes.

16. 15
Appendix 1 – Strategic Group Map
High
Low
Low Value High
Revenues
Foot Locker, Inc. North America, Canada, Europe, Australia, 7.41 B
and New Zealand
Dicks Sporting Goods, Inc. United States 6.21 B
Sports Authority, Inc. United States, Puerto Rico, Japan 2.65 B
Finish Line, Inc. United States 1.90 B
Wal-Mart Stores, Inc. North America, South America, Canada, 482.1 B
Europe, Asia, and Africa
Dicks
Sporting
Goods, Inc.
Finish
Line, Inc.
Wal-Mart
Stores,
Inc.
Sports
Authority,
Inc.
Foot Locker,
Inc.

17. 16
Appendix 2 – Financial Ratio
Profitability Ratios 2012 2013 2014 2015 2016- 01
Gross Profit Margin % - 31.9% 32.9% 32.7% 33.1% 33.7%
Operating Profit Margin % - 7.58% 7.69% 7.74% 7.81% 7.89%
Net Profit Margin - 4.9% 6.4% 8.1% 7.2% 7.2%
Return on total assets (annualized) % 9.11% 11.7% 15.1% 14.5% 14.3%
Return on stockholders (annualized) % 13.1% 16.7% 21.1% 20.8% 21.1%
EPS-Diluted- 1.80 2.58 2.85 3.56 3.84
Liquidity Ratios
Current ratio** 3.793 3.715 3.753 3.528 3.722
Quick ratio .485 .406 .481 .491 .506
Working Capital (in millions USD) 1531 1727 1724 1760 321
Leverage Ratios
Debt-to-assets ratio .308 .294 .284 .302 .323
Long-term debt-to-capital ratio .060 .052 - - -
Debt-to equity ratio 4.454 4.164 3.970 4.331 4.786
Long-term debt-to-equity ratio 6.398 5.595 - - -
Times-interest-earned ratio 6.242 5.545 - - 8.563
Activity Ratios
Days of inventory 10.19 6.89 6.84 6.38 6.32
Inventory turnover 35.79 35.54 35.83 38.21 38.18
Average collection period 32.455 40.148 55.549 40.323 46.782
Other Important Financial Measures
Dividend yield on common stock 2.1% 2.4% 1.7% 1.5% 1.8%
P/E ratio (quarterly figures annualized) 13.15 15.12 16.48 17.69 16.14
Dividend payout ratio 37% 28% 28% 25% 26%

18. 17
References
Foot Locker Inc. (n.d.). Retrieved April 25, 2016, from
http://financials.morningstar.com/income-statement/is.html?t=FL
"Foot Locker Inc." N.p., n.d. Web. 25 Apr. 2016. Retrieved from <http://www.footlocker-
inc.com/pdf/2004/2004AnnualReport.pdf>
Foot Locker., Retrieved from - http://www.footlocker-inc.com/
"FOOT LOCKER INC (FL:New York Consolidated): Company Description." Bloomberg.com.
Bloomberg, n.d. Web. 27 Apr. 2016.
<http://www.bloomberg.com/research/stocks/snapshot/snapshot_article.asp?ticker=FL>.