The biggest risks from Europe's economic problems for Foot Locker “are chastened consumers and a hit to sales,” as company CEO Ken Hicks indicated that “fewer people have been shopping in the company's European stores,” according to Dana Mattioli of the WALL STREET JOURNAL. Hicks said that Europe “was the only region where Foot Locker experienced a drop in same-store sales in its most recent quarter, with sales declining roughly 5%.” The company has responded “by keeping its inventory in Europe lean.” Foot Locker's core customers in the region are “males between the ages of 15 and 25, a group that has been hit hard by high unemployment.” Hicks said that in a sign that such customers are “trading down to lower-priced sneakers, sales of Converse shoes and lightweight running shoes have been higher in Europe in recent months, something Foot Locker saw in the U.S. during the depths of the recession” in ‘08 and ’09. Despite the downturn, Hicks said that Foot Locker's European stores “are still profitable and the company continues to expand in the region.” He added that Foot Locker's European stores “have some of the highest operating-profit margins in the company, with sales per square foot and sales per hour higher than in the U.S.” The company is “continuing to expand in Europe, with plans to open 40 new stores this year” and is “considering the acquisition of real estate outside of the euro zone in Turkey, Poland and the Czech Republic” (WALL STREET JOURNAL, 6/1).
