ONE FOOT IN THE GRAVE
Apr 1, 2004 12:00 PM
Bankrupt footwear conglomerate Footstar is seeking a buyer for its 353 Footaction stores, primarily because shoe giant Nike won't commit to supplying the retailer with its shoes anymore. Footstar owes Nike $19.4 million. The West Nyack, N.Y.-based company wants to refocus on its Meldisco business, which operates shoe departments in 2,496 discount stores.
Footstar has already announced plans to close all of its 88 Just For Feet stores and 77 Footaction stores. Footstar had been negotiating with landlords for substantial occupancy cost reductions at the rest of its stores, says Wells Fargo Securities analyst John Shanley.
Who'll profit from Footaction's demise? The chain specifically targets urban consumers. Indianapolis-based The Finish Line, which operates 531 stores, would likely gain most of the urban market share lost by closing Footaction stores, says Merrill Lynch analyst Virginia Genereux. Forty percent of Finish Line stores are in the same malls as Footaction stores. And Nike has suggested it would be diverting some product originally intended for Footstar to other retailers. “Finish Line could be a beneficiary here in the coming months,” Genereux says. Finish Line is opening 60 new stores this year, 10 of which are in California.
New York-based Foot Locker Inc. is also likely to benefit. Of the 75 mall-based Footaction closings, 71 contain Foot Lockers. Foot Locker closed 29 U.S. stores in 2003. It's focusing on international expansion, says Jim Duffy of Thomas Wiesel Partners. In fact, the retailer plans to close about 55 under-performing U.S. stores this year and add 55 international stores.
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