Foot Locker to close 400 mall stores as it shifts focus to niche shops for sneakerheads, kids, and higher-income shoppers

• Foot Locker hosted its first investor day under new CEO Mary Dillon.
• As part of a new business plan, Foot Locker will close hundreds of underperforming stores in malls.

Foot Locker said it will close more than 400 stores in shopping malls, part of a new business plan meant to "reset" the company.

Executives for the sneaker retail chain unveiled the store-closure plan at a Monday investor day in New York City. Foot Locker's "Lace Up" business plan also includes opening free-standing stores for niche audiences.

The plan seemingly left Wall Street unconvinced. Foot Locker shares were down more than 5% for the day despite the stock market trending slightly upward. Foot Locker also reported quarterly earnings on Monday above forecasts, but it offered sales guidance lower than expected.

The company didn't immediately respond to an email from Insider seeking details on expected store closures.

Foot Locker has about 1,300 stores in malls in North America. It expects to close as many as 420 by 2026 to focus on its best-performing stores. The company expects to close 25% of its stores in A- and B-rated malls and 50% of its stores in C- and D-rated malls.

Broadly, mall ratings reflect sales per square foot. In a presentation, Foot Locker noted sales at A- and B-rated malls increased 8% since 2019.

While closing hundreds of underperforming mall-based stores, Foot Locker plans to open more than 300 "new concept" stores by 2026, including outside of malls. By 2026, the company expects 50% of its revenue to come from outside of malls, up from 35% today.

Foot Locker hopes to grow its annual revenue by $1 billion to $9.5 billion by 2026. It expects to have about 2,400 stores, 300 fewer than today.

At the investor day, Foot Locker executives described three new store formats, including a 15,000-square-foot "community" store designed for areas with "strong affinity for sneakers." It also plans to open 10,000-square-foot "power stores" that provide an "elevated experience" in shopping areas with a "broad set of consumers" and "house of play" stores, around 7,500 square feet, that seem geared towards kids' products.

Foot Locker recently opened a "power store" in the Dallas area.

During the investor day presentation, Foot Locker CEO Mary Dillon said the store's "attracting an older and higher-income shopper."

"In fact, the household median income of the Dallas Fort Worth store is 30% higher than our average in the fleet," Dillon said. "So these are just a couple of examples of early wins that we're seeing and our ability to both expand wallet share and broaden our customer reach, which gives us great confidence in our growth plans."