Major mall retailer plans massive overhaul | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

In the wake of stubbornly high inflation, consumers are being increasingly picky about where and how they’ll spend their money. Gen X and Gen Z consumers in particular said they plan to cut back on discretionary spending in categories such as apparel, footwear, and electronics, according to an early 2025 McKinsey & Company survey.

Elevated interest rates are a big sticking point for consumers, too. Although the Federal Reserve lowered its benchmark interest rate three times during the latter part of 2024, persistently high inflation forced the central bank to pause its rate cuts during its most recent meeting.

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Given a recent uptick in the Consumer Price Index, it’s unlikely that the Fed will opt to lower rates when it meets in the middle of March.

If interest rates stay put, consumers will continue to be choosy about how they spend their money knowing that any sort of debt they incur will cost them more. And it’s that line of thinking that’s been hurting retailers.

In 2024, more than 7,300 U.S. retail locations shuttered, reports Coresight Research, with a number of notable brands filing for bankruptcy. Worse yet, Coresight anticipates an astounding 15,000 store closures in 2025.

Major retailer is revamping hundreds of stores.

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Iconic chain is part of a broad retail trend

In early 2023, Foot Locker announced plans to close 400 stores in North America by 2025 as part of a massive rebrand. The company is focusing on underperforming locations in malls.

Shopping malls performed surprisingly well in 2024, says Placer.ai, with total customer visits exceeding 2023 levels. Outlet mall traffic remained flat.

A number of retailers have taken steps to move away from malls in recent years. Shopping mall settings aren’t always optimal for retailers because there’s built-in competition. Retailers that focus on standalone stores can transform those properties into shopping destinations, drawing in customers with a wider selection of inventory and more spacious facilities.

In recent years, popular retailers such as Macy’s, Nordstrom, and Sephora have been shifting away from traditional malls to focus on outdoor shopping centers and standalone locations.

In 2024, Foot Locker announced plans to move away from malls and focus on a new store concept. As a key component of the brand’s broad Lace Up Plan, Foot Locker’s newest stores are designed to highlight new inventory and trending products. They also feature a communal try-on area where customers can connect with one another.

Foot Locker stores are getting a major refresh

As part of its plan to transform the in-store experience for customers, Foot Locker is moving forward with plans to open or convert 80 stores to align with its new concept. The company also announced plans to revamp 300 existing locations.

Foot Locker sales slid during the final quarter of 2024. Revenue for the year fell 2.2% to about $8 billion.

Despite that setback, Foot Locker is running full speed ahead with its reimagined store concept. If all goes according to plan, by the end of 2025, the company will have refreshed 800 stores over a two-and-a-half-year period.

Customers’ response to Foot Locker’s new store concept has been “extremely positive,” CEO Mary Dillon said. While the reimagined stores cost around $1 million to $1.2 million to build, they can generate $4 to $5 million in sales in their first year alone.

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Of course, the big question for retailers today to grapple with is the impact of tariffs. Foot Locker sources products from China, but they make up a fairly low percentage of the company’s overall sales.

“Our customers are young – by definition they’re more limited in their discretionary budgets,” Dillon said. “This is for sure a category that they prioritize in their lives, but we’re watching as they’re thinking about overall cost of living, plus some uncertainty about tariffs.”

Modernizing its stores could do a lot for Foot Locker, especially in the context of drawing in a younger audience. The company is also working to improve its mobile app and rewards program.