I cant understand if thats the reason for the almost 20% drop because its ond news close to a month that Venator is loosing against FEEt and finish line and that should have helped FEET not brake it
Just for Feet Inc.
Dow Jones Newswires -- July 7, 1998
Once An Athletic Star, Venator Faces Changing Industry
By Philana Patterson
NEW YORK (Dow Jones)--Once the superstar of athletic footwear retailing, Venator Group Inc. (Z) may be caught in a swirl of fundamental change in the industry.
Tuesday, the company, formerly named Woolworth, said it expects to report a fiscal second-quarter loss of 5 cents to 10 cents a share, which is below the First Call Corp. estimate of 21 cents a share. The company earned 19 cents a share in the year-ago period.
The owner of Foot Locker, Lady Foot Locker, Champs and other specialty retail chains also said if current sales trends continue throughout the second half of the year, full-year earnings, excluding its pending acquisition of Sports Authority Inc. (TSA) and nonrecurring items, could be between $1.10 and $1.20 per share. The First Call estimate for the year is $1.72 a share.
Sports Authority also said Tuesday that its fiscal second-quarter earnings will be between 12 cents and 14 cents a share, below the First Call estimate of 25 cents a share. The company earned 30 cents a share in the year-ago period.
For more than a year, the athletic footwear and apparel industry has been struggling with a reduction in demand. In the U.S., fashion shifted toward brown shoes and away from basketball and cross-training athletic shoes. In Asia, which was once pegged as a key growth market for athletic products, consumer demand slowed because of the economic crisis there. The situation created a glut of inventory that has put a lot of bargain-priced athletic footwear in the marketplace.
That hasn't seemed to hurt retailers such as Just For Feet Inc. (FEET) and Finish Line Inc. (FINL), which have the room in their stores and the customer demand to sell closeout merchandise. Both companies said they have taken advantage of the inventory glut to stock up on and sell discounted merchandise.
"We've chosen different routes," said Finish Line Chief Financial Officer Steve Schneider. "Our market is men, women and children, not just young fashionable males."
Catering to the family and using a larger format have made the difference for his company and Finish Line, said Just For Feet Chairman and Chief Executive Harold Ruttenberg.
In addition, adding entertainment to the mix as Just For Feet has done with in-store basketball courts and video walls also helps drive traffic, Ruttenberg said. Its stores are up to 20,000 square feet and most are freestanding or located in strip shopping centers as opposed to indoor malls. Finish Line stores are up to 25,000 square feet and have a more upscale look.
"We have a much newer and fresher approach," Ruttenberg said.
Employing new approaches is helping companies such as Just For Feet take market share in a changing business. Young males - the market segment on which Venator built its athletic business - are no longer the driving force in the athletic shoe industry, said Mike Kormas, president of Footwear Market Insights. Stores are now finding that their core ethnic consumers are choosing dressier styles, he said. In order to compete, retailers must show differentiation, whether it's from a price, entertainment or selection standpoint. Creating an environment where families and people over age 35 want to shop has also become more important.
"The big-box retailers have created a new environment as opposed to the smaller mall-based stores," Kormas said.
Venator's proposed acquisition of Sports Authority would provide an additional format that could potentially help Venator compete with growing athletic footwear companies and expand its focus from the young men's fashion market.
That is, if the acquisition happens. Denver-based sporting goods company Gart Sports Co. (GRTS) made a bid for Sports Authority last week that appears to top Venator's proposal. And even if Sports Authority rebuffs Gart's offer, Venator's stock is trading at levels that could jeopardize the deal. Sports Authority has the option of delaying or even terminating the merger if Venator's stock falls below $20.50 in the 20 trading days before the vote, which is expected later this summer.
Venator's NYSE-listed shares fell 2 3/4, or 13.1%, to 18 1/4 Tuesday on volume of about 3.3 million, compared with average daily volume of 652,500. Earlier, the shares fell to 17 3/4, a 52-week low; the previous low of 18 1/4 was set Oct. 30, 1997. Sports Authority's NYSE-listed shares were down 12.5%, or 2 1/16, at 14 1/2 on volume of 1.2 million, compared with average daily volume of 456,500.
"(Venator) probably thought that once they closed the Woolworth stores that they would be on the way up, but that hasn't happened," said Argus Research analyst David Toung. "It used to be that every six weeks, kids were buying a new pair of shoes - what a machine - but that's not happening anymore."
But Venator is making some efforts to fit in the new athletic environment in other ways outside the pending Sports Authority acquisition. The company is gradually adding larger stores. Its three-year, $1 billion-plus capital spending program will provide for the remodeling of many of its stores, a spokesman said. When the remodels are complete, more than half its stores will be less than three years old. Many of the stores will also be bigger. Now the stores have about 1,500 square feet of selling space. The remodels will boost that to 2,000 square feet.
The company has also struck deals to be the exclusive carrier of women's Saucony Inc. (SCNYA, SCNYB) products in Lady Foot Locker and Champion brand footwear in Foot Locker and Kids Foot Locker.
But no matter what Venator, Just For Feet or other athletic players do, the industry is undergoing fundamental change, said Footwear Market Insights' Kormas.
"In order to grow, retail (companies) are going to have to take market share," Kormas said.
Just For Feet said in June it would buy privately held Sneaker Stadium Inc. Consolidation will likely continue, Kormas and Just For Feet's Ruttenberg said.
And Venator will have to work harder to deal with the competition.
"They had it too easy for a long time," Ruttenberg said. "Stuff was just blowing off their shelves."
- Philana Patterson; 201-938-5360
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