The question is still open. Foot Locker has already indicated its intention to acquire this large American footwear group, but a report in Women’s Wear Daily a few days ago said that Kohlberg Kravis Roberts & Co. (KKR), the large American equity investment firm, was in acquisition talks with both Skechers and Genesco. The report suggested that KKR would combine the operations of the two companies if both deals went through.
However Robert Greenberg, chief executive of Skechers, released a letter to the company’s employees saying that “the kind of rumor contained in the (WWD) article can be disruptive to our employees and customers and our business,” but he did not deny that article’s veracity.
Last month Genesco rejected Foot Locker’s offer to buy the company for $46 per share, saying that Foot Locker had already mentioned “going higher” with the price. Earlier this week Foot Locker indicated that it was planning to scale back its store openings by 45 this year, with its new Footquarters chain of casual footwear stores losing out the most, because of soft sales in the USA and in order to build up a war chest for a possible acquisition of Genesco. The company said that it’s pleased with the amount of women’s and brown shoes it’s selling through the Footquarters concept, but admitted that it is still in a learning mode.
Foot Locker’s net profit dropped by 71 percent to $17 million in the 1st quarter, on a net sales decline of 3.6 percent to $1,316 million. Comparable store turnover slid by 5.1 percent, due to lagging sales in the USA across all business units. The gross margin fell by 3.3 percentage points to 27.4 percent. The retailer fared much better outside of the USA, with Europe continuing to improve and with increased profits in Asia Pacific and Canada.
Meanwhile Genesco, which is due to report its quarterly results next week, has announced that it will close or convert 57 underperforming stores, mostly in the Underground Station chain. The announcement follows a 33 percent drop in comparable store sales for the Underground Station banner in the 1st quarter. The doors being closed had an annual turnover of $22 million and a pre-tax operating loss of $4.9 million for the 12-month period ended May 5. Over the next 18 months, Genesco expects to incur $14-15 million in pre-tax charges related to asset write-downs, lease terminations and other costs related to store closures.