NEW YORK ( TheStreet) -- Stores with brightly colored tables to show off pricey sneakers. More mannequins wearing the hottest apparel from Nike (NKE) - Get Report. These are just a few of the changes execs at Foot Locker (FL) - Get Report plan to introduce to their stores over the next five years to keep sales and profits humming.
Foot Locker shares have been on fire recently, rising 33% in the past year compared to 11% for the S&P 500 I:GSPC, as profits have been bolstered by strong sales of premium basketball and running shoes.
But Foot Locker CEO Dick Johnson is not getting complacent. Along with gradually getting rid of the underperforming Lady Foot Locker brand and replacing it with the fresher SIX:02 concept for women, Johnson has the company redesigning many of its stores to sell more apparel and showcase higher-priced products.
Success on these fronts will be critical to reaching Foot Locker's latest long-term financial projections. The company is targeting $10 billion in sales by 2020, up from $7.5 billion in 2014, while sales-per-square-foot are projected to reach $600, compared to $490 last year. And profit margins before interest and taxes are seen reaching 12.5%, up from 11.4% a year ago.
"You will see performance zones, more emphasis on ladies products," said Foot Locker CEO Dick Johnson told TheStreet at its New York City investor day held on Mar. 16.
At Champs, Foot Locker's lifestyle brand that offers more casual apparel and sneakers, sneakers have been moved into the middle of the store from their previous home along the walls. Now, apparel and accessories such as backpacks, T-shirts and hats will occupy that wall space.
Foot Locker will also start more aggressively promoting its Eastbay sporting goods brand, which had previously been only sold online. The plan is to introduce it into more Champs stores this year. Currently, Eastbay shops are in four Champs locations, but will be "taken to an unspecified number of stores this year", according to the company.
Meantime, the main Foot Locker brand, which has over 1,900 stores around the world, will start to display premium products such as the Lebron 12 in enclosed glass pedestals to bolster their exclusive appeal. There will also be more space devoted to selling apparel and accessories.
The focus on apparel is a deliberate one by Foot Locker following years of profit-eating markdowns. Sales of apparel, which have high profit margins, fell by a double-digit percentage in the fourth quarter, hurt by underperformance from Champs and Foot Locker Europe. U.S. apparel sales at Foot Locker rose by a double-digit percentage, however, with those at Footaction, another of the retailer's more casual chains, up by the mid-teens.
"We have to think like an apparel company," said Johnson, noting that the rise in fast-fashion retailing -- spearheaded by companies such as H&M, Forever 21 and Zara -- requires that Foot Locker step up its game.
Apparel represented 21% of Foot Locker's total sales in 2014 compared to 28% back in 2004. Johnson said last year likely was the "bottom" in its apparel performance as its latest strategies kick into gear.
But Foot Locker also has several other tricks up its sleeve.
"We have some things in discussion with Under Armour (UA) - Get Report regarding vendor space," said Johnson. That boils down to the likelihood of Under Armour shops opening within Foot Locker locations in the near future, similar to those the shoe and apparel maker has been opening inside of Dick's Sporting Goods (DKS) - Get Report stores over the past few years. Under Armour now has over 230 shops in Dick's Sporting Goods stores that showcase the brand's premium offerings such as high-end jackets and pants.
The comments on Under Armour, which has long been rumored to have a frosty relationship with Foot Locker, come on the heels of strong initial sales of Under Armour's first signature basketball sneaker line made with popular Golden State Warriors point guard Stephen Curry. "Steph Curry's product came in, and it blew it out", said Foot Locker President and CEO-North America Jake Jacobs.
Under Armour shops would join a growing number of those from Adidas and Puma inside of Foot Locker stores.
Footaction, acquired by Foot Locker in 2004, will also receive some TLC. Acknowledging that refreshing its store design has not been a central focus recently, Foot Locker said it plans to redesign 45% of its Footaction stores by 2017. Similar to the refreshes at Foot Locker and Champs, the revamp at Footaction will emphasize apparel.
Beyond its plans for cosmetic changes, the company also has a social media upgrade in its sights. "We are focusing on Snapchat," said Foot Locker President and CEO of Footlocker.com/Eastbay Dowe Tillema, suggesting the brand could begin marketing on the popular teen social media network. Foot Locker has 150 million total followers across Instagram, Facebook, Twitter and YouTube, and has used these networks to encourage kids to post photos of their sneakers, and to share short videos of athletes rocking their sneakers from Foot Locker.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.