Foot Locker: Any Change Is Positive

So it looks like FL finally confirmed the speculation that started in April about Matt Serra retiring as CEO. I celebrated a birthday a week ago - let's just say it was a number between 35 and 40. FL is one of the few stocks in retail that you could have bought circa 1970 (in a 'diworsified form' as Woolworth/Venetor etc...). Had I been gifted a share way back then, my return would be a big fat goose egg. Yes, Foot Locker is the retail equivalent of Japan.

This company's management culture is one that strives for mediocrity - whether it knows it or not. In its best form, it succeeded in being slightly below average, but all along remained squarely on the investment community's 'least respected management team' list.

Come on McGough...give the guy a fair shake. Serra has only been at the helm since '00/'01, and should not be saddled with the mistakes of years past. Also, he saw the company through the recession and economic recovery in '01-'03, and generated decent returns in the ensuing years.

Agreed. I'll definitely give credit where it's due. But how much of this recovery came from management's efforts vs. a general economic rebound? I guess we'll never know. But what we do know is that the stock is DOWN 20% since he took control, and over the past 5 years, ROE has gone from 16% to -4%, and Return on Capital is off by 2/3 to 4%. My kids generated a better return on capital last weekend at their lemonade stand - in the rain.

My point here is that this team's credibility is SO low, that ANY change is positive. Not to mention bringing in Ken Hicks from JC Penney (JCP) - formerly JCP's President and Chief Merchandising Officer. I can't make the call yet as to how effective he'll be. But what I can say is that the gent's resume is far better than a company the size of Foot Locker probably deserves.

This thing is officially in the zone where it will get a free pass on any bad news related to operations for a couple quarters, and the Street will only get more jazzed and imaginative as it concocts kool-aid around what the new CEO could do to unlock value.

Comments

[107Sid:]

Given the industry conditions and environment over the past five years both here and abroad and the psotion of the company when he took over, Sera has done an OK job.

Jun 30 10:10 AM

[Frank8282:]

To The Author:
Matt Serra is a very well respected businessman, not only by his coworkers, but by his industry peers. Trust me, you wouldn't last a day in retail. Only a shrewd businessman with unsurpassed perseverance could've lasted for so long during this tough economic climate. But I wouldn't expect you to understand that. Afterall you write for a little known blog.

Jul 01 01:57 PM

[SR1006:]

I may be a little out of my league in responding to this blog, however I'm going to throw my 2 cents into the mix. Mr. Serra may be hailed as a respected businessman in his circle of high-level management colleagues and other industry peers. However, if you speak to the employees that actually report to him, lower on the "food chain", you will hear other opinions. Yes Mr. Serra brought Foot Locker through hard times during his tenure, however there seems to be a common thread - the same mistakes are made OVER AND OVER again! You can only squash the spirits of your subordinates so many times before they begin to rebel and start bucking the system. I feel the overall worth of a CEO or President of a company needs to be measured not only by the opinions of his peers, but by those of the people that work for them. Yes he had the final say in all matters, but does the staff of Foot Locker - both corporate and store level employees, respect the man and appreciate what he has (or has not in many cases!) done with the company? I sure hope the new guy has the guts to stand up and make some bold decisions and let senior management make choices that will not only fix what is broken, but move this company well beyond where it currently is.

Jul 09 03:34 PM