Former Ulta chief executive Mary Dillon will take the reins at Foot Locker, replacing Richard Johnson as president and CEO on Sept. 1, the sports footwear and apparel retailer said Friday. Dillon led the beauty retailer for eight years and previously held leadership positions at U.S. Cellular, McDonald's and PepsiCo.
Johnson’s planned retirement will begin that day, though he will stay on as executive chairman of the board until Jan. 31, per the company’s press release. Foot Locker is separating that board role from the chief executive role, so Lead Independent Director Dona Young will become non-executive chair on Feb. 1.
The announcement comes as Foot Locker also reported that total Q2 sales fell 9.2% year over year to $2.1 billion, with store comps down 10.3%, per another press release. Gross margin contracted by 340 basis points driven mainly by higher markdowns, and net income plummeted 78% to $94 million.
Foot Locker on Friday reported many of the same challenges faced at other retailers these days — including financially stressed consumers, rising costs and forced markdowns — which hurt Q2 results and has introduced uncertainty to the second half of the year. But with the announcement of Dillon’s appointment, the retailer was able to keep the focus on its longer-term strategy and vision for success.
“Ms. Dillion is a leader with a strong voice and will represent a meaningful change in tone for Foot Locker. We think the ripples within the organization could be very positive,” John Zolidis, president and founder of Quo Vadis Capital, said in emailed comments. “We also believe communication to investors will be upgraded based on the significant credibility she will bring to crafting a strategy and establishing an outlook. In short, this is very good news.”
Credit Suisse analyst Michael Binetti called her imminent arrival a “narrative changer,” adding that “Dillon's been one of the most impressive execs in retail.”
Speaking to analysts Friday morning, Johnson hailed Dillon’s leadership and values, and her achievements at Ulta, including digital growth. He also called out her familiarity with off-mall retail as particularly valuable for Foot Locker as it moves away from traditional shopping centers.
“She became a logical choice and I think a great choice to take the leadership over the company and move us into the next chapter and the next phase,” he said. “She understands where we're going. Certainly she'll come in and take a look at the work we've got in progress, but she's such a quality leader and quality person that I'm very confident about the timing of this and the candidate that we've selected.”
Dillon is known for her steady hand at the helm of Ulta, which rose from being a regional player to a national powerhouse during her tenure. The business grew from $2.7 billion in sales in 2013 when she arrived to $8.6 billion in 2021 when she left, as its store base expanded from 675 to some 1,300.
“She is credited with attracting new brands, building e-commerce capabilities, and doubling the number of loyalty members with effective marketing,” Telsey Advisory Group analysts led by Cristina Fernández said in a client note, adding that her tasks at Foot Locker will include right-sizing and relocating the store fleet, boosting e-commerce “and diversifying the merchandising mix to evolve Foot Locker into a house of exciting brands from primarily a retailer of Nike products (estimated 60% of sales in 2022).”
Dillon was able to woo skeptical vendors to Ulta’s beauty retail format and consumer experience, which was a shift away from department stores — a track record that bodes well for Foot Locker as it works to shake up its assortment and wean itself from its dependence on Nike, according to Quo Vadis' Zolidis
Finally, Dillon left Ulta when she felt that she had accomplished what she needed to there, while Foot Locker is in a different place, Zolidis also said. “It suggests Ms. Dillion envisions a path forward even with the obvious headwinds, and believes she can solve them and grow the business,” he said.