In her eight years as CEO of Ulta Beauty, Mary Dillon nearly tripled the cosmetics, haircare, and skincare chain's sales and store footprint in one of the most successful runs in modern retail history. When she stepped down in 2021, Ulta's revenue was at an all-time high of $8.6 billion. So Dillon, 61, could have chosen to relax and spend more time perfecting her tennis stroke, playing pickleball (her new passion), and sitting on corporate boards.
Instead, Dillon, unable to resist the challenge of restoring an illustrious company's luster and still feeling too energetic for a slower-paced life, accepted the CEO job at Foot Locker last year, a retailer that, while not broken, has been underperforming for years. "I didn't realize how much I would miss having one big thing to focus on and how much I would miss leading a retail company," Dillon told Fortune in a March interview at the Shoptalk conference in Las Vegas. In taking another CEO role, Dillon became the third woman to ever run two Fortune 500 companies, after Patricia K. Poppe (CMS Energy and PG&E) and Meg Whitman (HP and eBay.)
Much as she did at Ulta, which was weak in e-commerce and had too much product overlap with competitors when she took the reins in 2013, Dillon has set about differentiating Foot Locker from sports footwear rivals and improving its digital business. She was hired in large part to repair Foot Locker's crucial relationship with Nike, which generated 65% of Foot Locker sales last year but which in 2022 said it would reduce its presence at the shoe store over time. (Foot Locker's namesake corporate parent also owns and operates the Kids Foot Locker, Champs Sports, WSS, and atmos chains.)
Dillon, a brand-building guru and marketing data expert whose successes at Ulta include getting Estée Lauder to sell its luxury products at a strip-mall retailer, has called 2023 a "reset year." She told investors in March that Foot Locker has "re-established joint planning, as well as data and insight sharing" with Nike.
This interview has been edited and condensed for clarity.
Fortune: Not even a year into retirement, you land the top job at Foot Locker. Was retirement not for you?
I was so proud of creating an amazing group of leaders at Ulta to succeed me, and I felt it was time to hand over the reins to a team that was ready to rock and roll. But during the year I was executive chair of Ulta (mid-2021 to mid-2022), I didn't realize how much I would miss having one big thing to focus on and how much I would miss leading a retail company.
What did you imagine retirement would look like before leaving Ulta?
I thought it would be a mosaic of things—a couple of board seats (including private equity firm KKR). I wanted to get involved in some smaller startups, and the food industry is something I've always loved. I thought I would do that and maybe play pickleball, tennis, and travel. But I realized how much I miss running a company, and don't laugh when I say this, but I'm not getting any younger. So I thought, 'If I want to take another run at a company, now's the time to do it.'
But why Foot Locker? You're going from beauty products to sneakers.
Foot Locker might not be the most obvious place for me to show up, but there are many parallels between the sneaker and beauty categories. And there are parallels with Ulta. In 2013, the business was performing well, but we needed to go through an overhaul process to help Ulta hit its potential. Another similarity is that sneakers, like beauty, are a great growth category. They're an $80 billion industry just in North America. There are tailwinds for sneakers, like mass casualization, fashion, and fitness. Foot Locker is also a more complex business than Ulta; there are multiple banners, and it's global. It is time to really modernize and reinvigorate the brand and be an even better partner for our brand partners.
Still, running shoes are very different from hair products and lip balm. How did you learn about this new-to-you industry and how to be that better partner?
I'm still learning, and I will be a student forever because there's so much innovation and newness in sneakers. Since I already understood retail companies with multiple brands, my approach has focused more on getting to know our brand partners. It doesn't hurt that I've been a runner all my adult life. We just need to unlock this idea for people that Foot Locker is a place to meet all their needs. I love that a segment of our customers is sneakerheads.
So what was Foot Locker not doing adequately before your arrival?
One is all things digital. So we are about to start investing in a multi-year roadmap to modernize our tech infrastructure. We also need to develop our loyalty program, which has 500,000 members. (Ulta's currently has about 32 million members.) Our e-commerce needs to be better and have less friction, whether you're shopping on the app or the website, and we need better inventory visibility.
Nike caused a stir in early 2022 when it said it would reduce business with Foot Locker, among other partners. What's your approach there?
This is a unique dynamic in the industry. I've spent a tremendous amount of time with everybody at Nike, who welcomed me into the industry. We've discussed the areas where we can focus on capabilities and building a roadmap. With Nike, it's been about re-establishing and revitalizing our partnership with them. So we will differentiate our store brands more from one another and give all our brands a great platform, whether online or in stores. Our message is that we have a unique role to play for Nike and all brand partners. We can help drive category growth.
What does that look like more precisely?
We expect to be back on a growth trajectory with Nike soon and are focusing on a few key areas to collaborate. One is basketball, another is sneaker culture, and there will be more exclusives with Nike and other brands. We will go from having exclusives for Foot Locker be 15% of sales to 25%. But we also want to increase the mix of other brands, so we will grow with Nike but also brands like Adidas, New Balance, Puma, and Hoka.
Could all this include selling sneakers as fashion items?
All sorts of sneakers we sell are really fun to wear on the street and for different things, but we are not at that luxury price point. Down the road, who knows what we could experiment with, but that's a different pricing tier.
Since you departed from Ulta Beauty, the retailer has continued to thrive under Dave Kimbell. Why do you think that is?
I am so proud of the leadership team. We worked hard to create a great succession. One of my biggest strengths is identifying great talent and giving them runway to grow. Dave is doing a great job, and Keisha Steelman started as head of stores and is now chief operating officer because she had so much runway. It's amazing how they continue to slay it every day. I'm excited to be able to create a new chapter, hopefully, for Foot Locker as well. I think the aperture is wide to unlock the sneakerhead culture there.
Get to know Dillon:
- While she runs shorter distances nowadays, Dillon qualified for the prestigious Boston Marathon in her first attempt at a marathon in Chicago in 2000.
- Before joining Ulta, Dillon was CEO of U.S. Cellular and McDonald's marketing chief.
- Dillon cut her teeth in marketing at PepsiCo for 21 years, culminating in her appointment as president of its Quaker Foods division by the team she left in 2005.
