Foot Locker is investing $12.5 million in kids' clothing company Rockets of Awesome—the latest in a string of deals

  • Foot Locker has made a string of investments in online retailers.
  • In its latest deal, it's investing $12.5 million in children's apparel company Rockets of Awesome.
  • As part of the partnership, Rockets of Awesome will open up ministores within Foot Locker stores.
An employee arranges a sneaker display at a Foot Locker Inc. store inside the South Park Mall in Strongsville, Ohio.
Luke Sharrett | Bloomberg | Getty Images
An employee arranges a sneaker display at a Foot Locker Inc. store inside the South Park Mall in Strongsville, Ohio.

Foot Locker is making a string of investments in online brands as a way to stay relevant with younger shoppers.

In its latest deal, the sneaker retailer said Tuesday it has invested $12.5 million in children's apparel company Rockets of Awesome. This follows Foot Locker's $100 million investment in online sneaker resell platform Goat Group, along with investments in lifestyle brand Super Heroic, activewear brand Carbon38 and footwear design academy Pensole.

"We are elevating our customer experience and making investments for the long term," Foot Locker CEO Dick Johnson told CNBC. He said the company is actively looking for ways "to tap into the capabilities and talent of innovative and unique brands through partnerships or investments" as it aims to serve "the evolving youth culture."

Foot Locker's investment in Rockets of Awesome is part of the online retailer's $19.5 million Series C funding round. Now, Rockets of Awesome — which hasn't had much of a bricks-and-mortar presence other than a handful of pop-up shops — will be opening ministores within Kids Foot Locker locations across the country. Rockets of Awesome is also going to begin selling on Foot Locker's children's website.

"The investment represents a modern way of thinking in an increasingly competitive climate," Rockets of Awesome CEO Rachel Blumenthal said. "They want to learn from us just as much as we want to learn from them, and that exchange of expertise will give us both an advantage as we continue to shape our businesses."

Rockets of Awesome's website.
Source: CNBC
Rockets of Awesome's website.

The funds from Foot Locker will also help Rockets of Awesome open its first stand-alone store before the back-to-school shopping season this year, she added. "The store will bring our brand identity to life and reflect the same values we've always had, which is to make shopping fun and easy for both parents and kids."

In signing deals like the one with Goat and now Rockets of Awesome, Foot Locker is looking to be the destination of choice with younger consumers. Younger brands like Carbon38 — which sells super chic sports bras and leggings that could retail for upwards of $200 — are popular with millennials on social media. Those digital relationships with customers are something Foot Locker — as a massive bricks-and-mortar retailer — has a harder time building on its own.

With Rockets of Awesome, Foot Locker will "collaborate on brand development, product collections and go-to-market plans to help realize additional growth opportunities for both companies," Johnson said.

In many ways, Foot Locker is taking an approach like that of Walmart, which has been acquiring online brands including Art.com, Jet.com and clothing retailers Bonobos and Modcloth. These acquisitions give Walmart access to customer data, but more importantly teams of young and hungry retail entrepreneurs. That's how it got Jet.com founder Marc Lore, who now lead's Walmart's U.S. e-commerce business.

Foot Locker must find ways to stay relevant as many brands that typically sell within its stores — like Nike and Adidas — are pivoting their focus to selling directly to consumers. That doesn't mean those brands are pulling out of Foot Locker stores entirely, but the retailer must now look for other channels of growth.

Foot Locker shares are up roughly 25 percent during the past 12 months, with analysts citing strong inventory management and e-commerce initiatives as bright spots. Just earlier this month, Foot Locker said it planned to allocate more capital to remodeling stores and building out its supply chain in 2019.

Rockets of Awesome declined to comment on its valuation following its Series C round.

Foot Locker's quarterly earnings are due out Friday.