Courtesy: Foot Locker
The sneaker giant fell short of Wall Street’s expectations on both the top and bottom lines, blaming the decline on softer consumer demand and higher promotions in the marketplace. CEO Mary Dillon told CNBC in an interview that the company also saw “softness” in Nike.
“There are definitely some brands that we’re getting composed about, and then, you know, we’re also dealing with some more recent softies from Nike,” Dylan said. “Given their size and scale, it kind of makes sense that it would have an impact.”
Shares of Foot Locker fell 15% in premarket trading after the results were published.
Here’s how Foot Locker did in its fiscal third quarter compared to Wall Street’s expectations, based on a survey of LSEG analysts:
- Earnings per share: 33 cents adjusted vs. 41 cents expected
- Income: $1.96 billion vs. $2.01 billion expected
In the three months ended Nov. 2, Foot Locker posted a loss of $33 million, or 34 cents per share, compared with earnings of $28 million, or 30 cents per share, a year earlier. Excluding one-time items related to impairment charges for its Atmos brand and other expenses, Foot Locker reported earnings of $31 million, or 33 cents per share.
Sales fell to $1.96 billion, down about 1.4 percent from $1.99 billion a year earlier.
Dillon explained that consumers are looking for key shopping moments, such as back-to-school and the recent streak between Thanksgiving and Cyber Monday, but the pullback between those events, the peaks and valleys are faster than expected. makes Foot Locker is also dealing with sluggish demand from Nike, which is trying to turn around its business after relying heavily on single styles to drive sales.
Nike veteran Elliot Hill Took the helm Less than a month into the company, and Wall Street still hasn’t heard their strategy. Given Foot Locker’s performance during its third quarter, Nike could post another set of less-than-impressive quarterly results when it reports on Dec. 19.
Nike is Foot Locker’s largest brand partner, accounting for approximately 60% of its sales. If Nike is struggling, Foot Locker will inevitably suffer as well.
“It’s not the same across the board with all the brands. To be honest … I would just say there are some that are more promotional, but overall, the category is pretty promotional,” Dylan said. “There is a higher promotional level in this category that we did not foresee as it is.”
She reiterated that Foot Locker’s relationship with Nike and its new CEO is “very strong” and expects sluggish demand to ease as Hill moves in.
“We have a great relationship with him. [and] Dillon said he feels very confident about where he and his team are headed.
Strict guidance
Given the tough situation with Nike and the pressure on Foot Locker’s lower-income customers, the company cut its guidance for the full year and issued a disappointing holiday forecast.
For the holiday quarter, Foot Locker expects sales to be between 1.5% and 3.5% higher, compared with an increase of about 2% in the year-ago period. The company said there was an extra week of sales in the previous fiscal year.
According to LSEG, Foot Locker’s guidance range is worse than the 1.6 percent decline that most analysts had expected. According to StreetAccount, the company also expects comparable sales to grow between 1.5% and 3.5%, well below expectations for 3.4% growth.
For the full year, Foot Locker now expects sales to fall between 1% and 1.5%, compared to previous guidance of 1% to 1%. Analysts were expecting a 0.4% decline, according to LSEG.
The retailer also lowered its comparable sales outlook for the full year and now expects comps to grow between 1% and 1.5%, compared to previous guidance of 1% to 3%. Analysts expected the metric to rise 1.8 percent, according to StreetAccount.
Foot Locker also lowered its full-year earnings outlook and now expects adjusted earnings per share to be between $1.20 and $1.30, below Wall Street expectations of $1.54. Foot Locker previously expected earnings to be between $1.50 and $1.70 per share.
The company attributed the revised guidance, in part, to higher promotions and a shortened year, which will impact sales by about $100 million.
Despite the low guidance and gloomy holiday outlook, there were some Bright spots during the period. for Second quarter in a rowFoot Locker comparable sales increased by 2.4% over the prior year. That’s less than the 3.2 percent analysts were expecting, according to StreetAccount, but it’s an indication that Dillon’s Change planning It continues to show signs of life.
Champs, which has been dragging down Foot Locker’s overall business, also posted positive comparable sales at 2.8% growth, as did WSS, which grew 1.8%.
Dillon said that during the quarter, Foot Locker’s gross margin also increased 2.3 percentage points, thanks to fewer promotions compared to the year-ago period, and saw the biggest change in the entire year.
The former Ulta Beauty boss added that the company plans to continue using its cash to fund its store renovation programs and feels “really good” about its progress.
“It’s a little bit of a tale of two worlds, which is that we think what we’re doing is working really well, but in the market we’re seeing right now, we think it’s the right call. is.” Decision to reduce guidance Dillon. “It doesn’t shake our confidence in where we’re going with the lace-up plan and it doesn’t shake our confidence that these are the right things to do.”