Foot Locker (FL) met second-quarter earnings expectations but fell well short of sales estimates as the company reduced its full-year outlook amid “ongoing consumer softness.”
The footwear and apparel retailer’s stock plunged on the news by more than 25% at the open of Wednesday’s trading session.
For the second quarter ended July 29, Foot Locker reported a 9.9% decrease in sales to $1.86 billion, on non-GAAP earnings per share (EPS) down 96.4% to 4 cents. Comparable-store sales tanked 9.4%, “driven by ongoing consumer softness, changing vendor mix and the repositioning of Champs Sports,” the company said. Champs Sports is a Foot Locker subsidiary.
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"Our second quarter was broadly in line with our expectations, despite the still-tough consumer backdrop,” said Mary Dillon, Foot Locker president and CEO. “However, we did see a softening in trends in July and are adjusting our 2023 outlook to allow us to best compete for price-sensitive consumers, while still leaning into the strategic investments that drive our Lace Up plan.” In March, the company launched Lace Up as a new long-term growth strategy.
Retail theft affected results
This is the second time Foot Locker slashed its full-year outlook in the last six months. The company now expects 2023 sales to decline 8% to 9%, comparable-store sales to fall 9% to 10%, and non-GAAP EPS of $1.30 to $1.50. In its first-quarter report, the company forecast sales to decline 6.5% to 8%, comparable-store sales to drop 7.5% to 9%, and non-GAAP EPS to be $2.00 to $2.25.
“To ensure that we have the flexibility to continue to fund our strategic investments appropriately, we are pausing our quarterly cash dividend beyond our board's recently approved October payout,” Dillon said. “We intend to update the market on our go-forward capital allocation plans and the timing around our longer-term financial targets when we report fourth-quarter results."
Like several other retailers this earnings season, Foot Locker noted that its second-quarter results were affected by “higher shrink,” the industry's terminology for theft. As Kiplinger previously reported, Dick’s Sporting Goods and Target are among companies that have cited the issue.
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