Foot Locker boosts Q1 sales as profits slip
Foot Locker Inc. reported mixed financial results for its first quarter ended April 30, 2022.
The specialty athletic retailer reported net income of $133 million, or $1.37 per share, for the 13 weeks ended April 30, 2022, compared with net income of $202 million, or $1.93 per share, for the corresponding prior-year period. Net income declined 32% year-over-year.
On a non-GAAP basis, the company earned $1.60 per share, compared with non-GAAP earnings per share of $1.96 in the prior-year period.
First quarter same-store sales decreased by 1.9%, with apparel outpacing footwear. Total sales increased by 1% to $2.17 billion, compared with sales of $2.15 billion in the first quarter of 2021. Excluding the effect of foreign exchange rate fluctuations, total sales for the first quarter increased by 3%.
Gross margin declined by 8% compared with the prior-year period, which Foot Locker said was driven by higher supply chain costs and slightly higher markdowns compared to historically-low levels.
During the first quarter of 2022, the company recorded adjustments to earnings, primarily including $6 million of impairments and other charges, including acquisition and integration costs, and $24 million in minority interests net.
Foot Locker broadens brand mix in response to Nike
During the quarter, Foot Locker began ramping up its ongoing brand and DTC efforts in the wake of an accelerated shift by Nike to sell more of its product through its own stores and website. The company will continue to expand in apparel and broaden its product mix across brands and categories.
The quarter also saw Foot Locker appoint former Hasbro executive Samantha Lomow in the new position of president, global brands.
Richard Johnson, chairman and CEO, Foot Locker, put an upbeat spin on the retailer’s quarterly performance.
"We are off to a strong start in 2022, reporting a solid quarter against the tough comparisons of fiscal stimulus and historically-low promotions from last year," said Johnson. "Our progress in broadening and enriching our assortment continues, as we continue to meet our customers' demand for choice. These efforts helped drive our strong results in the first quarter, and we believe will allow us to more fully participate in the robust growth of our category going forward.
"As we elevate brands across our portfolio, continue to use our real estate flexibility to optimize our footprint, and evolve our omnichannel capabilities, we are excited about our improving ability to expand our customer base and fuel our consumer's desire for self-expression," concluded Johnson.
Andrew Page, executive VP and CFO, Foot Locker, was optimistic about the remainder of the fiscal year.
"Following our solid results from the first quarter, our strong inventory position going into the remainder of the year, and our strengthening vendor relationships, based on our current visibility, we now expect to achieve the upper end of our revenue and earnings guidance for the full year,” said Page. “Our balance sheet and real estate flexibility remain strategic assets for us as we continue to navigate this dynamic industry and serve the sport and sneaker community."
As of April 30, 2022, New York-based Foot Locker Inc. operated 2,815 stores in 28 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 148 franchised stores were operating in the Middle East and Asia.