Foot Locker income dives as sales soften ‘meaningfully;’ names new CFO
Foot Locker posted a tough first quarter with falling sales and earnings that missed Street estimates.
The athletic footwear and apparel retailer lowered its outlook and said it would take aggressive markdowns “to both drive demand and manage inventory.”
Foot Locker also announced the appointment of Mike Baughn as executive VP and CFO, effective June 12. He joins company from Kohl’s, where he served as executive VP of finance and treasurer.
Foot Locker’s net income dropped to $36 million for the quarter ended April 29, from $133 million in the year-ago quarter. Adjusted earnings per share came to $0.70 cents, compared with earnings of $1.60 a share in the same period last year. Analysts had expected earnings per share of $0.76.
Sales fell 11.4% to $1.93 billion, missing estimates of $1.99 billion. Same-store sales declined 9.1%, driven by macroeconomic headwinds, including lower income tax refunds in the United States, as well as the changing vendor mix and the repositioning of Champs Sport, the company said.
As part of its new “Lace Up” plan, Foot Locker is closing underperforming stores, shifting to off-mall locations and opening new formats. Its store closing plans include the shuttering of some 125 underperforming Champs Sports this year.
“Coming off the recent launch of our Lace Up Strategy at our Investor Day in March, we are making early progress in building a strong foundation to return to sustainable growth beyond this year," said CEO Mary Dillon. "However, our sales have since softened meaningfully given the tough macroeconomic backdrop, causing us to reduce our guidance for the year as we take more aggressive markdowns to both drive demand and manage inventory."
Dillon, who took the reins of the company in September, continued, "Despite the challenging near-term trends, we remain committed to our long-term strategy, including making the necessary investments to drive our Lace Up plan, and maintain conviction in our ability to execute against our new strategic imperatives."
For the full year, Foot Locker lowered its sales outlook to a 6.5% to 8% decline from its prior guidance of a 3.5% to 5.5% decline. The company also cut its adjusted earnings per share outlook to $2.00-$2.25 from its previous range of $3.35-$3.65.
As of April 29, 2023, the Company's merchandise inventories totaled $1,758 million, 25% higher than at the end of the first quarter last year.
During the first quarter, the company opened 13 new stores, remodeled, or relocated 18 stores, and closed 35 stores. As of April 29, 2023, Foot Locker operated 2,692 stores in 29 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 163 franchised stores were operating in the Middle East and Asia.