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Foot Locker Q1 profit tops estimates as turnaround efforts continue

Foot Locker Willowbrook
Foot Locker's store of the future concept is open at Willowbrook Mall, Wayne, N.J.

Foot Locker reported better-than-expected profit and comparable sales for its first quarter amid signs that its turnaround plan may be starting to take hold.

Net income fell to $8 million, or $0.09 a share, for the quarter ended May 9, from $36 million, or $0.38 a share, in the year-ago period. Adjusted earnings per share were $0.22, ahead of analysts’ estimates of $0.12 per share.

Total sales fell 2.7% to $1.87 billion, missing estimates of $1.89 billion.

Comparable sales fell 1.8%, not nearly as bad as the 3.1% decline analysts had expected and which included a 220 basis-point impact from the continued repositioning of the Champs Sports banner. Global Foot Locker and Kids Foot Locker comparable sales increased 1.1%.

Foot Locker has been working to end its ongoing sales slump with a turnaround strategy that  includes expense management, strengthening brand partnerships and store updates. In April, the company unveiled its "store of the future" concept in Wayne, N.J., which features a streamlined, easier-to-shop layout, a more modern and distinctive environment, digital fixtures and other technological advances. Four more locations are set to open this year.

The new store concept, which will serve as a model for store refreshes, is a key pillar of Foot Locker’s turnaround strategy, or “Lace Up Plan,” which includes the reshaping of the chain’s real estate footprint by opening new formats, refreshing existing locations, shifting off mall and closing underperforming stores.  

"We had a solid start to the year, which demonstrates that our Lace Up Plan is working,” stated Dillon in the earnings release. “Through our Lace Up Plan, we are strengthening our brand partnerships, enhancing customer engagement through digital and loyalty investments, and solidifying our position at the intersection of basketball and sneaker culture. In stores, we are elevating the customer experience through store refreshes and our newly unveiled retail concept. I remain confident that the Lace Up Plan is positioning the company for sustainable growth and shareholder value creation."

Foot Locker noted it was well-positioned with fresh assortments as it approaches the summer and back-to-school seasons. The retailer is also getting ready for the launch of its reimagined FLX Rewards program in the U.S. 

The company reaffirmed its full-year outlook, which calls for adjusted earnings per share to fall between $1.50 and $1.70. Comparable sales are expected to grow between 1% and 3%. 

During the quarter, Foot Locker closed 37 stores, opened four stores, remodeled or relocated 16 stores and updated 13 stores to its current design standards. 

As of May 4, the company operated 2,490 stores in 26 countries. In addition, 206 franchised stores were operating in the Middle East and Asia, down from 2,692 stores in 29 countries a year ago.

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