Foot Locker Q3 tops Street; ‘ready’ for holidays despite supply chain issues
Foot Locker reported better-than-expected third-quarter sales and adjusted earnings and expressed confidence it was ready to meet holiday demand despite persistent supply chain issues.
The athletic footwear and apparel retailer also made a series of executives moves, including naming a COO. (Details at end of story.)
In a statement, Foot Locker CFO Page said he expects global supply chain constraints to persist throughout the fourth quarter. He added, "that said, we are positioned for the holiday season, with positive momentum and inventory levels ready to meet customer demand."
On the company's earnings call, Page said that global supply chain problems are keeping the company cautious on its full-year outlook.
Foot Locker reported that its net income fell to $158 million, or $1.52 a share, in the quarter ended Oct. 30, compared with $265 million, or $2.52 a share, in the year-ago period and $125 million, or $1.16 per share, for the third quarter of 2019. Adjusted earnings per share increased to $1.93 from $1.21, easily topping analysts’ estimates of $1.37.
Total sales increased 3.9% to $2.19 billion, above estimates of $2.15 billion, compared with sales of $2.1 million. Total sales were up 13.3% from the third quarter of 2019.
Comparable-store sales rose 2.2%. The cost of sales fell 1.9%. Same-store sales rose 2.2%.
Foot Locker completed its acquisition of athletic footwear and apparel retailer WSS during the quarter. The company operates 93 off-mall stores in California, Texas, Arizona and Nevada and serves a largely Hispanic consumer base. And shortly after the quarter ended, it completed its acquisition of atmos, a streetwear and premium sneaker brand based in Japan.
“These impressive top and bottom-line results were against a robust back-to-school season from last year and in spite of the ongoing supply chain challenges,” said Richard Johnson, chairman and CEO. “On top of that, we successfully completed the acquisition of WSS in the third quarter, and subsequently closed the atmos transaction as well.”
As of October 30, the company's merchandise inventories, which included the addition of WSS, were 9.1% higher than at the end of the year-ago period.
"The combination of robust demand and fresh inventory, coupled with more full-priced selling, led to gross margin expansion of 380 basis points to 34.7%, from the 30.9% in the prior-year period," stated Page.
In May, Foot Locker said it would eliminate its Footaction banner, with plans to convert about one-third of its 231 Footaction stores to its other existing banners this year. It will close most of the remaining Footaction stores as leases expire. On the earnings call, Johnson said the converted Footaction stores are performing above expectations, and better than they performed as Footaction stores.
In a separate release, Foot Locker announced several executive moves "to advance its long-term global growth." These include the creation of a new chief strategy, innovation, and development officer role to oversee corporate strategy, business innovation and corporate development.
Other changes include:
• Franklin "Frank" R. Bracken, executive VP CEO—North America, has been promoted to COO, effective November 16. In the newly created role, he will oversee the company's global operations and omnichannel customer experience, including global technology and supply chain;
• Susan "Susie" J. Kuhn, senior VP, general manager, Foot Locker Europe, has been promoted to president—EMEA and general manager—Foot Locker Europe, effective November 16. She will oversee the Foot Locker Europe and Sidestep brands; and
• Andrew "Andy" Gray, executive VP and chief commercial officer, has expanded his responsibilities leading the organization's commercial area to fuel Foot Locker’s growth strategy.
During the third quarter, Foot Locker opened 32 new stores, remodeled or relocated 29 stores, closed 80 stores, including 32 Footaction closures and 18 conversions, and acquired 93 WSS stores. As of October 30, the company operated 2,956 stores in 27 countries in North America, Europe, Asia, Australia, and New Zealand.
In addition, 136 franchised Foot Locker stores were operating in the Middle East.