Foot Locker runs slower in Q4; expanding ‘power store’ format

Weak holiday demand and a shorter shopping season took a bite out of Foot Locker’s sales in the fourth quarter. 

The athletic footwear and apparel retailer reported mixed results for the fourth quarter, with earnings that topped the Street but sales that missed. On its earnings call with analysts, company executives said that women’s footwear was a bright spot in the fourth quarter and that it would continue to add in-store spaces dedicated to its female customers this year.

During the call, Foot Locker also said it plans that to triple its fleet of larger-format “power stores,” opening about 20 or more locations in 2020 across the U.S. and in international markets. To date, it has opened six. 

“We also intend to allocate capital to our core stores around the world,” said company chairman and CEO Richard Johnson. “We have an opportunity to evolve our fleet, layering the best elements of our ‘power store’ offense, [and] improve the productivity of our existing square footage to drive faster growth through these investments.”

Foot Locker reported net income fell 3.6% to $141 million, or $1.34 per share, for the quarter Feb. 1, compared with net income of $158 million, or $1.39 per share, for the year-ago period. On a non-GAAP basis, the company earned $1.63 cents per share, a 4% increase over last year. 

Revenues declined 2.2% to $2.22 billion, lower than analysts had expected. Same-store sales fell 1.6%.

"While we had leading positions in key on-trend footwear styles, this was not enough to offset softer than expected demand during the compressed holiday season, a very promotional marketplace for apparel, and tougher launch comparisons," stated Johnson.

Sales for 2019 were $8 billion — a new record for the chain and up 0.8% over the previous year. Full-year comparable-store sales increased 2.2%. Net income fell 8% to $498 million

"We built a strong foundation in 2019 and we believe we have the right plan in place to deliver against our long-term financial objectives," added Johnson. "We are optimistic about our company's future, and by making progress against our strategic imperatives, we believe we will strengthen our position at the center of sneaker and youth culture, and create value for our shareholders."

Foot Locker issued guidance of low single-digit comparable sales growth and low-mid single-digit earnings per share growth this year. But on the earnings call, Johnson said the guidance could change depending on the spread of coronavirus, which has hit store traffic in Hong Kong, Singapore, and Italy.

“Clearly, it’s a fluid situation and we’ve built into the guidance what we know today,” he said.

As of February 1, 2020, Foot Locker operated 3,129 stores in 27 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 130 franchised Foot Locker stores were operating in the Middle East, as well as nine franchised Runners Point stores in Germany.