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11/18/2022

Foot Locker in solid Q3, raises outlook; new CEO talks simplification

Marianne Wilson
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Foot Locker opened 24 new stores during its most recent quarter.

Foot Locker reported better-than-expected third-quarter results as it continues to diversify its assortment of footwear brands.

On her first earnings call with analysts, Mary Dillion, who took the reins as Foot Locker CEO in September, said she remains committed to the company’s brand diversification efforts, noting that it is under-penetrated in virtually all the brands it carries.

“We continue to see opportunities to bring the customer a broader and richer set of product offerings across brands and categories,” she said. “And we believe our third quarter results are further evidence that our efforts to broaden our portfolio are driving growth across multiple brands and helping us expand our customer base.”

Dillon said she is also looking for ways to “simplify” the Foot Locker business in an effort to “make sure we’re focused on the areas that have the most strategic value and will generate the most return.” To that end, the company has paused its plan to expand in Japan and is winding down two of its European joint ventures. 

Dillon’s other priorities include building out Foot Locker’s omnichannel capabilities, enhancing its technology and optimizing costs.

The specialty athletic retailer reported net income of $96 million, or $1.01 per share, for the quarter ended October 29, 2022, compared with $158 million, or $1.52 per share, in the prior-year period.

On a non-GAAP basis, the Company earned $1.27 per share, compared with non-GAAP earnings of $1.74 per share in the prior-year period.

Total sales decreased by 0.7%, to $2.17 billion on a reported basis. Sales increased 3.3% in constant currency.

Comparable-store sales increased by 0.8% against record sales levels last year. The increase was driven by strong demand, brand diversification efforts and improved access to high-quality inventory, the company said.  

“Foot Locker's solid third quarter results in the midst of ongoing macroeconomic challenges are a testament to the strengths of this organization that I am honored to now be leading," stated Dillon in the company’s earnings release. "Despite the tough environment, our expanding customer base remained resilient, and I'm proud that our team delivered sales above our expectations, thanks to their exceptional execution."

The company noted that its current inventory quality and aging continue to be healthy and put in a good position to fulfill demand for the holiday season and the fourth quarter overall.

Citing its better-than-expected third-quarter results and strong momentum coming out of the quarter, Foot Locker said it was increasing its outlook for the fourth quarter and the full year. 

“While the macroeconomic environment remains uncertain, our demand trends, and inventory position in high-quality product gives us confidence we can achieve our new range, while also remaining flexible to manage through ongoing volatility,” stated VP and CFO Andrew Page

Foot Locker now expects 2022 sales to be down 4% to 5% for the year, citing strong demand trends and inventory availability. 2022 earnings per share are expected to be between $4.42 and $4.50, compared to prior range of $4.25 to $4.45.

During the third quarter, Foot Locker opened 24 new stores, remodeled or relocated 23 stores, and closed 29 stores. As of October 29, 2022, the company operated 2,794 stores across 28 countries in North America, Europe, Asia, Australia, and New Zealand. 

In addition, 155 franchised stores were operating in the Middle East and Asia.