Foot Locker swings to Q1 loss; phased store reopening underway

Foot Locker reported a much wider-than-expected fiscal first-quarter loss as its stores went dark during the pandemic and is temporarily suspending its cash dividend.

The athletic shoe and accessories retailer swung to a net loss of $98 million, or $0.93 a share, for the quarter ended May 2, from net income of $172 million, or $1.52 a share, in the year-ago period. Excluding non-recurring items, the adjusted loss per share was $0.67 cents. Analysts had expected a loss of $.12.

Sales dropped 43% to $1.18 billion, below estimates of $1.36 billion. Comparable-store sales decreased 42.8%.  

Foot Locker’s gross margin rate declined to 23.0% from 33.2%, while the expense rate increased to 26.9% from 20.0%. Merchandise inventory increased 20.4% to $1.46 billion.  

“Against the backdrop of the pandemic and our global store closures, our team has focused intently on controlling what we can in order to protect our business,” said Richard Johnson, chairman and CEO. “We have taken full advantage of the investments we have made in technology in recent years in order to stay connected with our customers and serve them online, worked aggressively to protect our financial position and flexibility, and taken actions to ensure we are well-positioned to drive our business forward. Our phased reopening of stores is underway, and our plan is to build, be back, and be better than before."

Foot Locker said it was temporarily suspending its quarterly dividend -- the last dividend paid was $.40 cents a share -- "to preserve financial flexibility." 

As of May 2, 2020, the company operated 3,113 stores in 27 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 54 franchised Foot Locker stores were operating in the Middle East, as well as four franchised Runners Point stores in Germany.