Footlocker’s Turn-Around Plan Seems to be Bearing Fruit

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Written By Jackson Hartwell

Foot Locker’s turnaround efforts are beginning to yield positive results. The sneaker giant reported a smaller-than-expected decline in comparable sales for its fiscal first quarter, with a drop of 1.8% versus the anticipated 3.1% decrease according to StreetAccount.

The company reaffirmed its fiscal year guidance, projecting sales to range between a 1% decline and a 1% gain, surpassing analysts’ forecasted decline of 0.6% according to LSEG.

Shares of Foot Locker surged 30% in early trading Thursday, reflecting investor optimism. Here’s how the company performed compared to Wall Street expectations, based on a survey of analysts by LSEG:

  • Earnings per share: 22 cents adjusted vs. 12 cents expected
  • Revenue: $1.88 billion vs. $1.88 billion expected

Financial Overview

Credits: DepositPhotos

Foot Locker reported net income of $8 million, or 9 cents per share, for the three-month period ending May 4, compared to $36 million, or 38 cents per share, a year earlier. Adjusting for one-time items, including impairments associated with certain store closures and restructuring,

Foot Locker’s earnings were 22 cents per share. Sales dropped to $1.88 billion, down approximately 3% from $1.93 billion a year earlier.

For the full year, Foot Locker anticipates adjusted earnings per share to be between $1.50 and $1.70, exceeding estimates of $1.57 according to LSEG. The company expects comparable sales growth between 1% and 3%, ahead of the 1.5% growth analysts had expected, according to StreetAccount.

CEO’s Thoughts

“We had a solid start to the year in the first quarter, which demonstrates that our Lace Up Plan is working,” CEO Mary Dillon told CNBC in an interview. “The reason I feel confident — we’re launching an enhanced FLX rewards program, so we have a lot of opportunity with rewards”.

“We’re launching a revamped mobile app, which we know is a great way to drive customer engagement and commerce, and we see growth opportunities … with all of our brand partners throughout the year, including returning to growth with Nike in the holiday quarter.”

Dillon, the former CEO of Ulta Beauty, has been steering Foot Locker through its turnaround, but the process has been protracted. Sales have consistently declined as the retailer deals with a low-income consumer base hit hard by inflation.

Additionally, Foot Locker has faced challenges with brand partners like Nike, which has reduced the number of new releases to Foot Locker’s stores. Nike CEO John Donahoe acknowledged in April that the brand went too far in favoring its own stores and website over wholesalers.

Foot Locker’s Champs Sports banner has also been a drag on the business, with comparable sales down 13.4% during the quarter and overall revenue declining nearly 19%.

The retailer has relied on promotions to drive sales, leading to a loss of Wall Street’s confidence, with shares down about 28% year to date as of Wednesday’s close.

Foot Locker’s Prospects Are Looking Up

Despite these challenges, Foot Locker’s prospects are improving. Dillon noted that while core consumers are still under pressure from inflation, the company’s average selling price rose during the quarter, indicating that customers are willing to pay full price for the right product.

“Our consumer … this is a category that is very important to them. So when people have discretionary income, it may be limited, but you’re gonna prioritize where you spend it, right?” Dillon said. “So they’re prioritizing, but I’d say spending with purpose.”

Dillon has also focused on revamping Foot Locker’s stores, which still account for about 80% of its annual sales. She has opened new off-mall locations, closed underperforming stores, and refreshed existing ones.

These changes aim to attract top products from brands and encourage consumers to choose Foot Locker over competitors like Dick’s Sporting Goods.

Foot Locker’s ‘Store of the future’

Credits: DepositPhotos

In April, Foot Locker unveiled its “store of the future,” completely overhauling the traditional Foot Locker format to serve as a model for future store refreshes. “Instead of a wall of shoes, it’s really a house of brands,” Dillon said. “And I think it’s coming to life in a way that our brand partners are thrilled with. We’ve heard that from everybody.”

As Foot Locker continues to navigate its turnaround, the company’s renewed focus on customer engagement, strategic partnerships, and store innovation is starting to show promise. Investors remain cautiously optimistic, watching closely for sustained improvement in Foot Locker’s performance.



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