Shares of Foot Locker rose on Wednesday after the corporate posted surprise earnings and sales beats and said it saw strong results over Thanksgiving weekend.
The sneaker and sportswear retailer narrowed its full-year forecast, reflecting barely higher sales trends. It said it now expects sales to drop by 8% to eight.5% for the 12 months, compared with a previously issued forecast of an 8% to 9% decrease. It projects a same-store sales decline of 8.5% to 9%, compared with its previous guidance of a 9% to 10% drop.
Yet Foot Locker lowered the high end of its adjusted earnings guidance, dropping the range to $1.30 to $1.40 per share, down from the previous $1.30 to $1.50 per share.
In a news release, CEO Mary Dillon said the corporate has made progress with its turnaround initiatives. She pointed to a latest marketing cope with the NBA.
She said Foot Locker updated its outlook to reflect that momentum and capture “strong results over the Thanksgiving week period, against the backdrop of ongoing consumer uncertainty.”
Here’s how Foot Locker did within the three-month period that ended Oct. 28 compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly often called Refinitiv:
- Earnings per share: 30 cents adjusted vs. 21 cents expected
- Revenue: $1.99 billion vs. $1.96 billion expected
Within the fiscal third quarter, Foot Locker reported net income of $28 million, or 30 cents per share, compared with $96 million, or $1.01 within the year-ago period.
Foot Locker’s same-store sales fell 8% 12 months over 12 months, which the corporate said reflected “ongoing consumer softness,” a change in its mixture of vendors and a 3% negative impact because it closes some Champs stores. Even so, that was barely higher than the 9.7% drop that analysts expected, in keeping with FactSet.
Like many retailers, Foot Locker has gotten hurt by shoppers cutting back on discretionary spending as inflation forces them to spend more on food, housing and on a regular basis needs and as experiences, moderately than goods, turn into a priority. Foot Locker has also faced company-specific troubles, resembling having some stores in struggling malls and leaning heavily on merchandise from Nike, a brand that is making an even bigger push to sell directly through its own stores and website.
An excessive amount of inventory has also been an issue for Foot Locker, particularly as shoppers watch their spending. At the top of the third quarter, the retailer’s inventory was 10.5% higher than at the top of the year-ago period. Foot Locker said about 6% of that was strategic, as the corporate stocked up on merchandise to sell throughout the holiday season.
Dillon said in a news release that the corporate stays on the right track to finish the fiscal 12 months with inventory levels flat or down barely compared with the prior 12 months.
Other pressures on the corporate remain. Foot Locker’s gross margins within the quarter declined 12 months over 12 months, because it had higher promotions and shrink, a term used to explain losses from theft and damage to merchandise.
As Foot Locker deals with those challenges, it has also chased latest ways to draw customers and drive sales growth. Earlier in November, it announced a multi-year cope with the NBA that may give Foot Locker exposure with on-court virtual signage during national broadcasts and on NBA social media platforms. The corporate’s holiday ad campaign also features NBA stars, including Kevin Durant and Steph Curry.
On Wednesday, Foot Locker said it can enter a latest market, India, next 12 months. It said it has struck a long-term licensing agreement with two operators in India, Metro Brands Limited, one in all India’s largest footwear and accessories specialty retailers, and Nykaa Fashion, an e-commerce retailer. Those two corporations may have exclusive rights to own and operate Foot Locker stores and sell its merchandise online in India.
As of Tuesday’s close, shares of Foot Locker had tumbled by about 37% this 12 months. That compares to the roughly 19% gains of the S&P 500 throughout the same period. Foot Locker’s stock closed at $23.84 on Tuesday, bringing its market value to $2.25 billion.
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