Foot Locker's stock dives as profit beat forecasts but outlook was unchanged
By Tomi Kilgore
Retailer said it was closing stores in parts of Asia and Europe, and moving its headquarter to Florida from NYC
Shares of Foot Locker Inc. were headed for a fall Wednesday, after the athletic shoe and apparel retailer reported quarterly results that beat expectations, even as the company booked its first quarterly adjusted loss in four years, but kept its full-year outlook unchanged.
The company also announced store closures in some areas of Asia and Europe as part of its "Lace Up" plan announced a year ago aimed at boosted growth and shareholder value.
And Foot Locker said it will move its headquarters to St. Petersburg, Fla. in 2025, from New York City, and will maintain only a "limited presence" in New York going forwared.
"The 'Lace Up' plan is working, as evidenced by our return to positive total and comparable sales growth as well as gross margin expansion in the second quarter," said Chief Executive Mary Dillon. "Our top line trends strengthened as we moved through the quarter, including a solid start to back-to-school."
The stock (FL) tumbled 13.2% in morning trading toward its biggest one-day selloff since it plunged 29.4% on March 6, after posting fiscal fourth-quarter results.
The post-earnings selloff comes in the wake of disclosures of share sales by Foot Locker's second-largest shareholder over the past couple of weeks.
Net losses for the quarter to Aug. 3 widened to $12 million, or 13 cents a share, from $5 million, or 5 cents a share, in the same period a year ago.
Excluding nonrecurring items, per-share losses of 5 cents beat the FactSet loss consensus of 7 cents. That's the first adjusted per-share loss reported by Foot Locker since the fiscal first quarter of 2020, according to FactSet data.
Total revenue grew 1.9% to $1.896 billion, just above the FactSet consensus of $1.888 billion.
Cost of sales rose less than revenue, up 1.2% to $1.37 billion, to lift gross margin to 27.7% from 27.2%.
Comparable sales, or sales of stores open at least a year, increased 2.6%, to beat expectations of 1% growth, led by global Foot Locker and Kids Foot Locker comparable sales growth of 5.2%.
Chief Commercial Officer Bracken said on the post-earnings call with analysts "challenges persisted" in the company's apparel business, with comparable sales down in the mid-teens percentage range.
"While the promotional environment in apparel remains difficult, we believe we can do more to stabilize the category with greater key item and sneaker connectivity, while also filling in gaps in our assortments with a compelling private label offering," Bracken said, according to an AlphaSense transcript.
Looking ahead, the company affirmed its full-year guidance for adjusted earnings per share of $1.50 to $1.70, for sales growth of negative 1% to positive 1% and for comparable sales growth of 1% to 3%.
During the quarter, the company said it opened five new stores but also closed 31 stores, leaving it with 2,464 stores in 26 countries.
For its international operations, Foot Locker said it will be closing its stores and e-commerce operations in South Korea, as well as in Denmark, Norway and Sweden.
The stock, which has now shed 13.6% since closing at a 5 1/2-month high of $32.96 on Aug. 22, has slid 8.6% year to date, while the SPDR S&P Retail ETF (XRT) has tacked on 6.7% and the S&P 500 index has advanced 17.7%.
-Tomi Kilgore
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
08-28-24 1056ET
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