- Foot Locker beat Wall Street’s revenue and earnings estimates and reported comparable sales growth for the first time in six quarters.
- In addition, the sneaker company was able to increase its gross margin for the first time in over two years.
- As part of its efforts to streamline operations, Foot Locker is withdrawing from a number of international markets and moving its headquarters from New York City to Florida.
Is this the beginning of Foot Locker’s comeback story?
The struggling sneaker company said Wednesday that comparable sales rose for the first time in six quarters as its efforts to refresh its stores and improve the customer experience continue to bear fruit.
Foot Locker’s sales rose 2.6 percent in the second quarter, which, according to StreetAccount, is well above the 0.7 percent increase expected by analysts. The gross margin also increased for the first time in over two years.
“The Lace Up Plan is working,” CEO Mary Dillon said in a press release, referring to the company’s turnaround strategy. “Our sales trends improved throughout the quarter, including a solid start to the back-to-school season. We are also particularly pleased with the stabilization of our Champs Sports banner.”
Here’s how Foot Locker performed compared to Wall Street expectations, based on an analyst survey conducted by LSEG:
- Loss per share: 5 cents adjusted compared to 7 cents expected
- Revenue: $1.90 billion compared to expected $1.89 billion
For the three months ended Aug. 3, Foot Locker lost $12 million, or 13 cents per share, compared with a loss of $5 million, or 5 cents per share, a year earlier. Excluding one-time items, Foot Locker posted a loss of 5 cents per share.
Revenue increased to $1.90 billion, an increase of about 2% from $1.86 billion in the previous year.
For the current fiscal year, Foot Locker largely maintained its forecast and continues to expect sales to be in a range between a decline and growth of one percent compared to the previous year. This is better than the decline of 0.4 percent that analysts had expected, according to LSEG.
Foot Locker also stuck to its forecast for adjusted earnings per share. The company expects earnings between $1.50 and $1.70 – significantly more than the $1.54 expected by analysts, according to LSEG.
Since former Ulta Beauty boss Mary Dillon took the helm at Foot Locker about two years ago, she has worked to transform the company and ensure it remains relevant in a world where brands are no longer as dependent on multi-brand retailers as they once were.
Dillon has worked to improve the company’s relationship with its biggest brand partner, Nike, and has also taken a close look at the sprawling but outdated chain of stores that generate about 80 percent of the company’s sales. This year, the company plans to invest $275 million to modernize and remodel its stores. Foot Locker has said the modernization is working.
Dillon has also worked to cut costs at Foot Locker. On Wednesday, the company announced it would close its stores and e-commerce operations in South Korea, Denmark, Norway and Sweden, and rely on a third-party vendor to operate in Greece and Romania. In total, 30 of Foot Locker’s 140 stores in Asia Pacific and 629 in Europe will be closed or transferred to a new operator as part of the changes.
Foot Locker also plans to move its global headquarters from New York City to St. Petersburg, Florida, at the end of 2025 and will maintain only a limited presence in the Big Apple going forward.
“The intent behind the move is to further expand the company’s significant presence in St. Petersburg and enable increased collaboration between teams across different divisions and functions while reducing costs,” Foot Locker said in a press release.
Foot Locker’s Champs banner, which has been dragging down the company’s overall performance, is also showing some signs of improvement. During the quarter, comparable sales declined 3.9%, an improvement from the 25.3% decline in the year-ago period.
By improving stores, products and the customer experience online and in-store, Foot Locker is managing to increase sales even as its core customers continue to feel the pressure of constant inflation and high interest rates, showing that Dillon’s efforts are working.
At the close of trading on Tuesday, the company’s shares had risen by more than 5 percent this year. By comparison, Nike shares lost more than 21 percent in the same period.
Retail demand has undoubtedly dropped, but consumers are still spending money. They’re just much more selective about what they choose to buy – which makes execution all the more important.
“Our strategies are gaining momentum as we look ahead to the remainder of the year,” Dillon said in a statement. “I remain confident that we are taking the right actions to position the company for the next 50 years of profitable growth and create long-term shareholder value.”
