Foot Locker shares plunged 14.3% Wednesday after the company reported lower-than-expected earnings and lowered its full-year forecast after weak holiday demand. The CEO specifically cited Nike products.
Former Ulta Beauty president Mary Dillon, who took over Foot Locker in 2022, blamed weak demand for Nike sneakers and promotions that exceeded industry-wide expectations.
“Certainly there are some brands that are performing better, and, as you know, we're also dealing with the recent softening in Nike,” Dillon said. told CNBC. “Given its size and magnitude, it makes sense that there would be an impact.”
Foot Locker reported a loss of $33 million, or 34 cents per share, for the three months ended Nov. 2.
Excluding one-time charges such as costs related to the closure of Atmos' website and stores, the company reported profit of $31 million, or 33 cents per share.
The Manhattan-based company reported profit of $28 million, or 30 cents per share, in the same period last year.
Total sales decreased 1.4% to $1.96 billion from $1.99 billion a year ago. In a small sign that the company's turnaround efforts may be working, same-store sales rose 2.4%, falling short of the 3.2% growth expected by analysts, according to Street Account.
Dillon said the company has been hit hard by consumers cutting back on spending between big sales and by Nike's “Just Do It” brand, which accounts for 60% of Foot Locker's sales. He said he is dealing with disappointment in demand for the product.
Nike is struggling to keep pace as innovative new competitors like Hoka and On scramble to take the lead in the sneaker category.
Elliott Hill, a 32-year Nike veteran, took over in October, but has not yet disclosed any turnaround plans.
“It's not like all brands are uniformly that way. Frankly…I'll just say there are some that are more promotional, but overall, this category is pretty promotional,” Dillon told CNBC. told. “The level of promotion in this category has increased to a level we never expected to see.”
Dillon said Foot Locker is confident in Hill's ability to grow Nike's sales.
“We have a great relationship with him [and] I'm very confident about where he and his team are going,” Dillon told CNBC. “I think we're going to solve all of that, that's the question.”
Meanwhile, as retailers struggle to cope with a shorter-than-usual shopping period from Thanksgiving to Christmas and bargain-savvy customers who aren't as willing to splurge as in previous years, shoe companies are looking ahead to the holiday season. has been revised downward. . Foot Locker expects to lose $100 million in sales due to the shortened holiday season, the company said in its earnings call.
Foot Locker said it expects sales for the important holiday season to be down 1.5% to 3.5%, below the 2% increase from the same period last year.
The company said it expects comparable sales to increase 1.5% to 3.5% in the fourth quarter.
Foot Locker now expects full-year sales to decline 1% to 1.5%, worse than its previous outlook of a 1% decline to 1% increase.
The company also lowered its full-year comparable sales forecast. Foot Locker now expects comparable sales to increase 1% to 1.5%, below its previous guidance of 1% to 1.3%.
The shoe retailer lowered its full-year earnings forecast to adjusted earnings per share of $1.30 from $1.20. Foot Locker had previously expected earnings of $1.50 to $1.70 per share.
The new forecast was below analysts' fourth-quarter and full-year sales expectations, according to Street Account and LSEG analysts.
Despite the dismal holiday and outlook for the year, Dillon said the company was confident in the future of its “lace-up” strategy. This includes revamping store concepts, closing unprofitable stores, and focusing on flagship stores such as Champs Sports and WSS.
Champs, which has been a pain for Foot Locker in the past, reported similar sales growth of 2.8% in the third quarter. WSS also posted similar sales growth of 1.8% over the same period.
