Foot Locker Shares Drop 25% After Big Earnings Miss

(CTN News) – Despite disappointing results in the fiscal first quarter, Foot Locker’s stock opened 24% lower on Friday after the company lowered its outlook two months after introducing it and reported dismal results.

There have been small losses on both the top and bottom lines for the footwear retailer, and it has had to increase markdowns in order to generate sales.

As a result of a survey of analysts by Refinitiv, here is a breakdown of Foot Locker’s performance in its first fiscal quarter compared to what Wall Street was anticipating:

• An adjusted profit per share of 70 cents was reported compared to an expected profit of 81 cents

• Compared with the expectations of $1.99 billion, revenue came in at $1.93 billion

According to company figures, the company’s net income for the three-month period ended April 29 was $36 million, or 38 cents per share, compared with approximately $132 million, or $1.37 per share, a year ago.

A year ago, Foot Locker’s revenue risen to $2.18 billion, but in the most recent quarter sales fell to $1.93 billion, down 11.4%.

As a result of the tough macroeconomic backdrop, our sales have since declined meaningfully, causing us to reduce our guidance for the year as we take more aggressive markdowns in order to both drive demand and manage our inventory levels,” Mary Dillon said in a statement released today.

According to the company, sales are now expected to decline by 6.5% to 8% for the year, compared to a previous range of down 3.5% to 5.5%. Comparable sales are expected to decline between 7.5% and 9%, compared to a previous range of down 3.5% to 5.5%.

Compared with its previous forecast of $3.35 to $3.65, Foot Locker expects non-GAAP earnings per share of between $2 and $2.25.

As compared to a prior range of 30.8% to 31%, the company anticipates gross margins to be between 28.6% and 28.8%.

There is already pressure on Foot Locker’s margins. As a result of heavy discounting and theft-related shrink, its margins in the first quarter decreased by four percentage points. Moving forward, the company expects promotions to continue to pressure margins.

The Bank of America trading desk noted earnings results from retailers such as Target, TJ Maxx and Walmart this week were better than expected, but 45% of the retail sector has yet to report earnings and the companies to come are not as highly regarded as the ones that reported this week.

In the coming weeks, a variety of retail companies will be reporting earnings, and Foot Locker’s poor report may indicate trouble ahead

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