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Foot Locker’s stock opened 24% lower Friday after it reported dismal fiscal first-quarter results and reduced its outlook just two months after introducing it.
The footwear retailer missed on both the top and bottom lines and said it has had to increase markdowns to drive sales.
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Here’s how Foot Locker did in its first fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:
- Earnings per share: 70 cents adjusted vs. 81 cents expected
- Revenue: $1.93 billion vs. $1.99 billion expected
The company’s reported net income for the three-month period that ended April 29 was $36 million, or 38 cents a share, compared with roughly $132 million, or $1.37 per share, a year earlier.
Sales dropped to $1.93 billion, down 11.4% from $2.18 billion a year earlier.
“Our sales have since softened meaningfully given the tough macroeconomic backdrop, causing us to reduce our guidance for the year as we take more aggressive markdowns to both drive demand and manage inventory,” CEO Mary Dillon said in a statement.
The company now expects sales to be down 6.5% to 8% for the year, compared to a prior range of down 3.5% to 5.5%. It expects comparable sales to fall 7.5% to 9%, compared to a prior range of down 3.5% to 5.5%.
Foot Locker expects non-GAAP earnings per share to be between $2 and $2.25, compared to its previous outlook of $3.35 to $3.65.
The company anticipates gross margins will be between 28.6% to 28.8%, compared to a prior range of 30.8% to 31%.
Foot Locker’s margins are already under pressure. Heavy discounting and theft-related shrink shaved four percentage points off of its margins in the first quarter compared to the prior-year period. The company expects promotions will continue to pressure margins moving forward.
The Bank of America trading desk noted earnings results from retailers like 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 still to come aren’t as high quality as the ones that reported this week.
Foot Locker’s poor report could signal trouble ahead for other names in the retail sector, as a range of companies report earnings over the next few weeks.
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