Foot Locker, the popular sneaker retailer, experienced a significant drop in shares after reporting a holiday-quarter loss and postponing an important financial goal. The company’s shares fell more than 20% following the news, which included weak guidance for the current year and a delay in meeting its profitability goal. Foot Locker’s finance chief, Mike Baughn, stated that the company now expects to reach an EBIT margin of 8.5% to 9% by 2028.
In terms of its fiscal fourth quarter performance, Foot Locker reported adjusted earnings per share of 38 cents, surpassing analysts’ expectations of 32 cents. However, the company swung to a loss of $389 million in the three-month period, compared to a profit of $19 million in the previous year. Despite this loss, sales rose slightly to $2.38 billion, up 2% from the previous year.
Looking ahead, Foot Locker expects its profit for the current fiscal year to be worse than anticipated by analysts. The company projects adjusted earnings per share between $1.50 and $1.70, compared to estimates ranging from $1.40 to $2.30. For fiscal 2024, Foot Locker anticipates sales to be between a 1% decrease and a 1% increase.
CEO Mary Dillon acknowledged the challenges faced by Foot Locker but highlighted the company’s efforts to drive full-price sales and increase customer engagement. However, she also noted that the retailer’s gross margin fell due to higher markdowns as it aimed to reduce inventory levels.
Dillon, who took over as CEO in September 2022, has been working on revamping Foot Locker’s store footprint and strengthening brand partnerships. The company opened 29 new stores, remodeled or relocated 66 locations, and closed 113 stores during the fourth quarter. Additionally, Dillon has been focused on reducing Foot Locker’s reliance on Nike and diversifying its sales channels.
The relationship between Foot Locker and Nike has been evolving, with Nike highlighting other wholesale partners such as Dick’s Sporting Goods and JD Finish Line. However, in mid-February, Foot Locker announced a new partnership with Nike and the Jordan Brand called The Clinic. This partnership aims to bring interactive experiences, media activations, basketball clinics, and community events to customers.
Overall, Foot Locker’s performance has been slower than expected under Dillon’s leadership, although she inherited long-standing challenges. Analysts had high hopes for her turnaround initiatives, but the company continues to face obstacles such as changing sneaker brands and a target consumer impacted by inflation. Despite the recent setback in shares, Foot Locker remains committed to its transformation into a modern, omnichannel retailer for sneakers.
