Foot Locker (FL) stock tanked 25% on Friday after the company cuts its full-year sales outlook as same-store sales lag behind the same period last year.
“Our sales have, since (March), 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,” Foot Locker CEO Mary Dillon said in the company’s earnings release.
Foot Locker sees comparable store sales declining as much as 9% for the year after initially guiding for no worse than a 5.5% decline. The footwear retailer hasn’t seen same-store sales decline more than 6% for the year since 2010.
The bleak print also included misses on revenue and earnings per share for the first quarter. Foot Locker reported first-quarter revenue of $1.93 billion, down from $2.18 billion in the year-earlier period. The Street had estimated $1.99 billion, per Bloomberg consensus data. The company’s earnings per share came in at $0.70 versus an estimate of $0.77 and $1.60 for the same period in 2022.
Foot Locker revenue has now declined for four straight quarters. Other athletic apparel brands like Nike (NKE)and Under Armour (UAA) also declined on the news.
Foot Locker’s closed out a week of mixed results from retailers as investors watch for a potential consumer slowdown. Earlier in the week, Home Depot (HD) trimmed its guidance while Target (TGT) warned of a shift away from discretionary spending impacting its yearly sales numbers. Walmart (WMT) for its part, could stand to benefit from those shifts as consumers trade down.
But as executives point toward a shift away from discretionary spending, and the sporting goods category lead declines in the latest monthly retail sales report, the picture is looking increasingly bleak for athletic apparel companies looking for a second wind.
Under Armour told investors as much in early May when the stock tumbled after its full-year sales guidance fell short of Wall Street’s estimates. Now Foot Locker is reporting similar troubles in its rebuilding efforts, though they weren’t entirely unexpected.
“2023 is a reset year, we’ve been very clear about that,” Dillon told Yahoo Finance in March.
After successfully building up Ulta (UTLA) for eight years ending in 2021, Dillon was named the Foot Locker CEO in August 2022 and assumed the position in January. Led by Dillon, Foot Locker is in the midst of its turnaround strategy dubbed ‘Lace Up.’ The footwear chain that became a staple in brick and mortar malls plans to close 400 underperforming stores, mostly in lower-tier malls, and focus more on off-mall locations.
As part of the plan Foot Locker is attempting to delve into the growing sneaker culture with more “exclusives.” Foot Locker also says while it will “revitalize” its partnership with Nike beyond 2023, it sees Nike being a smaller portion of overall sales in the future.
Nike represented 70% of Foot Locker sales as of the March 2022 investor day. Foot Locker hopes that number decreases to 55% to 60% by 2026 in an effort to diversify its business and combat Nike’s growing direct-to-consumer arm.
Josh is a reporter for Yahoo Finance.
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