Foot locker reported Wednesday that comparable sales rose for the first time in six quarters as efforts to remodel stores and improve the customer experience continue to pay off.
The troubled sneaker company's same-store sales grew 2.6% in its fiscal second quarter, far beating the 0.7% increase analysts had expected, according to StreetAccount. Gross margin also expanded for the first time in more than two years.
Despite the positive trends, shares fell about 5% in premarket trading.
“The Lace Up Plan is working,” CEO Mary Dillon said in a press release, referring to the company’s turnaround strategy. “Our topline trends strengthened as we moved through the quarter, including a solid start to Back-to-School. We were also particularly pleased to deliver stabilization in our Champs Sports banner.”
Here's how Foot Locker performed compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Loss per share: 5 cents adjusted versus 7 cents expected
- Gain: $1.90 billion vs. $1.89 billion expected
In the three-month period ended Aug. 3, Foot Locker lost $12 million, or 13 cents a share, compared with a loss of $5 million, or 5 cents a share, a year earlier. Excluding one-time items, Foot Locker lost 5 cents a share.
Revenue rose to $1.90 billion, up about 2% from $1.86 billion a year earlier.
For the current fiscal year, Foot Locker largely maintained its guidance, still expecting revenue to fall between 1% and grow 1% from the prior year. That's better than the 0.4% decline analysts had expected, LSEG said.
Foot Locker also stuck to its adjusted earnings-per-share forecast. It expects profit to be between $1.50 and $1.70 — much of that range above the $1.54 analysts had expected, according to LSEG.
Since the former Ulta Beauty About two years ago, Foot Locker CEO Mary Dillon took over the helm. She’s been working hard to transform the company and ensure it remains relevant in a world where brands aren’t as reliant on multi-brand retailers as they once were.
Dillon has been working to repair the company's relationship with its largest brand partner, Nikeand has also taken a critical look at its sprawling but aging store fleet, where the company gets about 80 percent of its sales. This year, the company plans to spend $275 million upgrading its stores through remodels and renovations. Foot Locker has said the upgrades are working.
Dillon has also been working to streamline costs at Foot Locker. The company said Wednesday that it is closing its stores and e-commerce operations in South Korea, Denmark, Norway and Sweden, and will turn to a third party to run its operations in Greece and Romania. In total, 30 of Foot Locker’s 140 stores in Asia Pacific and 629 in Europe will be closed or re-operated as part of the changes.
Foot Locker also plans to move its headquarters from New York City to St. Petersburg, Florida, by the end of 2025. Going forward, the company plans to have only a limited presence in the Big Apple.
“The goal of the move is to further expand the company’s meaningful presence in St. Petersburg and enable greater collaboration between teams across industries and functions, while also reducing costs,” Foot Locker said in a press release.
Foot Locker's Champs banner, which has been dragging down the company's overall performance, is also showing some signs of improvement. For the quarter, comparable sales fell 3.9%, an improvement from the 25.3% decline in the same period last year.
By improving stores, products and the customer experience online and in stores, Foot Locker is boosting sales while core consumers continue to feel the pressure of persistent inflation and high interest rates, indicating that Dillon’s efforts are paying off.
At Tuesday's close, the company's shares had risen more than 5% this year, compared with Nike's shares, which have fallen more than 21% over the same period.
Demand has undoubtedly slowed in retail, but consumers are still spending money. They’re just much more selective about who they spend it on — making execution even more important.
“Our strategies are building momentum as we look ahead to the remainder of the year,” Dillon said in a statement. “I remain confident that we are taking the right actions to position the company for the next 50 years of profitable growth and to create long-term shareholder value.”
