Foot Locker delivered stronger-than-expected earnings in its first quarter, marking a positive step in its ongoing turnaround efforts. While overall sales dipped slightly, the company exceeded analyst expectations for profit and reaffirmed its full-year guidance.
Solid start of the year
The retailer reported a net income of $8 million, down from $36 million in the same quarter last year. However, profit, excluding some items, was 22 cents a share, almost doubling the average analyst estimate. Comparable store sales, a key retail metric, fell 1.8% for the quarter ended May 4. That was slightly better than expected.
“We’re off to a solid start this year,” said Mary Dillon, Foot Locker’s President and CEO. “The Lace Up Plan is working. We delivered comparable sales results and gross margin in line with our expectations, while earnings per share outperformed due to disciplined expense management and some favorable shifts in expense timing.“
Lace Up plan takes root
Foot Locker remains committed to its “Lace Up Plan,” a strategic roadmap unveiled in March 2023 that aims to reach $9.5 billion in annual revenue by 2028. The plan focuses on diversifying brand offerings, revamping the Foot Locker brand experience, and investing in technology and loyalty programs.
“We’re strengthening partnerships with key brands, deepening customer engagement through digital initiatives and loyalty programs, and solidifying our position as the center of basketball and sneaker culture,” Dillon explained in a press release.
Early wins amidst challenges
While CEO Dillon, who previously led Ulta Beauty, has been steering the turnaround, it hasn’t been smooth sailing. Sales have softened as Foot Locker’s core customer, budget-conscious consumers, grapple with inflation. While Foot Locker’s core consumers were still under pressure from inflation in Q1, a silver lining emerged: Dillon said the company’s average selling price rose during the quarter, indicating customers are willing to pay a premium for the right products.
Foot Locker also highlighted several key achievements in Q1 that align with the Lace Up Plan. The company unveiled its “store of the future” concept in New Jersey, a blueprint for upcoming renovations and expansions. “Instead of a wall of shoes, it’s really a house of brands,” said Dillon. “And I think it’s coming to life in a way that our brand partners are thrilled with. We’ve heard that from everybody.” Four more locations are on the way this year. Additionally, an improved loyalty program and a new mobile app are on the horizon in the coming months. The retailer also continued to diversify its brand mix with non-Nike sales holding steady at 40%, on track to meet its 2026 goal of exceeding 40% non-Nike sales.
Looking ahead: a brighter horizon
Foot Locker anticipates increased allocations from Nike by the fourth quarter and remains optimistic about the athletic giant’s product pipeline. The sneakers retailer reaffirmed its outlook for fiscal year 2024 and expect sales to be between down 1 percent and up 1 percent. Comparable sales aree expected to be up between 1 and 3 percent.
