DICK'S Sporting Goods Inc

Foot Locker shares fall after heavy promotions lead to holiday-quarter losses

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The Foot Locker logo is displayed in a store on May 19, 2023 in San Francisco, California.

Justin Sullivan | Getty Images

Shares of Foot Locker fell in premarket trading Wednesday after the sneaker retailer reported a holiday-quarter loss and issued weak guidance for the current year.

Here’s how the company did in its fourth fiscal quarter, compared with estimates from analysts surveyed by LSEG, formerly known as Refinitiv:

Earnings per share: 38 cents adjusted vs. 32 cents expected
Revenue: $2.38 billion vs. $2.28 billion expected

The company swung to a loss in the three-month period that ended Feb. 3. Foot Locker lost $389 million, or $4.13 per share, compared with an income of $19 million, or 20 cents per share, a year earlier.

Sales rose slightly to $2.38 billion, up about 2% from $2.34 billion a year earlier.

For fiscal 2024, Foot Locker is expecting sales to be between down 1% and up 1%, compared to estimates of down half a percent, according to LSEG.

It expects adjusted earnings per share to be between $1.50 and $1.70, compared with estimates of $1.40 to $2.30, according to LSEG.

It’s been a little over a year since CEO Mary Dillon took the helm of Foot Locker. During her tenure, sales have consistently fallen as the retailer grappled with a changing mix of sneaker brands and a target consumer that has felt the brunt of inflation more acutely than those in higher income brackets.

Foot Locker has also been repositioning its Champs Sports brand and has grappled with high inventory levels that, unlike its peers, it has struggled to curb.

In her past life as Ulta Beauty’s chief executive, Dillon skillfully won over buzzy beauty brands and turned the company into a powerhouse cosmetics retailer. When she took over as Foot Locker’s top boss in Sept. 2022, she was seen as the savior the legacy retailer sorely needed.

While Dillon inherited a slew of problems that existed long before she took over, and is still highly regarded across the retail industry, her turnaround of Foot Locker has come more slowly than some analysts had expected.

During its fiscal third quarter, Foot Locker eked out surprise beats on the top and bottom lines. Dillon told investors the company was making progress with its turnaround initiatives. The company inked a new marketing deal with the NBA, made plans to enter India and said the holiday quarter was off to a strong start.

Last March, Dillon touted a renewed and revitalized relationship with Nike, which has long been the largest driver of Foot Locker’s sales. She has also sought to reduce the company’s reliance on the sneaker giant as it has focused on driving direct sales and squeezing out wholesalers.

The relationship between the two brands still appears to be in a state of flux. On earnings calls, Nike routinely points to Dick’s Sporting Goods and JD Finish Line as its treasured wholesale partners.

But in mid-February, Foot Locker announced a new partnership with its longtime supplier. The partnership, dubbed The Clinic, brings together Foot Locker, Nike and Jordan Brand, and will feature “interactive activations, high reach media, real life basketball clinics, social media content, community events and more.”

The partnership officially launched during the 2024 NBA All-Star Game in Indianapolis, In.

Read the full earnings release here.

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March 6, 2024

Bad news for Black Friday: Retailers cast doubt on holiday shopping with cautious guidance

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A person walks past a sales advertisement at Saks Off 5th department store ahead of the Thanksgiving holiday sales in Washington, D.C., on Nov. 21, 2023.

Saul Loeb | AFP | Getty Images

There’s a dark cloud hanging over Black Friday.

A slew of retailers have issued tepid, cautious or downright disappointing fourth-quarter outlooks over the past few weeks, casting a pall over the crucial holiday season right as they gear up for the biggest shopping day of the year.

The companies, which include everyone from luxury goods giant Tapestry to big boxer BJ’s Wholesale Club, cited a host of dynamics that led them to reduce their outlooks or issue forecasts that came in below expectations.

Some, such as Best Buy and Nordstrom, cited the uncertain state of the consumer following months of persistent inflation, while others, such as Hanesbrands, said demand is simply drying up for its basic T-shirts, socks and underwear as wholesalers look to keep inventories in check.

Even Dick’s Sporting Goods and Abercrombie & Fitch, which both raised their full-year guidance on Tuesday after strong third quarters, managed to underwhelm with their holiday forecasts.

If there’s one theme that captures the commentary, it’s caution, and while some retailers may have been overly conservative with their outlooks, the resounding lack of confidence spells trouble for the holiday quarter and raises questions about the overall health of the economy.

“Consumers are still spending, but pressures like higher interest rates, the resumption of student loan repayments, increased credit card debt and reduced savings rates have left them with less discretionary income, forcing them to make trade-offs,” Target CEO Brian Cornell told analysts on a call last week.

“As we look at recent trends across the retail industry, dollar sales are being driven by higher prices with consumers buying fewer units per trip. In fact, overall unit demand across the industry has been down 2% to 4% in recent quarters, and the industry has experienced seven consecutive quarters of declines in discretionary dollars and units,” he said.

When asked about the upcoming holiday season, Cornell said it was too soon to weigh in on early sales, saying only that the company was “watching the trends carefully.”

Ho-hum growth for holiday spend

The holiday shopping season over the past couple of years has seen outsize growth brought on by the Covid-19 pandemic, which gave consumers stimulus payments and an opportunity to pad their bank accounts while they were stuck at home and unable to travel or dine out.

In 2020, holiday spend was up 9.1% from the year prior, according to the National Retail Federation. In 2021, spend was up 12.7% year over year, and in 2022, it was up 5.4%.

As 2023 comes to a close, savings accounts dwindle and consumers continue to face inflation and high interest rates, that growth in holiday spend is expected to slow to 3% to 4%, according to the NRF. That’s consistent with the slower growth rates seen between 2010 and 2019 in the lead up to the pandemic.

The expected slowdown has led many retailers to approach the holiday season with more caution than Wall Street anticipated.

On Monday, Bank of America’s consumer team found that out of 43 retailers that issued earnings forecasts, 37, or 86%, came in light of Street expectations.

Take Walmart, for example. The retailer struck a cautious tone with its outlook, which came in below expectations, after it saw consumer spending weaken toward the end of October. Last week, it said it expects adjusted earnings per share of $6.40 to $6.48 for the year, lower than the $6.48 analysts had projected, according to LSEG, formerly known as Refinitiv.

“Halloween was good overall,” Chief Financial Officer John David Rainey said on a call with CNBC. “But in the last couple of weeks of October, there were certainly some trends in the business that made us pause and kind of rethink the health of the consumer.”

For some retailers, even good news wasn’t cheery enough.

Dick’s Sporting Goods raised its forecast Tuesday after posting strong top- and bottom-line beats and said it now expects full-year earnings per share of between $11.45 and $12.05, compared with the $11.27 to $12.39 range that analysts had projected, according to LSEG.

But compared to its strong third-quarter results, the outlook came off as tempered.

The retailer said it was “excited” for the holiday but couched that optimism with executives repeatedly noting they were looking forward to the things “within our control” — a refrain heard four times during the hour-long call.

“We are very excited about what we have within our control for Q4. Our products are in stock. We’ve got tremendous gifts … and the teams are pumped to deliver an amazing holiday experience,” CEO Lauren Hobart said on a call with analysts. “We’re balancing all of that with caution about the macroeconomic environment and the consumer, because we know that consumers are going through a lot right now. So, I think, we’ve been reasonably cautious in our guidance.”