Foot Locker (FL) Q1 2024 earnings

From Foot Locker The turnaround is starting to pay off.

The sneaker giant saw comparable sales fall 1.8% during its fiscal first quarter, far better than the 3.1% decline analysts expected, according to StreetAccount.

The company also reaffirmed its guidance for the fiscal year, which expects revenue to be between a 1% decline and a 1% gain, compared to a 0.6% decline that analysts had forecast, according to LSEG.

Shares of Foot Locker rose 15% on Thursday.

Here's how the company did compared to what Wall Street expected, based on a survey of analysts by LSEG:

  • Profit per share: 22 cents adjusted versus 12 cents expected
  • Gain: $1.88 billion versus $1.88 billion expected

Foot Locker's reported net income for the three-month period ended May 4 was $8 million, or 9 cents per share, compared with $36 million, or 38 cents per share, a year earlier. Adjusted for one-time items, including impairment charges related to certain store closures and restructurings, among other things, Foot Locker reported earnings of 22 cents per share.

Revenue fell to $1.88 billion, down about 3% from $1.93 billion a year earlier.

For the full year, Foot Locker expects adjusted earnings per share to be between $1.50 and $1.70, higher than the $1.57 estimate, LSEG said.

The company expects comparable sales growth of between 1% and 3%, higher than the 1.5% growth that analysts had expected, according to StreetAccount.

“We had a solid start to the year in the first quarter, which shows that our Lace Up Plan is working,” CEO Mary Dillon told CNBC in an interview. “The reason I'm confident: We're launching an enhanced FLX rewards program, so we have a lot of opportunity with rewards. We're launching a revamped mobile app, which we know is a great way to drive customer engagement and commerce and we see growth opportunities… across all our brand partners throughout the year, including a return to growth with Nike during the holiday season.”

Foot Locker CEO Mary Dillon on First Quarter Results: Our 'Lace-Up' Turnaround Plan is Working

Dillon, the former CEO of Ultimate beautyhas been working to turn around Foot Locker, but those efforts have taken longer than expected.

Sales have consistently fallen as the retailer faces a low-income consumer who has felt the effects of inflation more acutely than other consumers.

The company also deals with Mercurial brand partners such as Nike, which has pulled back the number of new releases in Foot Locker stores. In April, Nike CEO John Donahoe acknowledged that the brand went too far when it eliminated wholesalers in favor of its own stores and website. Donahoe told CNBC that Nike is “investing heavily with our retail partners” as it goes through its own turnaround efforts.

Foot Locker's Champs Sports banner has also put pressure on its overall business, with comparable sales down as much as 13.4% during the quarter and total sales down nearly 19%.

Foot Locker had to rely on promotions to drive sales. However, things are starting to look good for the company.

While Foot Locker's core consumers are still under pressure from inflation, Dillon said the company's average selling price increased during the quarter, proving that consumers are willing to pay full price for the right product.

“Our consumers… this is a category that is very important to them. So if people have discretionary income, it may be limited, but you're still going to prioritize what you spend it on?” Dillon said. “So they're prioritizing, but I would say they're spending on purpose.”

Dillon has also been working to revamp Foot Locker's stores, where it still makes about 80% of its annual sales. She has built new locations outside the malls, closed underperforming stores and renovated existing locations. The idea with these changes was to entice brands to send their best products and encourage consumers to choose Foot Locker instead of shopping directly with a brand or going to a competitor, such as Dick's sporting goods.

In April, the retailer unveiled its “store of the future,” completely revamping the outdated Foot Locker format and serving as a model for its store renovations.

“Rather than a wall of shoes, it's really a house of brands,” Dillon said. “And I think it's coming to life in a way that our brand partners are happy with. We've heard that from everyone.”

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