Foot Locker slashed its full-year guidance on Wednesday after reporting a rough set of quarterly results.
The sneaker giant fell short of Wall Street’s expectations on the top and bottom lines and blamed the miss on soft consumer demand and elevated promotions across the marketplace.
Foot Locker shares dropped 7% in premarket trading after it posted the results.
Here’s how Foot Locker did in its third fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:
- Earnings per share: 33 cents adjusted vs. 41 cents expected
- Revenue: $1.96 billion vs. $2.01 billion expected
In the three months ended Nov. 2, Foot Locker swung to a loss of $33 million, or 34 cents per share, compared with earnings of $28 million, or 30 cents per share, a year earlier. Excluding one-time items related to impairment charges for its atmos brand and other expenses, Foot Locker reported earnings of $31 million, or 33 cents per share.
Sales dropped to $1.96 billion, down about 1.4% from $1.99 billion a year earlier.
“Consumer spending trends softened following the peak Back-to-School period in August, and the promotional environment was more elevated than anticipated,” CEO Mary Dillon said in a news release. “We saw a meaningful and positive acceleration over the key Thanksgiving week period, especially in stores. Despite that strong performance, we are taking a more cautious view and are lowering our full-year sales and earnings outlook due to a more promotional environment and softer consumer demand outside of key selling periods.”
For the holiday quarter, Foot Locker expects sales to be down between 1.5% and 3.5%, compared to a gain of about 2% in the year-ago period. The company said the previous fiscal year had an additional sales week.
Foot Locker’s outlook is worse than the 1.6% decline that analysts had expected, according to LSEG. It anticipates comparable sales will rise between 1.5% and 3.5%, largely below expectations of 3.4% growth, according to StreetAccount.
For the full year, Foot Locker now expects sales to fall between 1% and 1.5%, compared to previous guidance of down 1% to up 1%. Analysts were expecting a decline of 0.4%, according to LSEG.
The retailer also cut its comparable sales outlook for the full year and now anticipates comps will grow between 1% and 1.5%, compared to previous guidance of 1% to 3%. Analysts expected the metric would climb 1.8%, according to StreetAccount.
Foot Locker also lowered its full-year earnings outlook and now expects adjusted earnings per share to be between $1.20 and $1.30, below Wall Street expectations of $1.54. Foot Locker previously expected earnings to be between $1.50 and $1.70 per share.
The company attributed the revised guidance, in part, to elevated promotions and the shorter year, which is expected to impact sales by about $100 million.
Despite the slashed guidance and gloomy holiday outlook, there were some bright spots during the period. For the second quarter in a row, Foot Locker’s comparable sales grew compared to the previous year, with a 2.4% increase. That’s below the 3.2% analysts expected, according to StreetAccount, but it’s one indicator that Dillon’s turnaround plan is continuing to show signs of life.
Champs, which has been dragging down Foot Locker’s overall business, also posted positive comparable sales at 2.8% growth, as did WSS, which saw an increase of 1.8%.