Dive Brief:
- A year after sales tumbled 11%, Foot Locker’s top-line numbers are still declining, though at a slower rate. For the first quarter, the retailer reported total sales fell 2.8%, while comps declined 1.8%, per a company press release.
- The footwear retailer is still in the black, though net income plunged 78% to $8 million. Foot Locker reiterated its full-year outlook, which predicts sales will be down 1% to up 1%, and projects comps to grow between 1% and 3%.
- The company’s physical fleet is still in flux, with store refreshes under way along with a shift to more off-mall locations as it shutters stores. In Q1, the retailer closed a net 33 stores and plans for its footprint to be 4% smaller by the end of the fiscal year.
Dive Insight:
Foot Locker execs stayed focused on the future during an earnings call Thursday, pointing to a host of efforts that are expected to come to fruition in the second quarter including a relaunch of the FLX loyalty program in the U.S., the impact of new buying teams and an acceleration of store refreshes.
While Foot Locker revamped 13 stores in Q1, for example, Chief Commercial Officer Frank Bracken said that number will jump up to more than 100 on a quarterly basis starting in Q2. New store formats now make up 16% of Foot Locker’s global square footage, according to CEO Mary Dillon, up from 11% a year ago, and the retailer’s off-mall penetration has grown to 39%, with an eventual goal of 50%.
The retailer opened its first store of the future concept in April, aimed at improving a host of old pain points, including a historically male-focused store design and a lack of cohesion across the store fleet. Bracken noted that the improved women’s section in the new concept, which is outperforming the balance of the chain by “significant margins,” comes at a time when women — and teen girls specifically — are leading the trend on sneakers adoption.
Foot Locker’s assortment of Nike products is also expected to start growing again come Q4, with Bracken adding that the retailer feels good about the innovation its brand partner has planned for the next few years.
“I think it’s fair to say Nike’s going back on offense,” Bracken said.
Dillon also noted that the two retailers have been working closely on multiyear growth plans and that the banner feels “well-positioned” with Nike going forward.
“I think we’re well-positioned as they refocus on wholesale,” Dillon said. “As we raise our game, which is improving the customer experience in-store and online, a more enticing loyalty program, better data sharing, etc. — I think that’s good for our brand partners, too, including Nike.”
Foot Locker is still investing in brand diversification as well, including adding On and Hoka to more stores, with the Hoka business doubling in the most recent quarter. But all of this will take time to execute, and it’s still not clear how it will pan out financially.
“A guidance reiteration does seem to be a step in the right direction (after cutting their outlook three times last year), but we're somewhat puzzled by the magnitude of the premarket reaction,” Wedbush analysts led by Tom Nikic said in emailed comments. “The company is still embedding significant accelerations in sales, gross margin, and EPS growth for the remainder of the year, all of which need to flip from YoY declines in Q1 to significant growth the remainder of the year.”
