Foot Locker saw strong financial results over Thanksgiving weekend, and the sneaker and sportswear retailer decided to make a quick pivot in its full-year forecast, showing slightly improved sales trends attributed to its new approach to its retail stores, which aim to offer more than merchandise.
The company now expects sales to drop by 8% to 8.5% for the year, rather than the previous forecast of an 8% to 9% decrease. It also projects a same-store sales decline of 8.5% to 9%, a narrower range compared to the previous guidance of a 9% to 10% drop.
“While we recognize that we have work ahead of us, I’m encouraged by the progress we’ve been making in this reset year,” said Foot Locker President and CEO Mary Dillon during a Wednesday (Nov. 29) call with analysts discussing third-quarter earnings.
During the first quarter, Foot Locker shifted toward a more personalized strategy, employing a “Lace Up” approach to foster stronger connections with customers. The strategy included the strategic expansion of community-centric concept stores in locations frequently visited by sneaker enthusiasts.
In Q3, the retailer continued to pursue these initiatives, departing from conventional mall settings and embracing newer formats. Dillon stressed the commitment to tailor the company’s banners, giving each one a unique personality. Throughout the quarter, Foot Locker achieved success by either inaugurating or transforming 30 new community and power stores worldwide, contributing to a total of 198 stores in these modern formats.
Dillon emphasized the performance of these locations, showcasing higher levels of traffic, conversion rates and average ticket values compared to the rest of the fleet.
Dillon also reported the closure of 14 underperforming stores during the quarter, including the shutdown of three of its U.S. Atmos stores.
Elsewhere, Foot Locker-owned Champs Sports exceeded initial expectations despite a 20% decline in comparable store sales during Q3.
In Q3, Foot Locker’s total sales dropped by 8.6% year over year. Comparable store sales fell by 8%, attributed to ongoing consumer softness, vendor mix changes, and a 3% negative impact from repositioning Champs Sports.
Gross margin declined by 470 basis points due to higher markdowns, occupancy deleverage and increased shrink. Selling, general and administrative expenses increased by 100 basis points as a percentage of sales, driven by underlying deleverage, inflation and investments.
Net income was $28 million, lower than the $96 million in Q3 2022. Earnings per share dropped to $0.30 from $1.01 in Q3 2022.
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