Shares of Foot Locker Inc. dropped by 25% on May 21st, 2023, as the American footwear retailer reported lower than expected drops in Q1 earnings, sales, and comparable-store sales. The first-quarter profit was $36m, in comparison to $133m the previous year, while total sales fell by 11.4%, and comparable-store sales slid by 9.1%. This shows Foot Locker’s continued struggling to maintain consistent revenue growth, leading to underperformance over the past several years.
Foot Locker, which provides sportswear and athletic footwear, had its worst day in four years when the earnings report failed to meet expectations. The retailer’s quarterly revenue was $1.93bn, compared to the analysts’ expected $1.99bn, while the adjusted earnings-per-share dropped by 56% to 70 cents ($1.39 a share), which was lower than the predicted 81 cents. The decline in revenue and comparable-store sales has been related to fierce competition in the retail market.
One of Foot Locker’s major suppliers, Nike, recently reported considerable demand for footwear. Mary Dillon, the company’s CEO, despite this, has suggested that the US footwear retailer is making progress to build its foundations for return to sustainable growth. Yet Foot Locker’s revenue of $1.93bn was down from the $2.18bn achieved during the same period last year. Due to discounted sales and increased inventory stockpiles, the company’s sales forecast for the fiscal year has fallen from $8.2bn earlier to between $7.7bn and $8.0bn, with the adjusted earnings-per-share expected to be between $5.00 and $5.50, down from $5.47.
As a result, investors have responded negatively to the Q1 2023 earnings report, with Foot Locker’s shares experiencing a significant decline of 25.4%, and 14 million shares changing hands on the same day. Moreover, the company downgraded its full-year adjusted earnings-per-share expectation to between $2 and $2.25 from $3.35 to $3.65. The sports industry suffered a decline in May’s monthly US retail sales report, leading to concerns among competitors such as Under Armour and Walmart.
In summary, Foot Locker had a dreadful day in the stock market when it failed to meet the anticipated earnings report. The sportswear and athletic footwear retailer had disappointing Q1 earnings, sales, and comparable-store sales. This follows Foot Locker’s trend of continued struggle to maintain consistent revenue growth over recent years. As its CEO, Mary Dillon pledges to make early progress to return to sustainable growth. In light of the poor performance of the footwear retailer, investors have reacted negatively, and the company downgraded its full-year adjusted earnings-per-share guidance from its early expectation.
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