Foot Locker Thinking of ‘Plan B’ As Sales Weaken

Foot Locker store
Foot Locker
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As tough retail times persist, Foot Locker Inc. is reaching into its arsenal for a back up plan.

The specialty athletic retail firm’s shares are feeling the heat today — down more than 15 percent as of 11:45 a.m. — after its first-quarter profit results fell short of expectations.

Foot Locker said its profits during the period fell 5.8 percent to $180 million, or $1.36 per diluted share, missing market watchers’ estimates for diluted earnings per share of $1.38.

Revenues increased less than 1 percent, to $2 billion, which was in line with analysts’ estimates. Comparable-store sales also edged up 0.5 percent, missing expectations for a 1.5 percent gain.

Let me start by saying we’re certainly not satisfied with our results this quarter, even though it was still a highly profitable quarter — one of our company’s best ever despite the unprecedented challenges we experienced early in the quarter,” said Foot Locker chairman and CEO Dick Johnson during a call with investors. “Our goal is to continually raise the earnings bar higher, and we did not quite succeed in achieving that in the first quarter.” (Johnson noted that the company’s sales got off to a slow start in February due to a delay in tax refunds and were not fully offset by stronger sales in March and April.)

Johnson said the firm’s sales during the current quarter are also “trending a bit lower than we had planned over the last few weeks.” As a result, the company is now forecasting that second-quarter comparable sales will be up low single digits, with earnings relatively flat compared to a year ago.

And — in the event all else fails — Foot Locker’s chief said the firm is working on a “Plan B.”

While we remain optimistic that we can accelerate our momentum over the second half of 2017 to reach mid-single-digit comparable sales gains, we are developing a Plan B, so to speak, in case recent sales trends continue,” he said. “That Plan B is primarily focused on controlling expenses and inventory so that we can deliver the mid-single-digit EPS increase for the full year, excluding the 53rd week that we mentioned in our pre-announcement, even if top line growth is more modest than what we originally planned.”

During Q1, Foot Locker EVP and CFO Lauren Peters said Foot Locker in the U.S., Footaction and Foot Locker Asia Pacific posted low single-digit comparable stores sales declines, while sales at Kids Foot Locker were down in the mid-teens.

On the positive side, Champs Sports and Foot Locker Canada each delivered mid-single-digit comp increases, driven by gains in both footwear and apparel, Peters noted.