Foot Locker just posted better than expected results for the third quarter.
Net income in Q3 was $158 million, or $1.52 per share. Total sales were $2.19 billion, marking a year-over-year increase of 3.9%. Comp store sales were up just 2.2%.
But shares of Foot Locker still dropped as much as 12% by early afternoon on Friday after the company said it expects supply chain issues to continue to impact business. According to analysts, these headwinds could cause even more problems in the long-term.
“We expect global supply chain constraints to persist throughout the fourth quarter,” said CFO Andrew Page in a call with investors. “That said, we believe we are positioned for the holiday season, with positive momentum and inventory levels ready to meet customer demand.”
Page added in a call with investors that global supply chain problems are keeping the company cautious on its outlook for the year. The company expects full year sales growth to be in the high teens and comp sales in the mid-teens.
In light of the results, analysts expressed hesitation on the long term potential for Foot Locker.
“In a retail environment where many companies are experiencing massive top-line growth, Foot Locker continues to struggle,” wrote CFRA Research equity analyst Zachary Warring. “We see plenty of better opportunities in the space and expect Foot Locker sales to remain flat to down over the long-term.”
In a note to investors, Williams Trading analyst Sam Poser said to “remain on the bench” about the footwear retailer.
“Despite the better than expected 3Q21 results, it will become evident in the next two weeks, when Dick’s Sporting Goods and Hibbett report earnings, that Foot Locker is losing market share, especially when results are compared to 2019,” Poser wrote.
He added that Foot Locker’s position with top brands appears to be diminishing as well, as companies like Dick’s Sporting Goods, Hibbett, and JD Sports and “appear to be getting more love than FL by the major vendors.”
In May, Foot Locker said it would shutter many Footaction stores to focus on other brands. Poser posited that this move was likely influenced by a decision from Nike to limit product offerings at the chain, though Foot Locker did not confirm that to Poser.
“In the long term, we believe that Foot Locker will continue to shrink, and lose clout with Nike,” Poser said.