Foot Locker Inc. shares fell on Friday after the retailer reported a weak sales total for the first quarter.
Total sales for Q1 were $1.93 billion, down 11.4 percent over the prior year and slightly short of the $1.99 billion expected by analysts surveyed by Yahoo Finance. Net income was $36 million compared with $133 million in the prior year. Non-GAAP earnings per share decreased to 70 cents per share, short of analysts’ expectations of 81 cents.
Foot Locker shares were down more than 25 percent before markets opened on Friday and remained down throughout the morning.
The sales dip came amid foreign exchange rate fluctuations and a general “tough macroeconomic backdrop,” CEO Mary Dillon said in a release. As a result of the miss, Foot Locker reduced its full-year guidance as it implements markdowns and promotions to clear through inventory and drive demand.
“The recent softness has resulted in us taking a more aggressive promotional stance to drive demand and to effectively manage our inventory,” Dillon said in a call with investors. After a strong holiday season, consumers pulled back on discretionary spending for items like sneakers, which impacted Foot Locker’s first quarter results. This downward trend continued into May.
Foot Locker Inc. in March rolled out a multipronged strategy to help it increase market share and grow sales to $9.5 billion by 2026. Dubbed its “Lace Up” plan, this strategy hinges on Foot Locker diversifying its brand portfolio, relaunching the Foot Locker brand with new store formats focused on an off-mall presence, maximizing its loyalty program and investing in technology to enhance the customer journey.
“In the face of increasing macro headwinds, our sales trends have slowed significantly just in the past 1.5 months, which will have an impact on our near-term results,” Dillon said.
Comparable-store sales in Q1 were also down 9.1 percent, due to lower income tax refunds in the U.S. and the repositioning and vendor changes at Champs Sports. Foot Locker said last quarter it would close 400 underperforming stores, including close to 125 underperforming Champs locations. These stores are mostly older and in non-priority markets. In Q1, Foot Locker opened 13 new stores and closed 35.
“While early days since we launched our new strategy, we’re building momentum and gaining traction across all of our key strategic initiatives and remain excited and committed to reaching our goals and returning to long-term sustainable growth,” Dillon said.
Foot Locker on Friday also announced the appointment of Mike Baughn to the role of EVP and CFO, effective June 12. He joins the athletic retailer from Kohl’s, where he served as EVP of finance and treasurer.
Given the slow start to the year, Foot Locker now expects sales for fiscal year 2023 to be down between 6.5 percent and 8 percent, compared with a previously outlined guidance of down 3.5 percent to 5.5 percent. Non-GAAP EPS is expected to be between $2 and $2.25, compared with a prior expectation of between $3.35 and $3.65.