Foot Locker, Inc. Analyzes Third Quarter Financial Results and Adjusts Future Projections

Foot Locker, Inc. Reports Third Quarter 2024 Results

Foot Locker, Inc. (NYSE: FL) has released its financial results for the third quarter that concluded on November 2, 2024. The company faced some challenges, including a decline in total sales but marked some growth in comparable sales during the period.

Mary Dillon, President and CEO of Foot Locker, addressed the company's performance, stating, "Our team's continued focus on execution drove positive comparable sales trends and significant gross margin expansion this quarter. However, our overall financial performance did not meet expectations."

In this quarter, Foot Locker reported total sales of $1.958 billion, which translates to a 1.4% decrease from last year’s $1.986 billion. This decline is partially attributed to the softening of consumer spending following the peak Back-to-School shopping season in August and a more competitive promotional environment than anticipated. Even so, comparable sales increased by 2.4%, indicating that specific segments, such as global Foot Locker and Kids Foot Locker, had a comparable sales growth of 2.8%.

Continued collaboration with industry giants like Nike and the Chicago Bulls franchise highlights Foot Locker's strategic focus on enhancing its presence in basketball and sneaker culture. Dillon mentioned that the “Home Court” experience is being expanded to enhance customer engagement further.

This quarter, the company also experienced a gross margin expansion of 230 basis points year-over-year, an encouraging sign despite the challenging retail landscape. The gross margin increase was primarily attributed to reduced markdown levels, although it fell short of the company's expectations due to the heightened promotional activities.

Foot Locker’s third-quarter net loss stood at $33 million, a stark contrast to the net income of $28 million in the same quarter last year. Moreover, loss per share was reported at $0.34 compared to earnings of $0.30 per share in 2023. On a non-GAAP basis, however, Foot Locker reported earnings of $0.33 per share, compared to the $0.30 from the previous year.

Future Outlook

In light of the observed market trends, Foot Locker updated its sales and earnings outlook for the remainder of 2024. The revised guidance reflects concerns regarding overall consumer demand and an anticipated continuing promotional environment. The full-year sales change prediction has been adjusted to between -1.5% to -1.0% with comparable sales expected to rise between 1.0% to 1.5%.

Dillon mentioned that while November trends fell below expectations, the Thanksgiving week saw a positive sales acceleration, particularly in-store. This indicates potential recovery as the holiday season approaches, balancing some concerns around consumer behavior.

Foot Locker, in its commitment to enhancing performance, continues focusing on its Reimagined stores, digital enhancements—including a newly launched mobile app—and a revitalized customer engagement approach through the FLX Rewards Program. The ultimate goal is to realize a return on investment through these strategic maneuvers, as Foot Locker aims toward achieving an EBIT margin of 8.5-9% by 2028.

Balance Sheet Summary

As of November 2, Foot Locker’s cash and equivalents stood at $211 million, while total inventory decreased by 6.3% year-over-year to $1.7 billion. The company also saw an operational restructuring during the quarter, with 10 new stores being opened and 24 closed. Currently, the company operates a total of 2,450 stores across 26 countries and regions, maintaining a footprint in North America, Europe, Asia, Australia, and New Zealand, alongside 214 licensed stores in the Middle East and Asia.

As Foot Locker strives to navigate the complexities of the retail landscape, its continued commitment to adaptation and engagement demonstrates a resilient approach to maintaining industry leadership and shareholder value creation.