Foot Locker Inc. says its turnaround plan is right on track.
The company on Thursday reaffirmed its outlook for the full year of 2024 after it reported results for the first quarter that included better-than-expected earnings per share. Total sales in Q1 were $1.87 billion, down 2.8 percent over the prior year, short of the $1.88 billion expected by analysts surveyed by Yahoo Finance.
Foot Locker reported a net income of $8 million in the first quarter, compared with net income of $36 million in Q1 of last year. Non-GAAP earnings per share was 22 cents, compared to 70 cents per share in Q1 of last year. This was ahead of guidance provided by the company and ahead of analysts’ expectations of 12 cents.
Gross margin declined by 120 basis points, in line with the company’s expectations, and comparable sales in Q1 decreased by 1.8 percent.
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“We feel good about our progress,” Foot Locker president and chief executive officer Mary Dillon told FN in an interview. “We’re committed to furthering the Lace Up plan and we’re on track to deliver sustainable, profitable growth as we lay the foundation for our next 50 years of growth.”
Last quarter, Foot Locker updated its timelines for its strategic Lace-Up plan, revealed in March 2023, which includes a goal to grow Foot Locker’s business to more than $9.5 billion in annual revenue by 2026. The strategy hinges on diversifying its brand portfolio mix, 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. Foot Locker now expects these results to come to fruition two years later — in 2028.
Throughout Q1, Dillon said Foot Locker made notable improvements in line with these goals. In April, the chain revealed its new “store of the future” retail concept that will serve as a blueprint for future store renovations and expansions. (Foot Locker said it will open four more of these locations this year). And in the coming months, Foot Locker will launch its new and improved loyalty program as well as a new mobile app.
The retailer also continued its progress diversifying its brand mix outside of Nike in Q1. The percentage of non-Nike brand sales held steady at 40 percent in Q1, in line with the company’s goal to have more than 40 percent of its brand mix be outside Nike by 2026.
“Our diversified strategy for our customers is working,” Dillon said. “Our customers really want and love to have a wide variety of choices.”
Dillon said names like Adidas, New Balance, Hoka and On have continued to bolster the non-Nike business, though the Swoosh is still the retailer’s dominant brand. By the fourth quarter this year, Dillon said Foot Locker will see “increased allocations from Nike.” The executive also praised Nike’s innovation progress, an area that has recently been scrutinized by analysts.
“We were thrilled with the innovation that we saw across footwear and apparel in [Nike’s] Paris innovation event.” Dillon said, echoing similarly positive comments from Dick’s Sporting Goods — another Nike partner — from Wednesday. “[We’re] really seeing them increase the pace of their innovation with the lifestyle running category.”
Dillon also noted that Foot Locker saw sequential sales improvement throughout the March and April period as well as positive average unit retail prices (AUR) throughout the quarter, which she said “shows consumer willingness to pay for our assortment at full price.”
“We know our consumer has been exposed to prolonged inflation, higher interest rates and reduced savings, but this is an important discretionary category for our customers,” Dillon said. “And so they’re prioritizing it and spending with purpose.”
Foot Locker reaffirmed its outlook for fiscal year 2024 and expects sales to be between down 1 percent and up 1 percent. Comparable sales are expected to be up between 1 and 3 percent. Non-GAAP EPS is expected in the range of $1.50 to $1.70 and gross margin is expected to be between 29.8 percent and 30 percent, due to lower markdowns.
