The Story Of Sharply Different Retail Fates Continues

A story of sharply divergent quarterly results that began with Target Corporation TGT and The Home Depot Inc HD struggling on one side, and Walmart Inc WMT and The TJX Companies Inc TJX thriving on the other, continued last week with Foot Locker Inc FL and Urban Outfitters URBN. Last Wednesday, Foot Locker shares plunged 28% as the sneaker retailer slashed its outlook for the second time this year and reported another quarter of falling sales. Even Nike NKE shares sympathized as they dropped 2.7% on the day although Nike is pursuing its DTC strategy shift, due to which Foot Locker lost one of its biggest revenue drivers. Also last week, Urban Outfitters told an entirely different story with its second quarter earnings that improved YoY. Moreover, the outlooks these two retailers provided are just as different, further showing the sharp polarities of retail fates that occured during the second quarter of 2023.

A Dismal Quarter For Foot Locker 

For the quarter that ended on July 29th, the sneaker giant’s sales contracted 9.9% YoY to $1.86 billion, swinging from 2022 comparable quarter's profit of $94 million or 99 cents a share to a loss of $5 million, or 5 cents per share. Adjusted earnings amounted to 4 cents per share. Inventory levels remain high as they rose 11%YoY to $1.8 billion but they have improved from the previous, first quarter.

Upon the weak results, Foot Locker adjusted its 2023 outlook, expecting full year sales to drop between 8% and 9% while it previously guided for a drop between 6.5% and 8%. Same-store sales guidance has also been lowered from the previous range being a 7.5% to 9% drop while it now sees a drop of 9% to 10% drop. Adjusted earnings have been guided between $1.30 and $1.50 per share, down from the previous guidance of $2.00 to $2.25 a share.  

An Entirely Different Quarter Story Told By Urban Outfitters

For the second quarter that ended on July 31st, Urban Outfitters made a net income of $104.1 million dollars and earnings per diluted share of 1.10 dollars as net sales expanded 7.5% to a record $1.27 billion. Total retail segment experienced a 5.9% rise in net sales, while comparable retail segment net sales rose 4.9 percent on the back of mid-single-digit positive growth in both physical stores and digital channels.

Although its name brand experienced a revenue drop of 14.1 percent, net sales rose 26.9 percent at the Free People Group and 10.6% at the Anthropologie Group.

As for wholesale, net sales dropped 5.2 percent as Free People Group reported a sales drop of 6.5 percent owed to lower sales to department stores, but Urban Outfitters sales rose by $0.5 million on the wholesale front. 

Sharply Different Quarters- And Very Different Outlooks

The sneaker giant’s profits got pinched by markdowns and it slashed its guidance on account of consumer softness. Shrink, a retail industry term for merchandise lost by theft, damage or other means, is also bringing the profits of retailers across the industry down, although even Foot Locker didn’t disclose the exact amount of this damage. But, Urban Outfitters, the lifestyle-specialty retailer managed to be on the other end of the retail fate, although not thanks to its namesake brand. Urban Outfitters found a way to appeal to price-sensitive consumers as it thrived with a healthier supply chain and possibly even the results of its AI efforts it announced at the beginning of the year as the lifestyle retailer aims to use this technology to optimize its decision-making and improve its adaptability and response to changing consumer behavior and other external trends. Urban Outfitters CEO Richard A. Hayne also added that the positive second quarter sales momentum has continued in the undergoing, third, quarter. 

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