Foot Locker Q1 Earnings Reflects Tough Macroeconomic Conditions and Consumer Spending Trends, Says Analyst

Telsey Advisory analyst Cristina Fernandez reiterated an Outperform rating on the shares of Foot Locker Inc FL with a $50 price target.

Foot Locker missed already-low expectations in 1Q23, with EPS down about 56% YoY to $0.70 versus the FactSet (FS) consensus of $0.76, said the analyst.

The disappointing print included both worse-than-expected comparable brand sales of (9.1%) and operating margin contraction of 510 basis points to 5.2%, reflecting headwinds from a reduced Nike product allocation, lower tax refund, and a tougher macroeconomic environment, noted the analyst.

While trends improved through the quarter thanks to the timing of product launches, with April comp down low single digit versus February and March each down low-double digit, the acceleration did not meet the company's expectations, the analyst opined.

Given the 1Q23 miss and now softer expectations for sales through the rest of the year, as well as more aggressive markdowns and higher shrink, the analyst said Foot Locker sharply lowered its 2023 guidance.

Foot Locker now expects EPS to be much lower at $2.00-$2.25 versus $3.35-$3.65 previously. Sales decline of (8.0%) - (6.5%) versus (5.5%) - (3.5%) previously.

Foot Locker also announced the appointment of Mike Baughn as CFO effective June 12, who most recently served as an executive vice president of Finance at Kohl's KSS.

Price Action: FL shares are trading lower by 27.4% at $30.14 on the last check Friday.

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