Why Is Foot Locker Stock Diving Today?

On Wednesday, specialty athletic retailer Foot Locker Inc FL reported fourth-quarter FY23 sales growth of 2% year-on-year to $2.38 billion, beating the analyst consensus estimate of $2.28 billion.

Comparable store sales decreased 0.7%. Adjusted EPS of $0.38 beat the analyst consensus of $0.32.

The gross margin contracted 350 basis points, primarily as a result of higher markdowns, partially offset by occupancy leverage.

Selling, general and administrative expenses grew 2.3% Y/Y to $533 million. The operating margin was 1.4%, and operating income for the quarter declined 44% to $33 million.

The company held $297 million in cash and equivalents as of February 3, 2024. Merchandise inventories were $1.5 billion, an 8.2% Y/Y decrease.

During the fourth quarter, the company opened 29 new stores, remodeled, or relocated 66 stores, and closed 113 stores. As of February 3, 2024, it operated 2,523 stores in 26 countries. 

Mike Baughn, Executive Vice President and Chief Financial Officer, said, “We maintain conviction in the longer-term earnings potential that our Lace Up plan will generate and reiterate the 8.5-9% EBIT margin target communicated at our March 2023 Investor Day.  Given our lower starting point exiting 2023, we expect a two-year delay in achieving that goal and now see reaching that target by 2028.”

Outlook: Foot Locker sees FY24 comparable sales growth of 1% to 3%. FL expects sales to be -1% to +1%, representing $8.072 billion-$8.236 billion (consensus $8.02 billion).

Foot Locker expects Adjusted FY24 EPS of $1.50 – $1.70, versus the consensus of $1.93.

Price Action: FL shares are trading lower by 12.5% at $30.01 premarket on the last check Wednesday.

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