Foot Locker Inc. plummeted after cutting its full-year forecast and reporting results that fell short of Wall Street’s expectations amid concern over weakening spending patterns. The retailer also suspended its dividend.
(Bloomberg) — Foot Locker Inc. plummeted after cutting its full-year forecast and reporting results that fell short of Wall Street’s expectations amid concern over weakening spending patterns. The retailer also suspended its dividend.
The footwear chain now expects earnings of $1.30 to $1.50 a share this year excluding some items, down from a previous range of $2 to $2.25. After sales softened in July, the company also now sees revenue declines worsening to as much as 9%.
The company warned in May that revenue had slowed and Americans are reining in their discretionary spending. That came after the retailer had been struggling, which pushed it to use aggressive promotions to increase demand and keep excess goods from piling up too high. Inventories rose 11% to $1.8 billion in the quarter.
“Our customer remains price-sensitive and discerning,” especially lower to middle income shoppers, Foot Locker Chief Executive Officer Mary Dillon said in an interview on Wednesday. “We expect that pressure to continue, and it’ll require us to get ahead of that.”
The results add to the woes of athletic goods sector and raise doubts about the strength of consumer spending in the US. Earlier this week, Dick’s Sporting Goods Inc. cut its annual profit forecast, but did maintain its comparable sales guidance of flat to a gain of 2%.
Foot Locker mentioned that inventory shrink, an industry term that refers to factors such as shoplifting and employee theft, has increased over time, but it wasn’t one of the top impacts on margins. Dick’s said on Tuesday that theft played a “large part” in its earnings falling short.
Foot Locker fell 32% at 9:32 a.m. in New York on Wednesday. The stock had been down 39% this year through Tuesday’s close. Nike Inc.’s stock also fell after Foot Locker reported its results. Last year, the retailer bought 65% of its athletic merchandise from Nike.
Read More: Foot Locker’s New CEO Plots Route to $9.5 Billion in Sales
Comparable store sales at Foot Locker declined 9.4% for the quarter ended July 29, a bigger drop than Wall Street anticipated.
Dillon, who joined the company last year, has been working to turn around the ailing shoe chain. In March, she unveiled a plan that included opening new store formats away from struggling shopping malls and pushing loyalty programs. Foot Locker hopes to break $9.5 billion in sales by 2026.
(Updates with shares in seventh paragraph.)
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