Dive Brief:

• Sportswear retailer Foot Locker on Friday reported first quarter net income of $191 million, compared with net income of $184 million a year earlier. Earnings were $1.39 per share on revenue of $1.98 billion, a 7.8% increase from the $1.29 per share in Q1 2015, but missed estimates from analysts expecting $1.39 per share on revenue of $2 billion. 

• Excluding the effect of foreign currency fluctuations, Foot Locker's total sales for the first quarter increased 3.9%. Same-store sales increased 2.9%, missing FactSet estimates of 4.5%, while total first quarter sales increased 3.7% to $1.98 million this year, compared with sales of $1.91 million in the year-ago period. Executives blamed disappointing sales totals in part on declines in basketball footwear, noting declining demand for Nike’s LeBron James and Kevin Durant signature models.

• Foot Locker said that at the end of the quarter its merchandise inventories were $1.26 million, 2.1% higher than at the end of the first quarter last year. The company opened 32 new stores, remodeled or relocated 55 stores, and closed 19 stores; as the end of the quarter, it is operating 3,396 stores in 23 countries in North America, Europe, Australia, and New Zealand. In addition, 49 franchised Foot Locker stores now operate in the Middle East and South Korea, as well as 15 franchised Runners Point stores in Germany.

Dive Insight:

Foot Locker has been working to create the right mix of merchandise and store concepts, and its basic approach has worked well enough, at least at its flagship stores, especially when it comes to sales of Nike products.

But Foot Locker has seen dramatic changes in how consumers use sports apparel and gear. Some of the most profound have come from women, who are not only participating in fitness and athletic pursuits in greater-than-ever numbers, but are also wearing well-designed fitness apparel in their casual work and leisure moments. With so many sports and apparel retailers getting in the athleisure game, it won’t do for Foot Locker to keep its Lady Foot Locker stores an afterthought.

Foot Locker Chairman/CEO Richard Johnson said in a statement last week that the retailer is feeling most especially the uphill climb of “rapidly-shifting product category preferences by our customers,” noting softening demand in its basketball shoes and greater preferences for more all-around athletic shoe gear. Johnson nevertheless emphasized that the company managed “to achieve our 25th consecutive quarter of meaningful sales and profit increases over the prior year.”

At a time when Sports Authority is in the midst of a bankruptcy that will see its stores shuttered or sold to rivals, Johnson acknowledged that Foot Locker will continue to face a challenging environment of shifting consumer tastes and intensified competition from online sales, plus increased movement into the space by general merchandise retailers like Wal-Mart and Target.

“We produced the most profitable quarter in the company’s long history, an accomplishment of which everyone at Foot Locker, Inc. should be very proud,” Johnson said. “Never has it been more apparent how important is the work that we have done to build leadership positions across channels, geographies, banners and product categories.”