Dive Brief:
- As Foot Locker begins to execute on a turnaround plan, the retailer’s sales tumbled 9.9% in the second quarter to $1.9 billion, while comps declined 9.4%.
- Foot Locker also swung to a $5 million loss in Q2, down from $94 million in net income last year, according to a company press release. Gross margin fell by 460 basis points in the quarter, due in part to increased markdowns and higher shrink.
- On the back of these earnings results, Foot Locker lowered its annual guidance for the second time this year. The retailer expects sales to be down between 8% and 9% this year, worse than its previous guidance of sales falling between 6.5% and 8%.
Dive Insight:
Foot Locker is suffering from a tough consumer backdrop as it tries to execute a turnaround plan from new CEO Mary Dillon. The executive said on a call with analysts that this year has been “tougher than expected.” Foot Locker has had a weaker start to back-to-school than expected and its lower-income consumer was more cautious than anticipated.
The roughly 10% drop in net sales this quarter comes after sales tumbled 11% in May. The retailer lowered its 2023 guidance then too and said it was embracing higher markdowns to clear inventory.
Dillon’s plans for Foot Locker are wide-ranging and include everything from a website and app revamp to merchandise diversification efforts, which have included adding new brands like Heydude and expanding deals with existing partners like Adidas. Dillon said it’s also building up its relationship with New Balance, and that young brands like On and Hoka are bringing in more female customers and more affluent shoppers.
Changes to its real estate are also underway. The retailer in March announced it would shutter 400 mall-based stores by 2026, while expanding other concepts. Dillon said Wednesday that it closed 108 of its underperforming stores in the quarter and that new store formats now represent 12% of its global square footage. Off-mall penetration has also grown and WSS opened 12 new stores in the quarter. The Sidestep banner, which Foot Locker said it would wind down in January, is officially shuttered, Dillon said.
Chief Commercial Officer Frank Bracken announced several new hires on the call, including a vice president of e-commerce, a vice president of digital product management, a vice president and global creative director, and a vice president of loyalty and CRM.
Dillon said she now has her full senior leadership team in place, including a new chief technology officer, chief customer officer, chief financial officer and chief supply chain officer, who have been named since the start of the year. The executive also named a new chief operations officer and chief human resources officer in November, and brought on a Nike and Lululemon veteran to lead its newer WSS banner.
