Under its new president and CEO, Mary Dillon, Foot Locker outlined its financial objectives for FY24 to FY26 before investors in New York. Simultaneously, the group released Q4 and FY22 results and its outlook for the current fiscal year.
Operating income declined by 51 percent to $59 million from $121 million for the three months ended Jan. 28 as year-over-year gross margin slipped by 290 basis points to 30.1 percent from 33.0 percent due to higher markdowns caused by increased promotional activity across the industry. Q4 Ebit was down 67 percent to $48 million from $147 million as net income fell by 82 percent to $19 million from $103 million. Revenues were flat at $2,337 million versus $2,344 million.
In the EMEA, Foot Locker’s comparable store sales rose 12.7 percent as the banner’s revenues increased 6.8 percent to $455 million. Overall regional revenues, including a $25 million sales contribution and 40.0 percent comparable store sales gain for Sidestep, lifted 7.9 percent higher to $480 million versus $445 million in Q4/21. Meanwhile, North American comparable store sales from four banners inched 1.2 percent higher as a 13.2 percent increase for Foot Locker and a 10.6 percent gain for WSS in January was offset by a 10.4 percent same-store sales drop at Champs Sports. Total Q4 North American sales declined by 2.1 percent to $1,681 million from $1,726 million. In Asia Pacific, comparable store sales rose 5.7 percent as constant-currency sales increased by nearly 26 percent to $173 million.
Part of Foot Locker’s transformation plan under Dillon, which is forecast to escalate annual sales growth to 5 to 6 percent between FY24 and FY26, is to focus on core banners and regions. Considering that focus under the so-called “Lace up” strategy, the group has decided to close its stores and e-commerce operations in Hong Kong and Macau, continue to operate stores in South Korea, convert owned and operated doors in Singapore and Malaysia to a license model, and move forward with a growth strategy in Asia through licensed partners. MAP Active, a leading lifestyle retailer in Indonesia that already partners with Foot Locker in Indonesia and the Philippines, will assume store and e-commerce operations in Singapore and Malaysia with the intention of growing in those markets and others in the region over time.
For FY22, the group saw annual operating income tumble by 33 percent to $581 million as Ebit fell by 58 percent to $524 million. Net income was down nearly 62 percent to $342 million from $892 million on a 2.3 percent drop in total sales to $8,759 million from $8,968 million. In the EMEA, annual revenues rose by 4.9 percent to $1,722 million as comparable store sales increased by 14.5 percent. Foot Locker sales rose 4.0 percent to $1,628 million and were 24 percent higher at Sidestep with $94 million in revenues. Annual sales in the home North American market declined by 6.8 percent to $6,423 million as comparable store sales fell by 7.2 percent for the year. Champs Sports was the worst-performing banner, with a 13.1 percent drop in comparable store sales and a 13.3 percent decline in overall revenues to $1,681 million. Foot Locker sales across the region were essentially flat at $3,304 million versus $3,295 million. Asia-Pacific annual revenues increased by 43 percent to $602 million from $422 million, with the sales within the atmos format exploding by 284 percent to $188 million from $49 million.
Foot Locker, which operated 2,714 doors across 29 countries at FY22 end, is currently forecasting a 3.5 to 5.5 percent overall sales decline in FY23 as total square footage shrinks by approximately 4 percent and comparable store sales contract by 3.5 percent to 5.5 percent. The gross margin range will be between 30.8 percent and 31.0 percent. Looking ahead, the group will aim to create more distinction among its banners and transform its real estate footprint by opening new formats, shifting more doors to off-mall locations, and closing underperforming stores. According to company executives on a conference call with analysts, this includes closing up to 400 stores by 2026, including 200 locations in C and D malls and 200 unprofitable stores in A and B malls. Comparable store sales growth for the FY24 to FY26 period is pegged at 3 to 4 percent as the adjusted Ebit margin rate increases to 8.5 to 9 percent by FY26.
