Citing better-than-expected third-quarter results, plans to further realign its brand portfolio and a strategy to move to 300 non-mall locations by 2024, Foot Locker today raised its full-year outlook. The retailer, which has decided to abandon a fourth quarter entry into Japan and exit joint ventures in Benelux and Eastern Europe at FY end, is now forecasting annual sales to be down 4 to 5 percent, versus earlier guidance of a 6 to 7 percent decline. Despite ongoing promotional pressure, the group is now forecasting an annual gross margin of 31.7 to 31.8 percent and comparable store sales to be off by 4 to 5 percent instead of 8 to 9 percent.
The announcement of a 19.9 percent drop in third-quarter operating income to $157 million from $196 million marked the first public earnings call for Foot Locker CEO and president Mary Dillon. She told analysts that the retailer experienced mid-single-digit growth in non-Nike sales in the period ended Oct. 29. This included 70 percent growth for New Balance and a nearly 50 percent increase for the UGG brand. The former Ulta Beauty and McDonald’s senior executive also called out current and upcoming contributions from both Adidas and Puma (up by high single digits), adding that Nike’s percentage of Foot Locker’s overall sales will be higher this year than earlier projected. Third-quarter sales were off 0.7 percent to $2,173 million from $2,189 million, as net profit came in 39 percent lower at $96 million versus $158 million in the year-ago period.
European sales inched 0.8 percent higher in the third quarter, paced by growth in France, Italy and Spain as the retailer grew its omnichannel presence across the continent to 400 locations. Asia-Pacific’s comparable store sales increased 36.5 percent on an improving inventory situation. With its plans to open Foot Locker banners in Japan abandoned, the group will rely on its Atmos chain there going forward. Atmos’ comps were up double-digits in Q3, contributing $40 million in sales. Elsewhere, Champs, which will become the first U.S. brick-and-mortar store to carry the Gymshark apparel brand, suffered a low double-digit comparable sales decline, but the figure was higher than in Q3 2019. Foot Locker sales were up high single digits and fueled by basketball. Kids Foot Locker revenues rose mid-single digits. The company’s WSS banner, which focuses on the Hispanic market in the U.S. and will shortly be opening its first store in Florida, contributed $162 million in third-quarter sales. Foot Locker believes WSS will be its next banner to achieve $1 billion in annual sales, with this year’s projected sales expected to reach $600 million.
