The share price of Foot Locker fell by 8.8 percent at closing on Feb. 26 after the international U.S.-based sports retailer reported a drop of 2.7 percent in comparable sales for the fourth quarter ended Jan. 30, with a 12 percent drop in same-store sales offsetting a 44 percent increase in e-commerce.
Total revenues declined by 1.4 percent to $2,189 million, and they were off by 3.0 percent in local currencies. Net earnings fell by 7.9 percent to $123 million. Excluding impairments on underperforming stores and other items, the adjusted net profit declined to $163 million from $171 million.
E-commerce went up by triple-digit rates where stores were locked down, especially in Europe, and it came to represent 27.4 percent of the quarterly turnover, up from 18.7 percent a year earlier. Australia and New Zealand were the best performing countries. In the U.S., after a positive month of November, delays at U.S. ports prevented Foot Locker from taking full advantage of fiscal stimulus checks. About 10 percent of the company’s global store fleet is now closed.
Sales of footwear and apparel declined during the quarter, especially in the men’s segment. Curiously, running recorded a drop, while basketball went up, led by new entries under the Jordan, Puma and Reebok brands as well as iconic Nike styles.
Average selling prices improved, but unit sales went down at a high single-digit rate. The gross margin rose by 1.6 percentage points to 33.1 percent, thanks to Covid-related rebates in store rental fees and lower levels of promotions, but operating expenses went up, causing a decline in operating income to $161 million from $176 million in the year-ago quarter.
For the full financial year, revenues were off by 6.3 percent in terms of local currencies. On a reported basis, they dropped by 5.7 percent to $8,005 million. The gross margin fell by 2.8 percentage points to 28.9 percent. Operating expenses declined but went up as a percentage of sales, leading to a sharp drop in operating income to $303 million from $649 million. Net income contracted by 34 percent to $323 million, despite an increase of $186 million in extraordinary gains, mostly from the company’s stake in the GOAT Group.
While declining to provide any guidance, the management indicated that it is testing a new neighborhood store concept in the U.S. Northeast and in Europe that should allow Foot Locker to pay more attention to underserved communities – a market that JD Sports Fashion is now attacking with its recent takeover of 400 Shoe Palace and DTLR Villa stores in different parts of the U.S. Also, Nike, which remains Foot Locker’s biggest supplier by far, is testing a program of drop-shipping products directly to the chain’s customers.
Foot Locker is planning to add about 100 new stores this year, primarily in Asia, while closing some 150 others. It ended the year with 2,998 stores worldwide, plus 127 franchises in the Middle East, after closing 53 stores in the fourth quarter, opening 19 new ones and remodeling or relocating 39 others. The number of Foot Locker stores in Europe declined to 624 from 636 one year ago. The number of Sidestep stores went down from 77 to 76.