Foot Locker shares suffered a major setback after the group reported a whopping Q4 net loss of $389 million, outlined weak FY24 guidance, and delayed its Ebit margin range goal of 8.5-9.0 percent by two years until 2026. The news sent FL shares tumbling more than 29 percent, or $10.07, to close at $24.24 yesterday.
The stock market development occurred despite some key improvements in the group’s business, including 5.2 percent comparable sales growth in its North American Foot Locker unit and overall Q4 results that exceeded expectations. Overall comparable sales declined by 0.7 percent in the period, impacted by repositioning its Champs Sports business, but ahead of a -7 to -9 percent decline that was forecasted.
But the group’s tepid outlook for FY24, calling for comparable sales growth of 1-3 percent and earnings per share range ($1.50-$1.70) some 8.1 to 19 percent below expectations, also apparently contributed to Wall Street’s pushback on Foot Locker’s stock price. Other key aspects of the retailer’s annual guidance include a 4 percent reduction in overall store count, 1 percent less total square footage, and a gross margin rate range of 29.8-30.0 percent on lower merchandise markdowns.
Final period operating income tumbled by 44 percent to $33 million from $59 million on total revenue growth of 2.0 percent to $2,384 million from $2,334 million. An Ebit loss of $524 million against a profit of $48 million included a $478 million non-cash charge related to minority investments and $75 million for company pension plan obligations. Gross margin contracted by 350 basis points to 26.6 percent in Q4, negatively impacted by higher markdowns. Footwear comps were up by low single digits, an improvement from a negative high single-digit drop in Q3, but apparel comps fell by low double digits, and accessory comps were essentially flat.
In Europe, Foot Locker banner comps rose by a modest 0.3 percent in Q4 despite a region that was both challenged and promotionally driven in many markets. Looking ahead, the group is focused on improving in-store experiences for customers through refreshed presentations and edited assortments this spring. Foot Locker banner comps increased by 0.6 percent in Asia-Pacific with a promotional Australian marketplace.
Under President and CEO Mary Dillon, the group continues to make numerous changes to its business for this year and beyond. These include pushing e-commerce penetration to approximately 25 percent of business by 2026; launching a “store of the future” concept with four new doors this year; returning to growth with Nike spearheaded by basketball but also increasing its overall reliance on other key brands (40% in Q4 versus 37% in the year-ago period); and debuting a new Foot Locker mobile app later this year. The company says it has planned for growth across all partner segments in 2024 and beyond, including for key brands such as Adidas, New Balance, On, Hoka, Asics and Ugg.
The group is maintaining the 2026 operational targets for its Lace Up program, designed to simplify its overall business but also make key investments. Key areas include 40+ percent brand penetration beyond Nike, pushing banner product exclusives to 20 percent of the overall mix and making new retail concepts approximately 20 percent of global square footage.
