Foot Locker, part of the New York City corporate landscape for more than 60 years, will largely depart the Big Apple in 2025 as it establishes new headquarters in St. Petersburg, Florida, and continues to reshape its business under CEO Mary Dillon. She is the group’s first female president, which began 112 years ago as an iconic five-and-dime store operator Woolworths Corp. Foot Locker does intend to retain a limited presence in New York and open a global technology services hub in Dallas, Texas, next month. Meanwhile, the retailer’s shift to off-mall locations and its new Foot Locker Reimagined format are moving forward. The Reimagined format is projected to represent 20 percent of global square footage in 2026, up from 12 percent in 2023, and off-mall doors are forecast to account for half of the retail fleet.
Also on deck for the group next year is a restructuring of European and Asia-Pacific operations that will involve a complete exit from stores and e-commerce in the Nordic countries of Denmark, Norway and Sweden, a withdrawal of stores and e-commerce operations in South Korea and a transfer of retail and e-commerce ops in Greece and stores in Romania to the retail group and licensing operator Fourlis Group. The actions, projected for completion in mid-2024, will result in the closure or transfer of 30 stores of its 140 stores in Asia Pacific and 629 stores in Europe. For its part, Fourlis intends to open 100 additional Foot Locker branded stores across Southeast Europe over time.
Dillon said the changes, which will also include expansion into India later this year with licensed partners Metro Brands and Nykaa Fashion, are part of the group’s overall strategy to “expand the global reach of the Foot Locker brand in higher growth markets with reduced levels of investment and risk.”
But Wall Street was reportedly unhappy with the announced shifts in Foot Locker’s business in both Europe and Asia-Pacific, sending the shares down by more than 10 percent yesterday to close at $29.45 on the NYSE. And a day earlier, on Aug. 28, larger Foot Locker shareholder Vesa Equity Investment S.A.R.L. reaped more than $17.9 million by selling 5 percent of its stake in the group.
A deeper dive into Q2 results
Foot Locker returned to positive sales and comparable sales growth in Q2 ended Aug. 3. The comp improvement was paced by the global Foot Locker and Kids Foot Locker banners, which collectively comped up 5.2 percent in the period. Year-over-year gross margins grew by 50 basis points, fueled by fewer markdowns and occupancy leverage.
Total sales rose by 1.9 percent to $1,900 million from $1,864 million as comparable sales rose by 2.6 percent. However, the Q2 operating loss was $9 million versus the income of $1 million, and the net loss came in at $12 million against a loss of $5 million in the year-ago period.
| Foot Locker - Income | |||
|---|---|---|---|
| 2024 | 2023 | Change | |
| Q2 ($ million) | |||
| Sales | 1,896 | 1,861 | 1.9% |
| Licensing revenue | 4 | 3 | 33.3% |
| Total revenue | 1,900 | 1,864 | 1.9% |
| Cost of sales | 1,373 | 1,357 | 1.2% |
| SG&A expenses | 476 | 442 | 7.7% |
| Depreciation and amortization | 51 | 50 | 2.0% |
| Impairment and other | 9 | 14 | -35.7% |
| Income from operations | -9 | 1 | – |
| Interest expense, net | -3 | -4 | 25.0% |
| Other income, net | -2 | – | – |
| Pre-tax | -14 | -3 | -366.7% |
| Tax | -2 | 2 | – |
| Net income | -12 | -5 | -140.0% |
| Diluted EPS | -0.13 | -0.05 | -160.0% |
| H1 ($ million) | |||
| Sales | 3,770 | 3,788 | -0.5% |
| Licensing revenue | 9 | 7 | 28.6% |
| Total revenue | 3,779 | 3,795 | -0.4% |
| Cost of sales | 2,708 | 2,706 | 0.1% |
| SG&A expenses | 937 | 873 | 7.3% |
| Depreciation and amortization | 102 | 101 | 1.0% |
| Impairment and other | 23 | 53 | -56.6% |
| Income from operations | 9 | 62 | -85.5% |
| Interest expense, net | -4 | -5 | -20.0% |
| Other income, net | -6 | -3 | 100.0% |
| Pre-tax | -1 | 54 | – |
| Tax | 3 | 23 | -87.0% |
| Net income | -4 | 31 | – |
| Diluted EPS | -0.04 | 0.33 | – |
| Source: Foot Locker | |||
Additionally, the company realized some stabilization in its Champs Sports segment, whose 392 doors launched a new brand platform in Sport for Life, and relaunched its FLX Rewards program for US customers in mid-June that resulting in a non-recurring $11 million charge in Q2.
Specifics on the EMEA
The region’s Q2 sales rose 8.2 percent in constant currency to $445 million and 7.6 percent on a comparable basis and were up by 2.6 percent for the six months at $839 million.
| Foot Locker - Revenues | ||||
|---|---|---|---|---|
| 2024 | 2023 | Change | ||
| Q2 ($ million) | ||||
| North America | ||||
| Foot Locker | 754 | 704 | 7.1% | |
| Champs Sports | 268 | 293 | -8.5% | |
| Kids Foot Locker | 154 | 146 | 5.5% | |
| WSS | 155 | 145 | 6.9% | |
| Other | 1 | – | – | |
| Total | 1,332 | 1,288 | 3.4% | |
| EMEA | ||||
| Foot Locker | 445 | 416 | 7.0% | |
| Sidestep | – | 12 | – | |
| Total | 445 | 428 | 4.0% | |
| Asia-Pacific | ||||
| Foot Locker | 87 | 102 | -14.7% | |
| Atmos | 32 | 43 | -25.6% | |
| Total | 119 | 145 | -17.9% | |
| Total | 1,896 | 1,861 | 1.9% | |
| H1 ($ million) | ||||
| North America | ||||
| Foot Locker | 1,513 | 1,448 | 4.5% | |
| Champs Sports | 535 | 621 | -13.8% | |
| Kids Foot Locker | 337 | 313 | 7.7% | |
| WSS | 315 | 295 | 6.8% | |
| Other | 1 | – | – | |
| Total | 2,701 | 2,677 | 0.9% | |
| EMEA | ||||
| Foot Locker | 839 | 795 | 5.5% | |
| Sidestep | – | 26 | – | |
| Total | 839 | 821 | 2.2% | |
| Asia-Pacific | ||||
| Foot Locker | 159 | 200 | -20.5% | |
| Atmos | 71 | 90 | -21.1% | |
| Total | 230 | 290 | -20.7% | |
| Total | 3,770 | 3,788 | -0.5% | |
| Source: Foot Locker | ||||
Chief Commercial Officer Frank Bracken said the EMEA for Foot Locker “remain dynamic and somewhat promotion, especially within apparel.”
The retailer, which is opening its second Reimagined store later this year after debuting one during the Paris Games, admits it has work to do to drive fuller price selling across Europe.
Reaffirmed FY24 guidance
Foot Locker continues to see full-year non-GAAP EPS guidance of $1.50 to 1.70 as FY comps grow from 1 to 3 percent. Annual revenues are still forecast to be in a range of -1 to +1 percent. Gross margin for the FY is now seen as expanded by 180 to 200 basis points to a range of 29.5 to 29.7 percent versus a prior outlook of 29.8 to 30 percent due to promotional pressure within the banner
The group expects to open about 30 new stores in FY24 and shutter approximately 140 locations, ending the 12 months with 2 percent less square footage year-over-year and 4 percent fewer stores.
