Foot Locker’s sales rose 2.6% in Q4, modest growth forecast for FY25

The global retailer appears intent on improving the parts of its business it can control – including expenses and further strategic investments in stores and growing digital business – while it must continue to cope with an uncertain consumer and promotional environment in key global markets.

In Q4, Foot Locker’s gross margin improved by 300 basis points year-over-year, driven by stronger merchandise margins, and higher sales comps across its various banners as non-GAAP for the period exceeded revised estimates. Annual cash flow generation hit $105 million in 2024. Comparable sales rose by 2.6 percent as Foot Locker/Kids Foot Locker reported a 3.6 percent improvement and Champs Sports had a comp rise of 1.8 percent. In-store period sales declined by 5.8 percent to $2.24 billion, but only by 4.6 percent when excluding currency impact. Operating income from continuing operations was $55 million compared to a loss of $389 million in the year-ago period. Net income was $49 million.

Globally, sales declined in all regions on a constant-currency basis, led by a 14.1 percent decline in Asia-Pacific to $127 million. In EMEA where comp sales grew by 1.9 percent, total Q4 revenues dipped by 6.1 percent to $451 million. After a choppy and competitive Q4 in Europe where there were promotions for both footwear and apparel, Foot Locker sees FY25 as a transition year for the marketplace as ratchets up developments with key brand partners that will enable a move toward a pull market with more full-price selling. Revenues in the home North American market slipped 3.4 percent to $1,665 million with Foot Locker accounting for $945 million of the total.

FY25 Outlook

The group, which intends to further improve the in-store experience for its customers this year, will do another 300 store refreshes (following 400 in 2024) and 80 additional “Reimagined” doors as it tightens its overall store fleet with about 110 closures and 20 openings. Digital penetration is forecast to reach 25 percent of all revenues by 2026 after hitting 21.8 percent in Q4.

Other components of Foot Locker’s outlook include comp sales improvement of 1.0 to 2.5 percent, a 4 percent reduction in total doors, a 2 percent drop in square footage, and a gross margin range o 29.3 to 29.7 percent. Non-GAAP EPS guidance is currently $1.35 to $1.65 a share, equal to about 10 percent growth year-over-year. Senior executives told analysts that the company is continuing to take steps to position its business for long-term growth, including a fortification of its business relationship with Nike.

Additionally, however, “… results with brands such as Adidas, New Balance, On, Hoka, Asics, Saucony, Crocs and Timberland continue to reinforce our proposition as a multi-brand retailer,” President and CEO Mary Dillon said.

A closer look at FY24 results

Operating income declined by 28 percent to $103 million from $142 million on a 2.2 percent contraction in total revenues to $7,988 million from $8,168 million. Net income was $12 million against a year-ago loss of $330 million.

EMEA annual sales inched up by 0.7 percent to $1,735 million as comparable sales rose by 4.4 percent. Asia-Pacific sales declined by 17.7 percent to $465 million as the region’s comps fell by 6.7 percent. North American FY24 revenues slid by 1.6 percent to $5,771 million despite 1.3 percent comparable sales growth.

The company ended the fiscal year with 2,523 total doors, including 637 Foot Lockers in Europe compared to 608 in the prior year. Some 97 of the EMEA stores were relocated or remodeled last year. The region’s total selling square footage increased by 3.1 percent to 1.208 million square feet.