Performing better than expected, Foot Locker generated net earnings of $430 million for the second quarter ended July 31, up from net income of $45 million in the same period of 2020 and $60 million in the corresponding quarter of 2019. The progress was partly due to extraordinary gains of $303 million, including a $290 million revaluation of the company’s minority investment in the GOAT platform.
Even before this and other extraordinary items, the operating profit rose to $264 million from $69 million a year earlier. The gross margin expanded by 9.2 percentage points to 35.1 percent, thanks to strong demand for fresh inventory and less promotional activity. The gross margin was also five percentage points above the level of 2019. Women’s and kids’ shoes as well as apparel and accessories were in particularly strong demand. Inventories were 10.4 percent lower than a year ago at the end of the quarter.
Total revenues increased by 9.5 percent to $2,275 million as compared to a year ago in the latest 13-week period, exceeding a Wall Street consensus of $2.11 billion, and they were up by 6.9 percent on a comparable store basis. In constant currencies, sales were 7.3 percent higher than in the second quarter of 2020 and 28.2 percent higher than in the second quarter of 2019. At 20 percent of total sales, the penetration of e-commerce was lower than last year but up strongly from 14 percent in the same period of 2019.
“Our strong performance this quarter reflects the health of our category, the deep engagement we have with our customers, and the strategic nature of our relationships with our vendor partners,” said pointedly Richard Johnson, chairman, president and CEO of the group, which has been benefitting from the more selective wholesale distribution policies of bid brands such as Nike, Adidas and Under Armour.
At Foot Locker Europe, comparable store sales were up in the low 20s, as pent-up demand drove traffic once its stores were reopened, but Sidestep suffered a low-single-digit decline. The group’s stores in EMEA were open for about 87 percent of possible operating days, up from 70 percent last year.
Foot Locker’s growth softened as compared to the first quarter. In fact, for the first half of the financial year, the company booked sales increases of 33.4 percent in constant currencies and on a comparable store basis, leading it to post net earnings of $632 million versus a net loss of $65 million in the same period of last year.
During the latest quarter, the group opened 16 new stores, remodeled or relocated 23 others and closed 57 units, ending up with a global fleet of 2,911 directly operated stores and 134 franchises in the Middle East. The number of stores at Foot Locker Europe was down to 618 from 624 on Jan 30. Also in Europe, the Sidestep chain grew to 78 doors from 76.
Foot Locker is moving into the Indonesian market through a partnership with MAP Active, starting with e-commerce and two Foot Locker stores.
