Despite tapering traffic in some European stores, Foot Locker performed strongly in its second fiscal quarter, ended July 30, with net income increasing by 7 percent to $127 million on a 5.0 percent sales rise to $1,780 million. The retailer's comparable store sales moved up by 4.7 percent and its turnover increased by 5.4 percent excluding currency exchange rate changes.
Lauren Peters, executive vice president and chief financial officer at Foot Locker, told investors that weaker traffic was affecting the Runners Point and Sidestep banners in Germany, which suffered double-digit declines in sales. Some of this was attributed to the events that unfolded in Germany in the quarter. She added that traffic was down in Foot Locker stores in Germany, where its sales were weaker than in most other markets.
Dick Johnson, the company's chief executive, added that it was taking some time to adjust the formats adopted by Runners Point and Sidestep. Runners Point has taken out vulcanized shoes and skate shoes to focus more strongly on running, while Sidestep is striving to be more fashion-forward. Foot Locker's management spent some time in Germany over the summer to study the situation.
Taking the entire group, footwear sales were up with comparable sale gains in basketball, running and classics. Apparel sales were up for men's and children's products but sales of women's apparel were affected by a shift away from performance products. Sales of accessories were on the slide, chiefly due to a decline in socks.
Comparable store sales increased at mid-single digit rates for Foot Locker in Europe, Asia-Pacific and the U.S. market. Europe contributed strongly to a comparable sales increase of 7.1 percent in the group's direct-to-consumer business.
The retailer's gross margin firmed up by 0.4 percentage points to 33.0 percent for the quarter. There were fewer markdowns but the company had to spend more to draw customers to its online stores, because of the liquidations in the U.S. market related to the bankruptcies of other retailers.
For the first half of this year, the company's sales moved up by 4.3 percent to $3,767 million, with comparable store sales advancing by 3.7 percent. The entire group's sales were up by 4.6 percent in constant currencies for the six months. It ended the period with net income of $318 million, up from $303 million in the prior-year period.
The group opened 55 stores and closed 37 in the six months, to end up with 3,401 stores on July 30. Kids Foot Locker was the fastest-growing banner with 35 openings and just two closures. The group opened seven Foot Locker stores and closed four in Europe in the half-year, adding up to 606 European stores trading as Foot Locker. Another 21 of these stores were remodeled or relocated.
