Q2 2024 Earnings Report for Foot Locker (FL)

Is this the beginning of Foot Locker’s comeback story?

The sneaker company has seen a turnaround in its fortunes as its efforts to revamp stores and enhance the customer experience have started to pay off. Foot Locker reported a 2.6% growth in same-store sales during its fiscal second quarter, surpassing analysts’ expectations of a 0.7% uptick. Additionally, the company’s gross margin expanded for the first time in over two years.

CEO Mary Dillon attributed the positive results to the success of the company’s turnaround strategy, known as “The Lace Up Plan.” She highlighted the strengthening top-line trends, including a strong start to Back-to-School sales, and the stabilization of the Champs Sports banner.

Foot Locker’s performance in the second quarter exceeded Wall Street’s expectations:

• Loss per share: 5 cents adjusted vs. 7 cents expected
• Revenue: $1.90 billion vs. $1.89 billion expected

In the quarter ending Aug. 3, Foot Locker reported a net loss of $12 million, or 13 cents per share, compared to a loss of $5 million, or 5 cents per share, a year earlier. Excluding one-time items, the company posted a loss of 5 cents per share. Sales increased to $1.90 billion, up approximately 2% from the previous year.

Looking ahead, Foot Locker maintained its guidance, expecting sales to range from a 1% decline to 1% growth compared to the prior year. The company also reaffirmed its adjusted earnings per share guidance, projecting earnings between $1.50 and $1.70.

Under Mary Dillon’s leadership, Foot Locker has undergone a transformation to stay relevant in a changing retail landscape. Dillon focused on repairing relationships with key brand partners like Nike and improving the store fleet, where the majority of sales are generated.

This year, Foot Locker plans to invest $275 million in store upgrades through refreshes and remodels, a move that has already shown positive results. The company also announced store closures and operational changes in certain regions to streamline costs.

Foot Locker will be relocating its global headquarters from New York City to St. Petersburg, Florida by late 2025 to enhance collaboration among teams and reduce costs. The company’s Champs banner, which was previously underperforming, has shown signs of improvement with a decrease in comparable sales decline.

As Foot Locker continues to enhance its stores, products, and customer experience, the company has successfully driven sales growth despite challenges like inflation and high interest rates. Investors have responded positively, with the company’s stock up over 5% this year compared to Nike’s decline of more than 21%.

Consumer demand may have slowed, but Foot Locker’s strategic initiatives are gaining momentum. Mary Dillon remains confident in the company’s future prospects, stating, “I remain confident that we are taking the right actions to position the Company for its next 50 years of profitable growth and create long-term shareholder value.”