Foot Locker Q4 Beats Expectations as Retailer Unveils New Strategy Under CEO Mary Dillon
Foot Locker Inc. shares were down more than 5% when markets closed after the retailer revealed its Q4 financials and its long-term strategic plan.
In Q4, total sales decreased by by 0.3%, beating the company’s expectations from Q3 that had sales down between 8% and 10%. Net income decreased to $19 million. Non-GAAP net income decreased to $92 million. Non-GAAP EPS decreased to $0.97 per share, ahead of analysts’ expectations of $0.51. Comparable-store sales increased 4.2%.
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Foot Locker’s newly minted CEO Mary Dillon said the strong finish to the year was a result of “resilient holiday demand and a compelling assortment and inventory position from our brand partners.”
“We are entering 2023 with a focus on resetting the business – simplifying our operations and investing in our core banners and capabilities to position the company for growth in 2024 and beyond,’ said Dillon, who later unveiled long-term growth initiatives and financial targets at Foot Locker’s investor day presentation.
Foot Locker rolled out a strategy to grow business to more than $9.5 billion in annual revenue by 2026 by diversifying its brand portfolio, relaunching the Foot Locker brand with new store formats focused on an off-mall presence, maximizing its loyalty program and investing in technology to enhance the customer journey.
The Asia business is also getting an overhaul: Foot Locker said it would close all stores and e-commerce operations in Hong Kong and Macau and convert business to to a license model in Singapore and Malaysia. In Indonesia, leading lifestyle retailer MAP Active will take over Foot Locker operations in Singapore and Malaysia and grow the company’s presence in new markets as well.
The retailer also outlined its guidance for the full fiscal year of 2023, and expects sales to be down down between 3.5% and 5.5%. Comparable sales are expected to be down between 3.5% and 5.5%. Non-GAAP EPS is expected to be in the range of $3.35 and $3.65.
Foot Locker also said it has reignited a strong brand partnership with Nike, which will remain the retailer’s largest brand by sales. As the standout brand in the retailer’s portfolio, Nike will make up between 55% and 60% of Foot Locker’s total sales mix by 2026, Foot Locker chief merchandising officer Chris Santaella said. (Nike made up 70% of sales in 2021 and 75% of sales in 2020.)
Last year, Foot Locker said the amount of Nike product in its stores would be significantly less as the Swoosh accelerated its shift towards DTC sales. While this move initially caused the retailer to post a bleak outlook for 2022, Foot Locker still managed to churn out better-than-expected results for the third quarter, the first period in which the diminishment of Nike product was meant to be be felt in stores.
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