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Foot Locker sees sales dip in Q4 and warns of future drop in FY23 sales

Tom Shearsmith
20 March 2023

Sportswear and footwear retailer Foot Locker saw a drop in profits in the fourth quarter as its sales dipped slightly, but overall results were ahead of previous expectations.

Comparable-store sales grew by 4.2%, driven by increased traffic and improved access to high-quality inventory, resulting in broad-based strength across brands and regions.

Total sales decreased by 0.3% to $2.33 billion, compared with sales of $2.34 billion in the fourth quarter of 2021. According to the business, minus the effect of foreign exchange rate fluctuations, total sales for the fourth quarter increased by 3.6%.

Net income decreased to $19 million as compared with $103 million in the fourth quarter of fiscal 2021. Non-GAAP net income decreased to $92 million from $148 million in the fourth quarter of fiscal 2021.

Gross margin declined by 290 basis points compared with the prior-year period, driven mainly by higher markdowns on increased promotional activity across the industry.

At quarter-end, the company's cash and cash equivalents totalled $536 million, whilst debt on its balance sheet was $452 million.

During the fourth quarter, Foot Locker opened 21 new stores, remodelled or relocated 45 stores, and closed 101 stores. As of 28 January 2023, the company operated 2,714 stores in 29 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 159 franchised stores were operating in the Middle East and Asia.

Looking ahead at fiscal year 2023, Foot Locker now expects sales to be down by between 3.5% to 5.5% year-on-year. The company's new long-term financial targets for fiscal years 2024 through 2026 include sales growth of between 5% and 6%.

Mary Dillon, President and Chief Executive Officer, commented: "Our team delivered a great finish to the year with strong fourth quarter results that capitalised on 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.

"We are proud of Foot Locker's role in influencing and serving the global sneaker community, and next year, we will celebrate the 50th anniversary of the iconic Foot Locker brand. We are incredibly excited to introduce our "Lace Up" plan with a new set of strategic imperatives and financial objectives that are designed to set us up for success for the next 50 years."

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