Foot Locker’s sales dip thanks to “consumer softness”

Athletic footwear and clothing retailer, Foot Locker, has reported declining sales of 9.9% for the second quarter ending 29 July 2023.

At a currency neutral rate, the New York-based company’s total sales decreased by 9.9%, to £1.46 billion ($1.86 billion), compared to sales of £1.63 billion ($2.07 billion) in Q2 2022.

Comparable-store sales decreased by 9.4%, driven by ongoing 'consumer softness, a changing vendor mix and the repositioning of Champs Sports'.

Gross margin declined by a 460 basis points compared to the prior-year, driven by an increase in promotional activity, including higher markdowns.

For the quarter, Foot Locker had a net loss of £0.03 ($0.05) per share, as compared with income of $0.99 per share in the second quarter of 2022. Non-GAAP earnings per share decreased to $0.04, as compared with £0.87 ($1.10) the year prior.

With reflection on Q2, the company has made adjustments to its expectations for fiscal year 2023, which represents the 53 weeks ending 3 February 2024. It has adjusted its sales expectation to sit between a decrease of 8%-9%, down from 6.5%-8%.

Gross margins are expected to fall between 27.8%-28%, down from the previous expectation of 28.6%-28.8%. Licensing revenue has also been adjusted to £13 million ($17 million) from £15 million ($20 million).

Mary Dillon, President and Chief Executive Officer at Foot Locker, commented: "Our second quarter was broadly in line with our expectations, despite the still-tough consumer backdrop. However, we did see a softening in trends in July and are adjusting our 2023 outlook to allow us to best compete for price-sensitive consumers, while still leaning into the strategic investments that drive our Lace Up plan.

"Importantly, we are continuing to make progress on our inventory levels and look to best position the business for the upcoming holiday season and into 2024."

"We remain committed to our Lace Up plan as introduced at our March 2023 Investor Day, and we are encouraged by the progress we are making against our strategic priorities heading towards the holiday season. To ensure that we have the flexibility to continue to fund our strategic investments appropriately, we are pausing our quarterly cash dividend beyond our Board's recently-approved October payout. "