Foot Locker has reported a sales decline for the third quarter, which an analyst said was reasonable as the company’s reinvention is still in the early days.
For the quarter ended November 2, sales fell 1.4 per cent year-on-year to US$1.958 billion (down 2.2 per cent in constant currency), driven by store closures as part of a program to rebalance operations. Meanwhile, comparable sales rose 2.4 per cent.
The Foot Locker segment saw a 3.3 per cent decrease in sales and 1.6 per cent uplift in comparable sales. At Champs Sports, sales were down 8 per cent but comparables up 2.8 per cent.
According to GlobalData MD Neil Saunders, the company’s reinvention is in the early days, and it is reasonable that delivery will be choppy until it becomes more established.
However, he stressed that Foot Locker still has more work to do to carve out a distinct niche for itself in a market that has become more competitive.
While there were efforts to create better store environments, many locations in the chain remained with old designs and configurations, the analyst continued. This is becoming more of a disadvantage as other players like JD Sports and Dick’s are investing heavily on upgrading their store fleets, he added.
By region, sales were down 3.7 per cent in North America and 11.8 per cent in Asia Pacific, but increased 6.1 per cent in EMEA.
On the bottom line, the company swung to a net loss of $33 million from last year’s net income of $28 million.
For the full year, Foot Locker has lowered its outlook amid a more promotional environment and softer consumer demand. Sales are now expected to decrease 1-1.5 per cent while comparable sales to increase 1-1.5 per cent, with the store count down by about 4 per cent.
“Longer term, we have more confidence in Foot Locker’s ability to grow,” said Saunders.
“The company is pursuing the right strategies, and its management team is very focused on the customer. It is also the case that as the economy strengthens and consumer finances rebuild, demand for sneakers should pick back up.”
Nike softness
In a conference call, Foot Locker’s EVP and CCO Frank Bracken said the growth in comparable sales was led by strong results from Adidas, New Balance, On, Hoka, Ugg, and Asics.
Meanwhile, the company encountered softness from its top partner Nike, and some negative impacts as the brand rebalances its product mix and inventory levels in the near term.
“Our overall inventory levels with them remain controlled and we are working together closely to optimize new receipt flow, retail sell-through, and prioritize full-price selling as best as possible.
“At a strategic level, we are confident in the strength of our partnership with Nike as we continue to engage with its new leadership team,” Bracken elaborated.
He added that Foot Locker has returned to growth with Nike on an allocation basis during the holiday season and has a favorable launch calendar.
