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Sportswear and footwear retail company Foot Locker took a beating in its Q1 2023 report after sustaining an 11% drawdown in revenue.
Foot Locker Retail Inc (NYSE: FL) plunged 25% following a big earnings miss in the Q1 2023 outing. For the first quarter of 2023, the sportswear and footwear retailer reported revenue of $1.93 billion versus the $1.99 billion analysts expected. In addition, the company realized earnings per share of 70 cents adjusted versus 81 cents expected.
Following Friday’s disappointing Q1 2023 report, Foot Locker lowered its guidance for the rest of 2023. The company also said it increased markdowns during the dismal quarter to increase sales. Foot Locker’s discounted prices for products during the quarter were also to clear excess inventories.
The company’s sales slide is reflected in its latest quarterly income, 11% lower than the $2.18 billion realized a year earlier. Furthermore, reported net income for the period came in at $36 million, or 38 cents a share, compared with $132 million, or $1.37 per share, the year before.
Foot Locker CEO Ascribes Underwhelming Q1 2023 Performance to Bleak Economic Situation but Believes Better Days Lie Ahead
In a statement, Foot Locker chief executive officer Mary Dillon reflected on the company’s poor showing, saying:
“Our sales have since softened meaningfully given the tough macroeconomic backdrop, causing us to reduce our guidance for the year as we take more aggressive markdowns to both drive demand and manage inventory.”
Despite Foot Locker’s gloomy prospects, Dillon remained upbeat, highlighting:
“Despite the challenging near-term trends, we remain committed to our long-term strategy, including making the necessary investments to drive our Lace Up plan and maintain conviction in our ability to execute against our new strategic imperatives.”
The Lace Up plan Dillon referred to is a multipronged strategy to grow the New York-based shoe retailer’s market share by 2026. In that same time scale, Foot Locker also plans to stoke sales to $9.5 billion despite prevailing macroeconomic circumstances.
Under its Lace UP agenda, Foot Locker would diversify its brand portfolio and relaunch its product brand with new store formats. The company also seeks to maximize its customer loyalty scheme and invest in technology to enhance customer experience.
Foot Locker expects a sales drawdown of up to 8% for the year compared to its previous expectation of between 3.5% and 5.5%.
Meanwhile, the company announced a new chief finance officer. Incoming Foot Locker finance chief, and former Kohl’s Corp executive, Mike Baughn, will assume the position of EVP and CFO on June 12th.
Retail Sector Feeling the Economic Strain
Foot Locker’s underwhelming quarterly report might not augur well for other players in the retail sector ahead of their own earnings reports.
Although Bank of America analysts identified better sales than expected from retailers, including Walmart (NYSE: WMT) and Target (NYSE: TGT), 45% of the retail sector has yet to report earnings. Furthermore, analysts pointed out that the brand strength of the retailers that posted commendable results was an influencing factor. In other words, other upcoming names not nearly as high-quality in recognition might not fare as well.