In a striking turn of events, Foot Locker’s dynamic holiday season kickoff, fueled by compelling discounts, has not only exceeded expectations but prompted a significant revision in annual profit and sales forecasts. This success catapulted the retailer’s shares, witnessing an impressive 22% surge on Wednesday.
The Thanksgiving weekend, marked by over 200 million shoppers engaging in both in-store and online purchases, as reported by the National Retail Federation, alleviates earlier concerns about lackluster holiday sales.
CEO Mary Dillon, in a post-earnings call, emphasized the discerning nature of customers with discretionary spending while noting a positive response to new offerings. Foot Locker’s innovative Lace Up program aims to spotlight its banners, including Champs Sports, reducing dependence on major sports brands like Nike, which presently contributes around 65% of its merchandise.
These robust results align with recent industry indicators pointing to a surge in sneaker demand, echoing sentiments expressed by peers such as Dick’s Sporting Goods and Hibbett.
In a strategic shift, Foot Locker revises its annual outlook, now anticipating a narrower decline in annual comparable sales, ranging from 8.5% to 9%, compared to the earlier forecast of 9% to 10%. The mid-point of its adjusted profit forecast surpasses market expectations.
Telsey Advisory Group analyst Cristina Fernandez commends the results, stating, «The results were not as bad as feared… Investors were bracing themselves for another guidance cut, given how promotional Foot Locker has been recently.»
Foot Locker’s commitment to maintaining year-end inventory levels, aiming for a flat to slightly down year-over-year, stands out. This commitment holds even as gross margins take a hit of over 400 basis points for the second consecutive quarter.
In the third quarter, Foot Locker surpassed expectations with an adjusted profit of 30 cents per share, outperforming analysts’ estimates of 21 cents. The same-store sales decline of 8% also outperformed estimates, which predicted a 10.06% drop.
This exceptional performance during the holiday season positions Foot Locker as a resilient player, adapting dynamically to the evolving retail landscape. Explore further insights into Foot Locker’s surge, setting a positive tone for the retail giant’s trajectory.
