Shares of Foot Locker Inc. took a tumble Wednesday, after the athletic shoe apparel retailer provided a full-year profit outlook that was below expectations, and pushed back the timing of reaching its target for adjusted margins by two years.
The downbeat outlook, which followed increased markdowns to reduce inventory at the end of the year, offset better-than-expected fourth-quarter results.
The stock
FL,
sank 10.8% in premarket trading, which puts it on track to suffer the biggest one-day decline in seven months.
Chief Executive Mary Dillon said while significant momentum was built through the holiday season with “full-price selling” and “compelling promotions,” the company also then “proactively reinvested in markdowns” to reduce inventory below expectations at the end of the year.
As a result, fiscal fourth-quarter gross margin declined by about 3.5 percentage points, to 26.8%.
The company said it still believes its “Lace Up” plan to boost earnings will help the company reach its target for earnings before interest and taxes (Ebit) margin of 8.5% to 9%. But there’s a catch.
“Given our lower starting point exiting 2023, we expect a two-year delay in achieving that goal and now see reaching that target by 2028,” said Chief Financial Officer Mike Baughn.
For the quarter to Feb. 3, the company swung to a net loss of $389 million, or $4.13 a share, from net income of $19 million, or 20 cents a share, in the same period a year ago.
Excluding nonrecurring items, such as charges related to investments and the settlement of pension obligations, adjusted earnings per share fell to 38 cents from 97 cents, but beat the FactSet consensus of 32 cents.
Total revenue grew 2% to $2.38 billion, above the FactSet consensus of $2.28 billion, as same-store sales declined 0.7% to beat expectations of a 2.3% drop.
For fiscal 2024, the company expects adjusted earnings per share of $1.50 to $1.70, below the FactSet consensus of $1.86.
Total sales are expected to be down 1% to up 1%, while the current FactSet sales consensus of $8.03 billion implies a 1.7% decline.
The stock has run up 21.4% over the past three months through Tuesday, while SPDR S&P Retail ETF
XRT
has rallied 15.6% and the S&P 500
SPX,
has advanced 11.6%.
