Foot Locker Inc. (NYSE: FL) reported its first growth in comparable sales in six quarters, a positive sign for the beleaguered retailer as it continues its extensive turnaround strategy. The company's fiscal second-quarter results, released Wednesday, revealed a 2.6% increase in same-store sales, surpassing analysts' expectations of a 0.7% rise. This growth marks a notable shift from recent trends and underscores the effectiveness of the company's efforts to rejuvenate its brand and store experience.
Despite the encouraging sales figures, Foot Locker's stock experienced a significant decline of about 8% in premarket trading following the announcement. The company reported a revenue of $1.90 billion, exceeding the anticipated $1.89 billion. However, Foot Locker also reported a loss of $12 million, or 13 cents per share, compared to a loss of $5 million, or 5 cents per share, a year earlier. Excluding one-time items, the adjusted loss was 5 cents per share, which was an improvement over the forecasted 7 cents.
CEO Mary Dillon highlighted the progress made under the company's "Lace Up Plan," a comprehensive strategy aimed at revitalizing Foot Locker. "The Lace Up Plan is working," Dillon stated, noting that top-line trends strengthened throughout the quarter. The company also saw a positive start to the Back-to-School season and stabilization within its Champs Sports banner, which had previously been struggling.
Foot Locker's gross margin also expanded for the first time in over two years, a key indicator of improved profitability. The company's focus on store upgrades and enhancing customer experience has contributed to this positive trend. Dillon emphasized that the investments in store renovations are driving increased conversion rates and basket sizes, with a notable improvement in the performance of the women's business.
During the quarter, Foot Locker closed 31 stores and remodeled or relocated 14, while opening five new locations. The company's inventory decreased by 10% year-over-year, reflecting ongoing efforts to streamline operations. Additionally, Foot Locker announced plans to relocate its global headquarters from New York City to St. Petersburg, Florida, by late 2025. This move is expected to foster better collaboration among teams and reduce operational costs.
The retailer's turnaround efforts include a strategic partnership with Nike, aimed at developing new store concepts and leveraging consumer insights. Dillon noted, "With Nike, this has been since Day One, a high priority for me, and really building a partnership that isn't just about what number of shoes we are going to sell, but how do we think about using consumer insights to mutually grow our businesses together."
Foot Locker also announced the closure of its stores and e-commerce operations in South Korea, Denmark, Norway, and Sweden, with plans to rely on third-party operators in Greece and Romania. These changes are part of a broader strategy to focus on high-growth regions and improve efficiency.
The company maintained its fiscal 2024 guidance, projecting sales to be in a range of a 1% decline to 1% growth compared to the prior year. Foot Locker expects adjusted earnings per share to be between $1.50 and $1.70, which is slightly above the analyst consensus of $1.54.
In contrast to Foot Locker's positive sales growth, its stock has faced challenges, with a significant decline observed in recent trading. The company's stock has gained over 77% in the past 12 months, yet current market reactions reflect ongoing concerns about the broader retail environment and Foot Locker's ability to sustain its turnaround momentum.
