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Foot Locker Reports Fiscal Fourth Quarter Loss Amid Turnaround Efforts, Shares Tumble
Foot Locker Inc. (FL), under the leadership of former Ulta boss Mary Dillon, reported a significant loss in its fiscal fourth quarter as the company continues its strategic turnaround efforts. The holiday-quarter results revealed a loss, weak guidance for the current year, and a delay in achieving key profitability targets, causing shares to plummet nearly 30%.
Financial Performance Highlights:
- Earnings Per Share (EPS): Foot Locker reported an adjusted EPS of 38 cents, beating analysts' expectations of 32 cents.
- Revenue: Sales increased slightly to $2.38 billion, up about 2% from $2.34 billion a year earlier, surpassing the expected $2.28 billion.
- Net Loss: The company swung to a loss of $389 million, or $4.13 per share, compared with income of $19 million, or 20 cents per share, a year earlier.
- Full-Year Guidance: For the current fiscal year, Foot Locker anticipates adjusted earnings per share between $1.50 and $1.70, with sales expected to range between down 1% and up 1%.
Strategic and Operational Updates:
CEO Mary Dillon highlighted the company's full-price selling strategy and compelling promotions during the holiday quarter, despite needing to mark down items to clear out excess inventory. Efforts to evolve into a modern, omnichannel retailer have shown progress in strengthening brand partnerships and increasing customer engagement. The company also aims to boost its online sales channels, with digital revenue currently accounting for about 20% of the overall mix, targeting 25% by 2026.
Despite the challenges, Foot Locker has made strategic moves, including a renewed focus on its relationship with Nike and diversifying its brand mix to include sneaker brands like On Running, Hoka, Adidas, New Balance, and Ugg. The partnership with Nike and the Jordan Brand, dubbed The Clinic, launched during the 2024 NBA All-Star Game, showcasing the strong ties between the companies.
Store Network and Future Outlook:
In its quest to revamp its store footprint, Foot Locker opened 29 new stores, remodeled or relocated 66, and closed 113 in the fourth quarter. The company's CFO, Mike Baughn, announced a delay in reaching the previously laid out profitability goal, now expecting to achieve an EBIT margin of 8.5% to 9% by 2028.
Market Reaction and Analyst Expectations:
The results and the forward-looking statements have led to a sharp decrease in Foot Locker's market value, with shares dropping nearly 30% following the announcement. The company has lost more than half of its market value since May 2021, reflecting investor concerns over the pace and effectiveness of the turnaround strategy.
Despite the fiscal challenges, the exceeded Wall Street expectations for earnings and revenue in the fourth quarter indicate potential strengths in the company's foundational strategies. Foot Locker's focus on inventory management, digital growth, and strategic brand partnerships remains central to its long-term goals and recovery path.
As Foot Locker navigates a dynamic retail environment, the leadership's ongoing efforts to transform the business model and reposition the company for sustainable growth will be critical in regaining investor confidence and market stability.
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