Foot Locker Q3 sales amounted to $1.95bn, compared to $1.98bn during the same period the previous year.
Comparable sales rose by 2.4%, consistent with the previous quarter but falling short of the company's expectations for growth acceleration.
Q3 FY24 key highlights
The company witnessed positive comparable sales across several banners including Foot Locker North America and Europe, Kids Foot Locker, Champs Sports, and WSS, with global Foot Locker and Kids Foot Locker showing a 2.8% increase. Additionally, Champs Sports and WSS banners saw comparable sales growth of 2.8% and 1.8%, respectively.
For the quarter ending 2 November 2024, Foot Locker posted a net loss of $33m, which is a significant shift from the net income of $28m reported in the third quarter of the prior fiscal year.
Loss per share was $0.34 in Q3 FY24, compared to a gain of $0.30 per share in the same quarter of the previous year.
On an adjusted basis, which excludes certain items according to generally accepted accounting principles (GAAP), the company's net income for the quarter was $31m and adjusted earnings per share were at $0.33.
Gross margin for Foot Locker improved by 230 basis points during Q3 FY24, primarily due to lower markdowns. Despite this gross margin expansion, it did not meet expectations because of an increase in promotional activities.
Foot Locker president and CEO Mary Dillon said: “Our team’s continued focus on execution drove positive comparable sales trends and meaningful gross margin expansion in the quarter. However, our third quarter top- and bottom-line performance fell short of our expectations. Consumer spending trends softened following the peak back-to-school period in August, and the promotional environment was more elevated than anticipated.”
Store count, refreshes, openings and closures
During Q3, Foot Locker expanded its footprint by opening ten new stores but closed 24 locations. The company also remodelled or relocated 20 stores and updated 167 stores to reflect new design standards. It still remains on track to meet its goal of around 400 refreshes for the year.
As of early November 2024, Foot Locker operated a network of 2,450 stores across 26 countries in North America, Europe, Asia, Australia, and New Zealand. The company projected a reduction in store count by roughly 4% and square footage by about 2%, with plans to open 27 new stores while closing around 130.
In the earning call, executive vice president and chief commercial officer Frank Bracken noted that the apparel segment had been a drag on overall performance in Q3, with comparable sales dropping significantly.
He downplayed the impact of weather conditions on performance and attributed the drop to a lack of innovation relative to the Footwear division. This gap has led to increased promotional activity as consumer demand shifts towards newer, more innovative products.
Despite these challenges, Bracken highlighted the success of private-label apparel lines at Champs Sports, such as CSG and CSG Active. He emphasised plans to further develop private-label offerings due to their strong contribution to merchandise margins and their ability to fill gaps left by brand partners.
Bracken also mentioned collaboration efforts with Nike to improve product assortment and highlight newer, more popular items such as Nike Vomero and Shox platforms, as well as recent successes in Max Air and Dn lines.
FY24 Outlook
Looking ahead to the full year 2024, Foot Locker now predicts a sales decline between 1.5% and 1% and comparable store sales growth to be between 1.0% and 1.5%.
The company has also lowered its gross margin forecast to between 28.7% and 28.8%, compared with prior expectations ranging from 29.5% to 29.7%.
