FOOT LOCKER, INC. REPORTS FIRST QUARTER 2024 FINANCIAL RESULTS; REAFFIRMS 2024 OUTLOOK
Foot Locker (NYSE: FL) reported its Q1 2024 financial results, showing a total sales decline of 2.8% to $1,874 million compared to the same period last year. Comparable sales fell by 1.8%, influenced by a 220 basis-point impact from repositioning the Champs Sports banner. Global and Kids Foot Locker saw a 1.1% increase in comparable sales. The company posted an EPS of $0.09 and a Non-GAAP EPS of $0.22. Inventory decreased by 5.6% year-over-year. Despite the dip in sales, Foot Locker reaffirmed its full-year 2024 outlook, expecting Non-GAAP EPS of $1.50-$1.70. The first quarter net income was $8 million, down from $36 million in the prior year. Gross margin declined by 120 basis points while SG&A expenses increased by 220 basis points. Foot Locker operated 2,490 stores as of May 4, 2024, after opening 4 new stores and closing 37 in the first quarter.
- Global Foot Locker and Kids Foot Locker comparable sales increased by 1.1%.
- EPS of $0.09 and Non-GAAP EPS of $0.22.
- Inventory decreased by 5.6% year-over-year.
- Foot Locker reaffirmed its full-year 2024 Non-GAAP EPS outlook of $1.50-$1.70.
- Store updates included 13 stores refreshed to current design standards.
- Total sales decreased by 2.8% to $1,874 million.
- Comparable sales decreased by 1.8%.
- Gross margin declined by 120 basis points.
- SG&A expenses increased by 220 basis points.
- First-quarter net income fell to $8 million from $36 million in the prior year.
- Non-GAAP earnings per share decreased to $0.22 from $0.70.
- The company closed 37 stores in the first quarter.
Insights
Foot Locker's financial results for the first quarter of 2024 highlight both challenges and strategic initiatives that investors should carefully consider. Total sales decreased by 2.8% and comparable sales dropped by 1.8%, indicating a difficult operating environment. However, the 1.1% growth in Global Foot Locker and Kids Foot Locker comparable sales offers some bright spots within the company’s portfolio.
The EPS figures show a notable year-over-year decline, with EPS at $0.09 and Non-GAAP EPS at $0.22 compared to $0.38 and $0.70, respectively, in the first quarter of 2023. This significant drop suggests that although expense management has been relatively effective, the company is still facing profitability pressures, likely tied to external economic factors and internal restructuring efforts.
Inventory management appears to be another area of relative strength, with a 5.6% year-over-year decrease in inventories. This inventory reduction could indicate better alignment with current demand, minimizing potential markdowns and improving cash flow in the near term.
For retail investors, these mixed signals suggest a cautious approach is warranted. While the reaffirmation of the full-year outlook provides some confidence, the overall financial performance highlights underlying challenges that may take time to resolve. The long-term success of the 'Lace Up Plan' and ongoing investments in digital and customer engagement will be important to watch.
In terms of market positioning, Foot Locker's strategic emphasis on enhancing digital engagement and loyalty programs is in line with broader retail trends. The launch of the reimagined FLX Rewards program and investments in digital infrastructure reflect an intent to build a stronger, more engaged customer base. These initiatives are aimed at capturing a larger share of the sneaker and athletic wear market, which is highly competitive.
However, the decline in SG&A as a percentage of sales due to technological and brand-building investments, alongside higher inflation, suggests that these growth strategies are not without cost. Savvy investors should monitor the company's ability to balance these expenses with revenue growth to ensure that these investments translate into tangible returns.
Foot Locker's store strategy, involving new store openings and a substantial number of closures, points towards a focus on optimizing the store footprint to enhance profitability. The remodeling and relocation efforts indicate an emphasis on maintaining high standards and improving the customer experience, which could drive long-term loyalty, albeit potentially at a high initial cost.
For retail investors, it is essential to consider these strategic actions' potential impacts on both the top and bottom lines. While the short-term results may seem lackluster, the long-term investments in customer experience and engagement could pay off if executed effectively.
The broader economic context plays a significant role in Foot Locker's financial performance. The indication of higher inflation impacting SG&A expenses suggests that the retailer is not immune to macroeconomic pressures. These external factors can squeeze margins and reduce consumer spending power, particularly in discretionary segments like athletic footwear and apparel.
The company’s ability to manage cost optimization programs while maintaining investment in necessary areas like technology is noteworthy. This reflects a balanced approach to navigating economic challenges while positioning for future growth. However, the decline in net income and EPS underscores the delicate balance that needs to be maintained.
For investors, it’s important to be aware of these external economic pressures and consider how they might affect Foot Locker’s performance in the coming quarters. The reaffirmed outlook provides some reassurance, but the economic environment remains a variable factor that could influence results.
- Total Sales Decreased
2.8% ; Comparable Sales Decreased1.8% - Global Foot Locker and Kids Foot Locker Comparable Sales Increased
1.1% - EPS of
$0.09 $0.22 - Inventory Decreased
5.6% Year-over-Year - Reaffirms First-Half and Full-Year 2024 Non-GAAP EPS Outlook
Mary Dillon, President and Chief Executive Officer, said, "We had a solid start to the year, which demonstrates that our Lace Up Plan is working. We delivered comparable sales results and gross margin in line with our expectations, while earnings per share outperformed due to disciplined expense management and some favorable shifts in expense timing. Importantly, we are well-positioned with fresh assortments as we approach the summer and Back-to-School seasons, and we are pleased to be reaffirming our full-year outlook."
Ms. Dillon continued, "Through our Lace Up Plan, we are strengthening our brand partnerships, enhancing customer engagement through digital and loyalty investments, and solidifying our position at the intersection of basketball and sneaker culture. In stores, we are elevating the customer experience through store refreshes and our newly unveiled retail concept, which recently opened in
First Quarter Results
- Total sales decreased by
2.8% , to$1,874 million $1,927 million 2.4% . - Comparable sales decreased by
1.8% , including a 220 basis-point impact from the continued repositioning of the Champs Sports banner. Global Foot Locker and Kids Foot Locker comparable sales increased1.1% .
Please refer to the Sales by Banner table below for detailed sales performance by banner and region.
- Gross margin declined by 120 basis points as compared with the prior-year period, with markdowns sequentially moderating compared to the fourth quarter of 2023, partially offset by occupancy leverage.
- SG&A as a percentage of sales increased by 220 basis points compared with the prior-year period, with investments in technology and brand-building as well as higher inflation, partially offset by savings from the cost optimization program, ongoing expense discipline, and a shift in the timing of expenses into the second quarter from the first quarter of 2024.
- First quarter net income was
$8 million $36 million $21 million $66 million - First quarter earnings per share were
$0.09 $0.38 $0.22 $0.70
See the tables below for the reconciliation of Non-GAAP measures.
Balance Sheet
At quarter-end, the Company's cash and cash equivalents totaled
As of May 4, 2024, the Company's merchandise inventories were
Store Base Update
During the first quarter, the Company opened 4 new stores and closed 37 stores. Also during the quarter, the Company remodeled or relocated 16 stores and updated 13 stores to our current design standards, which incorporate key elements of our current brand design specifications.
As of May 4, 2024, the Company operated 2,490 stores in 26 countries in North America,
Reaffirming 2024 Financial Outlook
The Company's full year 2024 outlook, representing the 52 weeks ending February 1, 2025, is summarized in the table below.
The full-year Non-GAAP EPS guidance of
Metric | Full Year 2024 Guidance | Commentary |
Sales Change | - | ~ |
Comparable Sales Change | +1.0 to + | |
Store Count Change | Down ~ | |
Square Footage Change | Down ~ | |
Licensing Revenue | ||
Gross Margin | Lower markdowns year-on-year | |
SG&A Rate | Ongoing investment spending | |
D&A | ||
EBIT Margin | ||
Net Interest | ||
Non-GAAP Tax Rate | | |
Non-GAAP EPS | ||
Adj. Capital Expenditures* | ||
* Adjusted Capex includes capitalized Technology expense | ||
The Company provides earnings guidance only on a non-GAAP basis and does not provide a reconciliation of the Company's forward-looking EBIT, capital expenditures, and diluted earnings per share guidance to the most directly comparable GAAP financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations.
Conference Call and Webcast
The Company will host a conference call at 9:00 a.m. ET today, May 30, 2024, to review its first quarter 2024 results and provide an update on the business. An investor presentation will be available on the Investor Relations section of the Company's corporate website before the start of the conference call. The call may be accessed live by calling toll-free 1-844-701-1163 or international toll 1-412-317-5490, or via footlocker-inc.com. Please log on to the website 15 minutes prior to the call to register. An archived replay of the conference call will be accessible approximately one hour following the end of the call through June 12, 2024, by calling 1-877-344-7529 in the
Disclosure Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws. Other than statements of historical facts, all statements which address activities, events, or developments that the Company anticipates will or may occur in the future, including, but not limited to, such things as future capital expenditures, expansion, strategic plans, financial objectives, dividend payments, stock repurchases, financial outlook, and other such matters, are forward-looking statements. These forward-looking statements are based on many assumptions and factors, which are detailed in the Company's filings with the
These forward-looking statements are based largely on our expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond our control. For additional discussion regarding risks and uncertainties that may affect forward-looking statements, see "Risk Factors" disclosed in the Company's Annual Report on Form 10-K for the year ended February 3, 2024, filed on March 28, 2024. Any changes in such assumptions or factors could produce significantly different results. The Company undertakes no obligation to update the forward-looking statements, whether as a result of new information, future events, or otherwise.
Foot Locker, Inc. Condensed Consolidated Statements of Operations (unaudited)
Periods ended May 4, 2024 and April 29, 2023 (In millions, except per share amounts) | ||||||||
First Quarter | ||||||||
2024 | 2023 | |||||||
Sales | $ | 1,874 | $ | 1,927 | ||||
Licensing revenue | 5 | 4 | ||||||
Total revenue | 1,879 | 1,931 | ||||||
Cost of sales | 1,335 | 1,349 | ||||||
Selling, general and administrative expenses | 461 | 431 | ||||||
Depreciation and amortization | 51 | 51 | ||||||
Impairment and other | 14 | 39 | ||||||
Income from operations | 18 | 61 | ||||||
Interest expense, net | (1) | (1) | ||||||
Other income / (expense), net | (4) | (3) | ||||||
Income before income taxes | 13 | 57 | ||||||
Income tax expense | 5 | 21 | ||||||
Net income | $ | 8 | $ | 36 | ||||
Diluted earnings per share | $ | 0.09 | $ | 0.38 | ||||
Weighted-average diluted shares outstanding | 95.3 | 95.1 | ||||||
Non-GAAP Financial Measures
In addition to reporting the Company's financial results in accordance with generally accepted accounting principles ("GAAP"), the Company reports certain financial results that differ from what is reported under GAAP. Non-GAAP financial measures that will be presented will exclude (i) gains or losses related to our minority investments, (ii) impairments and other, and (iii) certain tax matters that we believe are nonrecurring or unusual in nature.
Certain financial measures are identified as non-GAAP, such as sales changes excluding foreign currency fluctuations, adjusted income before income taxes, adjusted net income, and adjusted diluted earnings per share. We present certain amounts as excluding the effects of foreign currency fluctuations, which are also considered non-GAAP measures. Where amounts are expressed as excluding the effects of foreign currency fluctuations, such changes are determined by translating all amounts in both years using the prior-year average foreign exchange rates. Presenting amounts on a constant currency basis is useful to investors because it enables them to better understand the changes in our business that are not related to currency movements.
These non-GAAP measures are presented because we believe they assist investors in allowing a more direct comparison of our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core business or affect comparability. In addition, these non-GAAP measures are useful in assessing our progress in achieving our long-term financial objectives and are consistent with how executive compensation is determined.
We estimate the tax effect of all non-GAAP adjustments by applying a marginal tax rate to each item. The income tax items represent the discrete amount that affected the period. The non-GAAP financial information is provided in addition, and not as an alternative, to our reported results prepared in accordance with GAAP. The various non-GAAP adjustments are summarized in the tables below.
Foot Locker, Inc. Non-GAAP Reconciliation (unaudited)
Periods ended May 4, 2024 and April 29, 2023 (In millions, except per share amounts)
| ||||||||
Reconciliation of GAAP to non-GAAP results: | ||||||||
First Quarter | ||||||||
2024 | 2023 | |||||||
Pre-tax income: | ||||||||
Income before income taxes | $ | 13 | $ | 57 | ||||
Pre-tax adjustments excluded from GAAP: | ||||||||
Impairment and other (1) | 14 | 39 | ||||||
Other income / expense (2) | 2 | 1 | ||||||
Adjusted income before income taxes (non-GAAP) | $ | 29 | $ | 97 | ||||
After-tax income: | ||||||||
Net income | $ | 8 | $ | 36 | ||||
After-tax adjustments excluded from GAAP: | ||||||||
Impairment and other, net of income tax benefit of | 11 | 33 | ||||||
Other income / expense, net of income tax expense of $-, and $- million, respectively (2) | 2 | 1 | ||||||
Tax reserves benefit (3) | — | (4) | ||||||
Adjusted net income (non-GAAP) | $ | 21 | $ | 66 | ||||
First Quarter | ||||||||
2024 | 2023 | |||||||
Earnings per share: | ||||||||
Diluted earnings per share | $ | 0.09 | $ | 0.38 | ||||
Diluted EPS amounts excluded from GAAP: | ||||||||
Impairment and other (1) | 0.11 | 0.36 | ||||||
Other income / expense (2) | 0.02 | — | ||||||
Tax reserves benefit (3) | — | (0.04) | ||||||
Adjusted diluted earnings per share (non-GAAP) | $ | 0.22 | $ | 0.70 | ||||
Notes on Non-GAAP Adjustments: | |
(1) | For the first quarter of 2024, impairment and other included a loss accrual for legal claims of
For the first quarter of 2023, impairment and other included transformation consulting expense of |
(2) | For the first quarters of 2024 and 2023, other income / expense consisted of |
(3) | In the first quarter of 2023, the Company recorded a |
Foot Locker, Inc. Sales by Banner (unaudited)
Periods ended May 4, 2024 and April 29, 2023 (In millions) | ||||||||||||||||
First Quarter | ||||||||||||||||
2024 | 2023 | Constant | Comparable | |||||||||||||
Foot Locker | $ | 759 | $ | 744 | 2.0 | % | 0.8 | % | ||||||||
Champs Sports | 267 | 328 | (18.6) | (13.4) | ||||||||||||
Kids Foot Locker | 183 | 167 | 9.6 | 6.4 | ||||||||||||
WSS | 160 | 150 | 6.7 | (5.8) | ||||||||||||
1,369 | 1,389 | (1.4) | (2.5) | |||||||||||||
Foot Locker | 394 | 379 | 3.7 | 1.6 | ||||||||||||
Sidestep | — | 14 | (100.0) | n.m. | ||||||||||||
EMEA | 394 | 393 | - | 1.6 | ||||||||||||
Foot Locker | 72 | 98 | (23.5) | (8.7) | ||||||||||||
atmos | 39 | 47 | (6.4) | 0.3 | ||||||||||||
111 | 145 | (17.9) | (5.5) | |||||||||||||
Total | $ | 1,874 | $ | 1,927 | (2.4) | % | (1.8) | % | ||||||||
Foot Locker, Inc. Condensed Consolidated Balance Sheets (unaudited) (In millions) | ||||||||
May 4, | April 29, | |||||||
2024 | 2023 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 282 | $ | 313 | ||||
Merchandise inventories | 1,659 | 1,758 | ||||||
Other current assets | 414 | 326 | ||||||
2,355 | 2,397 | |||||||
Property and equipment, net | 910 | 901 | ||||||
Operating lease right-of-use assets | 2,175 | 2,331 | ||||||
Deferred taxes | 114 | 94 | ||||||
Goodwill | 760 | 781 | ||||||
Other intangible assets, net | 392 | 421 | ||||||
Minority investments | 150 | 629 | ||||||
Other assets | 91 | 89 | ||||||
$ | 6,947 | $ | 7,643 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 515 | $ | 474 | ||||
Accrued and other liabilities | 389 | 447 | ||||||
Current portion of long-term debt and obligations under finance leases | 5 | 6 | ||||||
Current portion of lease obligations | 496 | 533 | ||||||
1,405 | 1,460 | |||||||
Long-term debt and obligations under finance leases | 441 | 445 | ||||||
Long-term lease obligations | 1,984 | 2,132 | ||||||
Other liabilities | 231 | 323 | ||||||
Total liabilities | 4,061 | 4,360 | ||||||
Total shareholders' equity | 2,886 | 3,283 | ||||||
$ | 6,947 | $ | 7,643 | |||||
Foot Locker, Inc. Condensed Consolidated Statement of Cash Flows (unaudited) (In millions) | ||||||||
Thirteen weeks ended | ||||||||
May 4, | April 29, | |||||||
($ in millions) | 2024 | 2023 | ||||||
From operating activities: | ||||||||
Net income | $ | 8 | $ | 36 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Non-cash impairment and other | 7 | 18 | ||||||
Depreciation and amortization | 51 | 51 | ||||||
Deferred income taxes | (5) | (4) | ||||||
Share-based compensation expense | 6 | 2 | ||||||
Change in assets and liabilities: | ||||||||
Merchandise inventories | (158) | (117) | ||||||
Accounts payable | 151 | (16) | ||||||
Accrued and other liabilities | (3) | (87) | ||||||
Other, net | 1 | (1) | ||||||
Net cash provided by (used in) operating activities | 58 | (118) | ||||||
From investing activities: | ||||||||
Capital expenditures | (76) | (59) | ||||||
Net cash used in investing activities | (76) | (59) | ||||||
From financing activities: | ||||||||
Dividends paid on common stock | — | (38) | ||||||
Shares of common stock repurchased to satisfy tax withholding obligations | (4) | (10) | ||||||
Payment of obligations under finance leases | (2) | (2) | ||||||
Proceeds from exercise of stock options | 5 | 4 | ||||||
Net cash used in financing activities | (1) | (46) | ||||||
Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash | 2 | — | ||||||
Net change in cash, cash equivalents, and restricted cash | (17) | (223) | ||||||
Cash, cash equivalents, and restricted cash at beginning of year | 334 | 582 | ||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 317 | $ | 359 | ||||
Foot Locker, Inc. Store Count and Square Footage (unaudited)
| ||||||||||||||||||||
Store activity is as follows: | ||||||||||||||||||||
February 3, | May 4, | Relocations/ | ||||||||||||||||||
2024 | Opened | Closed | 2024 | Remodels | ||||||||||||||||
Foot Locker | 723 | — | 12 | 711 | 4 | |||||||||||||||
Foot Locker Canada | 85 | — | 1 | 84 | — | |||||||||||||||
Champs Sports | 404 | — | 9 | 395 | — | |||||||||||||||
Kids Foot Locker | 390 | 1 | 6 | 385 | 3 | |||||||||||||||
WSS | 141 | — | — | 141 | — | |||||||||||||||
Footaction | 1 | — | — | 1 | — | |||||||||||||||
1,744 | 1 | 28 | 1,717 | 7 | ||||||||||||||||
Foot Locker Europe (1) | 637 | 3 | 9 | 631 | 16 | |||||||||||||||
EMEA | 637 | 3 | 9 | 631 | 16 | |||||||||||||||
Foot Locker Pacific | 98 | — | — | 98 | 4 | |||||||||||||||
Foot Locker Asia | 13 | — | — | 13 | — | |||||||||||||||
atmos | 31 | — | — | 31 | 2 | |||||||||||||||
142 | — | — | 142 | 6 | ||||||||||||||||
Total | 2,523 | 4 | 37 | 2,490 | 29 | |||||||||||||||
Selling and gross square footage are as follows: | ||||||||
April 29, 2023 | May 4, 2024 | |||||||
(in thousands) | Selling | Gross | Selling | Gross | ||||
Foot Locker | 2,351 | 4,025 | 2,386 | 4,049 | ||||
Foot Locker Canada | 251 | 413 | 257 | 423 | ||||
Champs Sports | 1,775 | 2,784 | 1,508 | 2,373 | ||||
Kids Foot Locker | 752 | 1,262 | 776 | 1,295 | ||||
WSS | 1,235 | 1,479 | 1,458 | 1,757 | ||||
Footaction | 6 | 11 | 3 | 6 | ||||
6,370 | 9,974 | 6,388 | 9,903 | |||||
Foot Locker Europe (1) | 1,155 | 2,372 | 1,210 | 2,459 | ||||
Sidestep | 93 | 179 | - | - | ||||
EMEA | 1,248 | 2,551 | 1,210 | 2,459 | ||||
Foot Locker Pacific | 216 | 331 | 246 | 371 | ||||
Foot Locker Asia | 126 | 233 | 52 | 98 | ||||
atmos | 36 | 62 | 28 | 48 | ||||
378 | 626 | 326 | 517 | |||||
Total | 7,996 | 13,151 | 7,924 | 12,879 | ||||
(1) Includes 13 and 10 Kids Foot Locker stores, and the related square footage, operating in | ||||||||
Contacts: | Kate Fitzsimons Investor Relations ir@footlocker.com
Dana Yacyk Corporate Communications mediarelations@footlocker.com |
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SOURCE Foot Locker IR
FAQ
What were Foot Locker's Q1 2024 financial results?
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