Foot Locker (ticker: FL) experienced a significant drop in its stock value on Wednesday, as the company faced a series of setbacks. The popular shoe and sportswear retailer not only missed second-quarter sales expectations but also had to revise its full-year outlook downward once again. Additionally, Foot Locker decided to temporarily halt its dividend.
In the quarter ending on July 29, Foot Locker reported earnings of 4 cents per share, generating $1.86 billion in revenue. While the per-share profit was in line with analysts’ predictions, sales fell short of the estimated $1.88 billion mark.
Adding to the disappointing results, the company revised its sales and earnings outlook for the fiscal year yet again, after already reducing it following the May earnings report. As a result of these developments, the stock plummeted by 28% during premarket trading. Interestingly, Nike’s (NKE) shares were also impacted, experiencing a 3% decrease prior to market opening.
Foot Locker’s latest fiscal-year projections now anticipate a decline in sales between 8% to 9% annually, a larger decrease compared to the previously expected range of 6.5% to 8%. Furthermore, the company adjusted its earnings per share forecast to range from $1.30 to $1.50, down from the earlier guidance of $2.00 to $2.25. As part of its cost-saving measures, Foot Locker decided to suspend its quarterly cash dividends beyond the already-approved October payout.
May Dillon, Foot Locker’s CEO, provided some insight into the situation, stating, “Our second quarter results were generally in line with our expectations, despite the challenging consumer environment. However, we did observe a decline in trends during July and are revising our 2023 outlook to better appeal to price-sensitive consumers. We plan to share our future capital allocation plans and provide updates on our long-term financial targets when we release our fourth quarter results.”
This recent setback poses significant challenges for Foot Locker, as the company works toward restoring investor confidence and finding effective ways to navigate the evolving retail landscape.