Foot Locker (NYSE: FL) reported a sharp downturn in its fiscal first-quarter results, swinging to a net loss of $363 million, or $3.81 per share, compared to a net income of $8 million, or $0.09 per share, a year earlier. The company fell short of Wall Street expectations, with both revenue and earnings coming in below estimates.
Adjusted (non-GAAP) earnings per share came in at a loss of $0.07, significantly missing analyst forecasts. Revenue dropped 4.6% year over year to $1.79 billion, falling $90 million short of expectations. Comparable store sales were down 2.6%, with international markets—particularly Europe—seeing an 8.5% decline.
Analysts remain cautious, with the consensus recommendation being a “Hold.” The average 12-month price target from 14 analysts stands at $21.29, indicating a potential downside of about 10.91% from the current share price of $23.90. Price targets range from a high of $24.00 to a low of $11.00.
Mary Dillon, Chief Executive Officer said, “We are continuing to execute our Lace Up Plan strategies as we look forward to the successful completion of our transaction with DICK’S Sporting Goods. As we noted at the time we reported preliminary first quarter results, we experienced softer traffic trends globally that impacted our performance. During the quarter, we remained focused on the rollout of our Reimagined and Refresh programs to elevate our in-store experience, enhancing our digital offerings, deepening customer engagement through our FLX program and leveraging our strong brand partnerships to generate excitement for our customers. As we have executed these and other initiatives to further advance our strategy, our teams have also remained nimble to navigate the uncertain macroeconomic environment, including managing our promotional levels, inventories, and expenses and remaining disciplined with our cash flows.”
Weeks after announcing its plans to buy Foot Locker, Dick’s Sporting Goods on Wednesday reported its fifth-straight quarter of 4%-plus comp growth. The retailer saw net sales moved higher by 2.5% in the first quarter to nearly $3.2 billion. Net income fell 4% to $264 million.
Dick’s has been vehemently defending its acquisition of Foot Locker.
“We understand that there’s really a group of people out there — shareholders — that would really prefer we just continue to do what we’re doing,” Executive Chairman Ed Stack said on an earnings call. “We don’t think that’s right long-term for the business.”
Stack emphasized that the acquisition will enhance Dick’s relationships with key brands, provide a strategic entry into the $300 billion global sportswear market, and attract a customer base the company currently lacks. On the earnings call, CEO Lauren Hobart added that only about 30% of Dick’s stores are located in malls, limiting its presence in many urban areas where Foot Locker has a strong footprint.
“What the Street needs to understand is that, like it or not, we don’t make investments or decisions for a quarter or two. We make these decisions and investments for a lifetime,” Stack said.
Despite Dick’s steady growth over the years, CEO Lauren Hobart noted that the company still holds only an 8% share of the athletic retail market, indicating significant opportunity for both Dick’s and Foot Locker to expand. Dick’s also sees potential to enhance Foot Locker’s operational efficiency, strengthen its brand partnerships, and position the combined business to better compete for long-term market share.
“The truth is that Dick’s would be just fine as a stand-alone business, but it sees the rise of players like JD and their expansion into the US market, and it knows it must make bolder moves if it wants to remain on top,” GlobalData Managing Director Neil Saunders said in emailed comments. “Even so, Dick’s is now entering a new era where it switches from the familiarity of driving organic growth to the unfamiliar ground of mergers and acquisitions.”
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