This story was updated March 6 at 4:14 p.m. EST
Foot Locker Inc. stock closed down nearly 30 percent on Wednesday after the company said it would take longer than expected to reach its financial goals.
The company updated its timelines for its Lace-Up plan, revealed in March 2023, and said it would take two more years to reach revenue targets of $9.5 billion annually. The company originally aimed to reach the goal by 2026 through diversifying its brand portfolio, relaunching the Foot Locker brand with new store formats focused on an off-mall presence, maximizing its loyalty program and investing in technology to enhance the customer journey. Now, Foot Locker expects these results to come to fruition in 2028.
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“We believe that it will take us a little bit longer, but we’re going to invest in the strategies that are working for us. [Those] will continue to drive our top line and long-term profitable growth,” Foot Locker president and chief executive officer Mary Dillon told WWD sister publication FN in an interview, explaining how the company exited 2023 at a weaker point than expected, which in part prompted the delayed timeline.
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Dillon said the plan had progressed in the fourth quarter, with increased brand engagement and awareness, digital growth, customer acquisition and increased conversion. Foot Locker has also seen success with its new store format plan, opening 29 new stores in the fourth quarter and remodeling or relocating 66 stores. Foot Locker also closed 113 stores in the quarter.
Dillon also highlighted Foot Locker’s progress in diversifying its brand mix outside of Nike. The percentage of non-Nike brand sales increased to 40 percent in the fourth quarter, from 37 percent of the same period last year, in line with the company’s goal to have more than 40 percent of its brand mix be outside Nike by 2026.
Dillon said names like Adidas, New Balance, Hoka, Ugg and On have continued to bolster the non-Nike business, though Nike is still the retailer’s dominant brand.
Foot Locker also announced results for the fourth quarter, which beat analysts’ expectations.
Total sales were $2.38 billion, up 2 percent over the prior year, ahead of the company’s guidance and ahead of the $2.28 billion expected by analysts surveyed by Yahoo Finance. Foot Locker reported a net loss of $389 million in the fourth quarter, compared with net income of $19 million in the fourth quarter of last year. Non-GAAP earnings per share was 38 cents, compared to 97 cents per share in the fourth quarter of last year. This beat analysts’ expectations of 32 cents and was ahead of guidance provided by the company. Diluted loss per share in the quarter was $4.13.
Comparable store sales were down 0.7 percent in the fourth quarter. Similar to prior quarters, Foot Locker attributed this drop to “repositioning the Champs Sports banner, consumer softness and changing vendor mix.” Foot Locker said last March it would close 400 underperforming stores, including about 125 underperforming Champs locations.
For fiscal year 2024, Foot Locker expects sales to be between down 1 percent and up 1 percent. Comparable sales are expected to be up between 1 and 3 percent. Non-GAAP EPS is expected in the range of $1.50 to $1.70 and gross margin is expected to be between 29.8 percent and 30 percent, due to lower markdowns.
In a statement, chief financial officer and executive vice president Mike Baughn said that 2024 will be “a cash rebuilding year” for Foot Locker.
After investing in markdowns to clear through inventory in 2024, Dillon said she believes the company can start lifting profits back up in 2024 as it looks to “recapture some of that promotional pressure.”
“We’re building off of 2023 in 2024,” Dillon said. “It’s a year where we’re going to continue to invest in our Lace Up plan strategies, but we are driving top-line comp growth.”