Foot Locker Inc. (NYSE: FL) is in trouble. What is less obvious is whether it can escape what appears to be a grim future. Its stock fell 30% after it announced weak quarterly financials. An industry move to shoe sales online and more direct brick-and-mortar competition means the trouble will not end.
Foot Locker’s results for the most recent quarter were not bad. Total revenue ticked up 2% to $2.38 billion, but comparable store sales dipped by 0.7%. The company lost $389 million in that quarter, compared to a profit of $19 million in the same quarter the year before.
Foot Locker President and Chief Executive Officer Mary Dillon commented on the extremely modest lift in revenue: “As we continued to deliver on the strategic imperatives of our Lace Up Plan, we built significant momentum through the holiday season, driven by full-price selling in addition to compelling promotions. We also proactively reinvested in markdowns to end the year with leaner inventory levels compared to our expectations.” The company’s forecast showed these improvements had not happened. Full-year guidance was that revenue would be about flat. (Here are five reasons to avoid Nike shoes today.)
Foot Locker has 2,523 stores across 26 countries. That means it has the distribution, rent, and retail expenses that online shoe sellers like Amazon do not. Additionally, large retailers like Walmart have built up athletic apparel offerings. Is Walmart’s inventory as complete as that at Foot Locker? Perhaps not. However, Walmart has 4,600 stores in the United States and is a one-stop shop for clothes for many of its customers.
Foot Locker has to stand out in a jungle of stores, often in malls. It does not have the convenience of shopping online, at least for most customers. It is not the only retailer with these challenges. But being one among companies with the same hurdle does not help it very much.
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