Foot Locker, Inc. reported Monday sharply lower profit in its fourth quarter with slight drop in net sales, even as comparable sales increased. Further, the specialty athletic retailer announced dividend, and issued fiscal 2023 forecast, well below last year. However, over the long term, the company projects growth.
The retailer also announced the launch of “Lace Up” plan with a new set of strategic imperatives and financial objectives.
Foot Locker further announced that it is transforming its business model in Asia as part of its efforts to simplify business model and focus on core banners and regions.
The company would close its stores and ecommerce in Hong Kong and Macau, and convert its current owned and operated stores and ecommerce in Singapore and Malaysia to a license model.
MAP Active, an Indonesian lifestyle retailer, who already partners with Foot Locker in Indonesia and the Philippines, will take over the company’s store and ecommerce operations in Singapore and Malaysia, and seek to grow in those markets and new markets in the region over time.
Foot Locker will continue to operate stores in South Korea, and would continue to pursue growth in the region through license partners.
Mary Dillon, President and Chief Executive Officer, said, “We are entering 2023 with a focus on resetting the business – simplifying our operations and investing in our core banners and capabilities to position the Company for growth in 2024 and beyond.”
For fiscal 2023, which includes the 53rd week, the company projects adjusted earnings per share of $3.35 to $3.65 including $0.15 from the extra week.
On average, 20 analysts polled by Thomson Reuters expect earnings of $4.15 per share for the year. Analysts’ estimates typically exclude special items.
In fiscal 2022, adjusted earnings were $4.95 per share.
The company expects annual sales to be down 3.5 percent to 5.5 percent including around 1 percent from the extra week, and comparable sales to be down 3.5 percent to 5.5 percent.
Beyond 2023, new strategies are expected to drive low- to mid-twenties adjusted earnings per share growth.
Over the long-term, for fiscal years 2024 through 2026, total sales would grow 5 percent to 6 percent and comparable sales would grow 3 percent to 4 percent.
Further, the Board of Directors declared a quarterly cash dividend on its stock of $0.40 per share, which will be payable on April 28, to shareholders of record on April 14.
In its fourth quarter, net income decreased to $19 million from last year’s $103 million. Earnings per share were $0.20, down from $1.02 a year ago.
Adjusted net income was $92 million or $0.97 per share, compared to $148 million or $1.46 per share in 2021.
Analysts expected earnings of $0.51 per share for the quarter.
Gross margin declined by 290 basis points, driven mainly by higher markdowns on increased promotional activity across the industry.
Total sales decreased 0.3 percent to $2.33 billion from $2.34 billion a year ago. Total sales increased 3.6 percent at constant exchange rates.
Analysts expected sales of $2.15 billion for the quarter.
Comparable-store sales grew 4.2 percent, driven by increased traffic and improved access to high-quality inventory, resulting in broad-based strength across brands and regions.
As of January 28, the company operated 2,714 stores in 29 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 159 franchised stores were operating in the Middle East and Asia.
In pre-market activity on the NYSE, Foot Locker shares were gaining around 1.5 percent to trade at $42.89.
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