“More aggressive markdowns” are on the cards at Foot Locker as the firm looks to drive demand and manage inventory, Mary Dillon, president and chief executive officer of Foot Locker, said with the company’s Q1 financial results announcement confirming it was revising previous guidance as macroeconomic pressures grow.
First Quarter (Q1) result highlights
- Total sales decreased by 11.4% to $1.93bn, compared with revenue of $2.18bn in the last quarter.
- Income from operations fell to $61m from $220m.
- Gross margin declined by 400 basis points compared with the prior-year period, driven by a combination of higher markdowns compared to historically low levels in the prior year, and occupancy deleverage, as well as an increase in theft-related shrink.
- Net income decreased to $36m as opposed to $133m in the first quarter of fiscal 2022.
Dillon explained: “Coming off the recent launch of our Lace Up Strategy at our Investor Day in March, we are making early progress in building a strong foundation to return to sustainable growth beyond this year. However, our sales have since softened meaningfully given the tough macroeconomic backdrop, causing us to reduce our guidance for the year as we take more aggressive markdowns to both drive demand and manage inventory.”
The retailer also pointed out that during the first quarter, it opened 13 new stores, remodelled, or relocated 18 stores, and closed 35 stores.
Last year in May, Foot Locker entered a strategic partnership with German sporting goods giant Adidas aimed at targeting $2bn in retail sales by 2025.
Foot Locker is also announcing the appointment of Mike Baughn as executive vice president and chief financial officer, effective 12 June 2023.
Baughn, who brings a wealth of more than 15 years of experience in various financial leadership roles, will be joining from Kohl’s Corporation and oversees Foot Locker’s financial initiatives and position the company for long-term growth.
“Foot Locker is a cultural staple that has led the footwear category for nearly 50 years. I am honoured to join this incredible team as CFO at such a pivotal time for the company as they deliver the Lace Up plan,” said Baughn. “Foot Locker has a rich heritage to build upon and I am looking forward to working closely with Mary Dillon and the leadership team to ensure great customer experiences, as well as value for our stakeholders.”