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Foot Locker Beats Earnings Targets In First Quarter

Foot Locker Beats Earnings Targets In First Quarter

Foot Locker reported first-quarter results declined against challenging year-ago comparisons, but earnings topped Wall Street estimates. Foot Locker now expects earnings and sales for the year to arrive at the upper end of revenue and earnings guidance.

“We are off to a strong start in 2022, reporting a solid quarter against the tough comparisons of fiscalsstimulus and historically-low promotions from last year,” said Richard Johnson, chairman and chief executive officer. “Our progress in broadening and enriching our assortment continues to meet our customers’ demand for choice. These efforts helped drive our strong results in the first quarter, which will allow us to more fully participate in the robust growth of our category going forward.”

Johnson continued, “As we elevate brands across our portfolio, continue to use our real estate flexibility to optimize our footprint, and evolve our omni-channel capabilities, we are excited about our improving ability to expand our customer base and fuel our consumer’s desire for self-expression.”

First Quarter Results
The company reported a net income of $133 million, or $1.37 per share, for the 13 weeks ended April 30, 2022, compared with a net income of $202 million, or $1.93 per share, for the corresponding prior-year period.

On a non-GAAP basis, the company earned $1.60 per share, compared with non-GAAP earnings per share of $1.96 in the prior-year period.

Adjusted EPS of $1.60 beat Wall Street’s consensus for $1.54. Sales of $2.175 billion were slightly below Wall Street’s consensus for $2.200 billion.

First-quarter comparable-store sales decreased by 1.9 percent, with apparel significantly outpacing footwear. Total sales increased by 1.0 percent, to $2,175 million, compared with sales of $2,153 million in the first quarter of 2021. Excluding foreign exchange rate fluctuations, total sales for the first quarter increased by 3.0 percent.

Gross margin declined by 80 basis points compared with the prior-year period, driven by higher supply chain costs and slightly higher markdowns versus historically-low levels.

SG&A deleveraged by 190 basis points, driven by labor costs and technology spending.

Financial Position
As of April 30, 2022, the company’s merchandise inventories were $1.4 billion, 37 percent higher than at the end of the first quarter last year, putting it in a solid position to fulfill demand. At quarter-end, the company’s cash and cash equivalents totaled $551 million, while debt on its balance sheet was $456 million.

The company’s total cash position, net of debt, was $95 million compared with $1.9 billion last year. During the first quarter of 2022, the company repurchased 2.7 million shares for $89 million and paid a quarterly dividend of $0.40 per share for $38 million. 

Financial Outlook
Andrew Page, executive vice president and chief financial officer, said, “Following our solid results from the first quarter, our strong inventory position going into the remainder of the year, and our strengthening vendor relationships, based on our current visibility, we now expect to achieve the upper end of our revenue and earnings guidance for the full year. Our balance sheet and real estate flexibility remain strategic assets as we continue to navigate this dynamic industry and serve the sport and sneaker community.”

Below is a summary of the company’s updated full-year 2022 outlook. 

  • Sales Change – Upper end of down 4 percent to 6 percent
  • Comparable Sales Growth – Upper end of down 8 percent to 10 percent
  • Square Footage Growth – Down 1 percent to 2 percent
  • Gross Margin – 30.6 percent to 30.8 percent
  • SG&A Rate – 20.7 percent to 20.9 percent
  • D&A – approximately $214 million
  • Interest – approximately $20 million
  • Tax Rate – 29-30 percent
  • Non-GAAP EPS – Upper end of $4.25-$4.60
  • Capital Expenditures – Up to $275 million

Store Update
The company opened 24 new stores during the first quarter, remodeled or relocated 23 stores, and closed 67 stores.  As of April 30, 2022, the company operated 2,815 stores in 28 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 148 franchised stores were operating in the Middle East and Asia.