Foot Locker’s fiscal 2Q17 top line
Foot Locker’s (FL) total sales declined 4.4% year-over-year to $1.7 billion during fiscal 2Q17.[1. fiscal 2Q17 ended July 29, 2017] The company’s results fell short of Wall Street’s top-line expectations by a margin of $100 million.
Foot Locker’s same-store sales fell 6% during the quarter, marking the first time in seven years that the company’s comps turned negative.
What drove down FL’s sales comps?
Richard Johnson, president and CEO of Foot Locker, noted that “sales of some recent top styles fell well short of our expectations and impacted this quarter’s results.” He added that the top line was also “affected by the limited availability of innovative new products in the market.”
Footwear sales were the hardest hit as comps declined at a mid-single digit rate. “Sales were down across all genders with mid-single-digit comp declines in men’s and women’s footwear, while children’s footwear sales decreased low double digits,” said Lauren Peters, Foot Locker’s chief financial officer.
The company’s management expects the difficult industry dynamics to continue throughout 2017. It expects sales comps to fall 3%–4% over the remainder of the year.
Foot Locker’s management expects to close more stores during the current fiscal year than the 100 closures anticipated earlier. Foot Locker ended the quarter with 3,359 owned stores.
Factors that are impacting FL’s sales
The sales of specialty athletic retailers are impacted by the decision of apparel players such as Nike (NKE) and Adidas (ADDYY) to move toward the direct-to-customer channel. Also, increasing competition from Amazon (AMZN) is a definite threat to these retailers’ sales.
However, Foot Locker’s (FL) management states that it is not worried about the Amazon threat. In the next article, we’ll explore Foot Locker’s management’s view on this trend.
Investors looking for exposure to Foot Locker could consider the First Trust Consumer Discretionary AlphaDEX FundETF (FXD), which invests 1% of its portfolio in the company.