Foot Locker (FL) stock collapsed early Wednesday, dropping as much as 34% in early trade as the company cut its full-year forecast for the second consecutive quarter and put its quarterly earnings on hold as a “difficult consumer backdrop” weighs on the shoe retailer.
“We saw a softening of trends in July and we are adjusting our outlook for 2023 to allow us to better compete for price-sensitive consumers while continuing to lean towards strategic investments,” said Marie Dillon, CEO of Foot Locker. Issuance of company earnings.
The retailer now sees full-year comparable sales falling in a range of 9% to 10%, which is a sharper decline than its initial forecast of a 7.5% to 9% decline.
Three months ago, Foot Locker stock fell more than 25% on the day the company also warned that a “difficult macroeconomic backdrop” would affect full-year sales during its first-quarter earnings call. Foot Locker has not seen same-store sales drop more than 6% in a year since 2010.
Foot Locker also cut its full-year forecast for earnings per share to a range of $1.30 to $1.50 after previously forecasting a range of $2.00 to $2.25.
Foot Locker stock is now down nearly 60% so far this year.
In the most recent quarter, the company’s earnings per share of $0.04 were down 96% from the same quarter a year earlier, reflecting Foot Locker’s worst quarter since the first quarter of its 2021 fiscal year.
Second-quarter sales were down nearly 10% from the same period a year earlier, to $1.86 billion. Wall Street analysts had expected $1.87 billion, according to Bloomberg data.
Like other retailers, the company also said that “downturn” affected profit margins during the quarter.
Foot Locker’s woes over the past few months could extend far beyond its own business, too.
After last quarter’s disappointing results, Wall Street analysts warned that a decline in Foot Locker could affect Nike (NKE), which historically accounts for more than half of all Foot Locker sales.
Nike shares fell more than 3.5% in early trading on Wednesday, with the stock poised for its 10th straight day of decline.
After successfully building Ulta (UTLA) for an eight-year term ending in 2021, Dillon was named CEO of Foot Locker in August 2022 and assumed the position in January.
Led by Dillon, Foot Locker is currently implementing a turnaround strategy dubbed “Lace Up”. The shoe chain that has become a staple of traditional malls plans to close 400 underperforming stores, mostly in lower-level malls, and focus more on locations outside of malls.
Foot Locker said in its statement that in order to continue with this plan, it will no longer provide its quarterly cash dividends.
“To ensure that we have the flexibility to continue to appropriately fund our strategic investments, we are pausing our quarterly cash dividend beyond the October dividend that the Board recently approved,” Dillon said in the statement. “We intend to update the market on our future capital allocation plans and the timing around our long-term financial goals when we report our fourth quarter results.”
Josh Schafer is a reporter for Yahoo Finance.
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