By Ciara Linnane
NEW YORK (Dow Jones) — US sporting goods retailer Foot Locker posted a second-quarter loss and again lowered its full-year guidance. The company is also suspending its quarterly dividend to conserve cash. Foot Locker cited an unchanged difficult consumer sector as the reason. Shoplifting was also a problem.
On the US stock exchange, Foot Locker shares plummeted 31 percent, dragging competitors down with it. Puma fell by 4.5 percent, Adidas slipped by 5.9 percent and currently hold the red lantern in the DAX.
Foot Locker posted a net loss of $5 million, or 5 cents a share, for the quarter, down from a profit of $94 million, or 99 cents a share, in the year-ago period. Adjusted earnings per share came in at 4 cents, in line with analyst guidance, according to a consensus factset. Revenue fell 9.9 percent to $1.89 billion. Retail sales fell 9.4 percent.
“Our second quarter was broadly in line with our expectations, despite the still challenging consumer environment,” said CEO Mary Dillon. “However, we saw a softening in trends in July and are adjusting our 2023 outlook to best position ourselves to compete for price-sensitive consumers, while remaining supported by the strategic investments that drive our Lace Up plan,” added her at.
As of July 29, 2023, the company’s inventories were $1.8 billion, up 11 percent from the end of the second quarter of 2022.
The company lowered full-year guidance and now expects adjusted earnings per share to be between $1.30 and $1.50, down from a previous guidance of $2.00 to $2.25, which was only lowered in May . In addition, Foot Locker expects sales to fall 8 to 9 percent from the previous guidance of minus 6.5 to minus 8 percent. The quarterly cash dividend is scheduled to be suspended in excess of the recently approved October payout to conserve cash for strategic investments. “We intend to update the market on our capital allocation plans and the timeline for our longer-term financial goals when we report fourth-quarter results,” Dillon said.
Gross margin decreased 460 basis points in the second quarter due to an increase in advertising activity, including higher discounts, lower occupancy and higher shrinkage. Shrinkage, a factor that appears in many retailers’ quarterly results, can include damaged merchandise but is increasingly related to shoplifting, which the companies say is often carried out by organized gangs. This problem costs companies in the retail sector billions of dollars annually, according to executives.
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(END) Dow Jones Newswires
August 23, 2023 08:11 ET (12:11 GMT)
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