Foot Locker’s first quarter results for this year show a decline in sales and gross margin, with 56 stores closing across markets.
The brand’s total sales were down 4.6 per cent to $1.77 billion from 41.87 billion year-on-year.
Its comparable sales decreased by 2.6 per cent, with North American comparable sales decreasing by 0.5 per cent.
The company’s international businesses saw comparable sales decline by 8.5 per cent, mainly attributed to softened sales in Europe.
GlobalData MD Neil Saunders emphasised the need for more effort to improve operational functions across the brand.
“The position of Foot Locker stores in some malls is suboptimal, and the store design is in desperate need of a refresh,” he said.
“This is especially so as rivals like JD expand rapidly and offer a fresher take on sneaker retail.
“This is a problem in the core US market, but it is also impacting overseas markets where Foot Locker has a less convincing position and is being buffeted by rivals who are more visible and, generally, execute better,” said Saunders.
Its gross margin dropped by 40 basis points as compared to the same period last year.
The company saw a net loss of $363 million as compared to a net income of $8 million year-on-year, with a $271 million loss in operating income.
Although the brand opened nine new stores in the first quarter of the year, it saw 56 store closures, including those in South Korea, Denmark, Norway, Sweden, Greece, and Romania.
Foot Locker remodelled 11 stores and refreshed 69 others under its upgraded design strategy.
“Broadly, we are impressed with things like newer format stores and the lineup of sneakers outside of the Nike portfolio,” said Saunders.
The company launched its new Champs Sports and Foot Locker Kids mobile apps.
“On a divisional basis, both the Foot Locker and Champs formats posted sales declines, the former by 2.6 per cent on a comparable basis and the latter by 2.2 per cent,” said Saunders.
“Both chains lost a modest amount of share in the sneaker and sporting goods segments over the period, some of which came from heavier exposure to customers who have pulled back more than average,” he said.
Foot Locker has also announced its acquisition by Dick’s Sporting Goods, allowing the brand to lean on the extensive retail experience of Dick’s as it recovers.
“Fortunately, we note from yesterday’s updates by Dick’s that the company has gone into this transaction with its eyes firmly open and with the knowledge that it needs to improve execution,” said Saunders.
“Given its track record, we believe it has the power and ability to transform Foot Locker, but this will only be achieved with a significant amount of effort.”
