Foot Locker’s second-quarter results indicated it is rebounding from a sluggish 2017 but its shares tumbled as same-store sales missed analysts’ estimates.
The retailer’s net income rose to $88 million, or $0.75 per share, from $51 million, or $0.39 per share, in the prior year, while total sales climbed 4.8% to $1.78 billion. Analysts had expected earnings of $0.70 per share on revenue of $1.76 billion.
But same-store sales, a key retail metric, inched up only 0.5%, versus estimates of a 0.7% gain. CFO Lauren Peters said comparable sales in Foot Locker’s struggling footwear division declined in the low single digits.
On news of the earnings, Foot Locker shares fell 9.1% to $48.32 in trading Friday.
“Our performance reflects the work we are doing on several fronts to position the company to succeed in a rapidly evolving retail environment,” CEO Richard Johnson said in a news release. “We remain optimistic that our improving product flow and depth in premium styles positions us to deliver stronger comparable sales growth in the second half of 2018.”
Foot Locker’s gross margin rate increased to 30.2% from 29.6% a year ago, while the SG&A expense rate increased to 21.3% from 19.9% last year.
Peters told analysts the company expects comparable sales to be up low single-digits in the third quarter, “with Q4 strengthening further within that low single-digit range.”
Like many other retailers, Foot Locker has been squeezed by competition from the online segment led by Amazon. To turn things around, it has invested in its digital offering, closed under-performing stores, and created new ways to collaborate with its biggest partner, Nike.
The company has been benefiting from higher sales of premium products and Peters also attributed the second-quarter performance to “our disciplined approach to inventory management … which is enabling us to flow improving merchandise assortments into the business for back-to-school and the holidays.”
In the footwear category, men’s comparable sales posted a low single-digit gain, while women’s and kids’ footwear both posted low single-digit declines, Peters said.