City analysts say they’re concerned about the weak guidance given in the latest quarterly report
Foot Locker shares fell more than 8% in trading on Friday after the sporting goods retailer reported slightly higher earnings, but gave a softer-than-expected sales forecast for the holiday quarter.
The sportswear retailer forecast a third-quarter sales increase of between 2.5% and 3.5% over the year prior, at a time when most of its competitors are expecting significant growth. It also expects to keep operating margins steady for the second quarter in a row.
However, Foot Locker still has growth markets such as e-commerce, Instagram influencers and social media influencers – meaning consumers are engaging with the brand online as part of their shopping experience. Companies like Nike and Under Armour have been taking advantage of these efforts by seeking out consumers and putting their advertising dollars behind the influencers on these platforms.
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Before Friday’s report, there was growing concern about the health of Nike, which has recently felt the effect of a sales slump in North America. It’s also been a tough year for Under Armour, which had sought a $200m round of funding from a group of backers in order to pay for closing its deal to buy rival sportswear company Camuto Group.
Foot Locker said net sales in North America increased 4.1% to $1.39bn for the third quarter. Revenue was a bit weaker than forecast, however. Analysts were expecting $1.41bn in sales in the period, according to IBES data from Refinitiv. Revenue from stores open at least a year increased 2.4% in the third quarter, in line with analysts’ estimates. The company also reported that the decline in same-store sales was mainly due to a decrease in traffic.
“We executed well in a range of scenarios, achieving EPS in the mid-point of our revised guidance even with challenges in a few regions,” said Richard Johnson, the chief executive of Foot Locker.
In September, Nike said that it is cutting its workforce in an effort to cut costs. The layoffs include departures at its ad agency, Wieden+Kennedy. Foot Locker said on Friday that the company is reviewing its own workforce and that no additional job cuts are expected, suggesting that the changes at Wieden+Kennedy are happening at Foot Locker.
Nike and Under Armour are expected to have an unprofitable year as the sportswear industry struggles to rebound from declining sales.