Footlocker Stock Price Plunges After Earnings Miss Blamed On Soft Back-To-School Sales

According to the earnings report, total sales fell by 1.4%

Foot Locker's stock price dropped sharply Wednesday after the company missed earnings expectations for the third quarter of 2024, primarily due to weaker-than-expected back-to-school sales.

According to an earnings report by FootLocker, total sales fell by 1.4% or $1.96 billion, while comparable sales only rose by 2.4%, below forecasted projections.

The decrease in sales is attributed to the sneaker and sports gear store's soft back-to-school sales in their Foot Locker locations and subsidiary stores such as Champs Sports, atmos and Kids Foot Locker.

The retailer's increased discounts and promotions outside of a non-seasonal period hurt profit margins, despite gross margins improving slightly by 230 basis points.

The weak back-to-school sales likely magnified concerns about FootLocker's ability to adapt to changing consumer habits, manage inventory, and compete in the current retail landscape which is highly competitive.

This combination of factors made the earnings miss a red flag for investors, driving the stock price to plunge.

The company also reported a loss of $0.34 per share or $33 million compared to a profit of $0.30 per share or $28 million the previous year.

Another contributing factor in Foot Locker's diminished stock price is the company's spending on technology and brand-building, which increased selling, general, and administrative costs by 210 basis points.

Comparing stock performance, Foot Locker's shares have been struggling.

Despite this, operational costs will continue to rise as Foot Locker invests in store updates and digital improvements.

The company lowered its full-year sales and earnings forecast, signaling challenges ahead.

While shares were more stable during the second and third quarters, the company is taking a more cautious outlook for the rest of 2024, which has raised concerns amongst NAME.

Last year, FootLocker shut 400 stores and 125 Champs Sports locations, while vowing to open 400 concept shops by 2026 as part of their 'Lace Up' plan.