Foot Locker Q4 2024 Earnings

Foot Locker Expects Another Year of Deep Discounts in Sneaker Industry

Foot Locker said Wednesday it expects another year of deep discounts in the sneaker industry as its largest brand partner Nike continues its reset and relies on markdowns to clear through stale inventory.

Earnings and Sales Performance in the Holiday Quarter

The footwear giant delivered mixed results for its holiday quarter, beating Wall Street’s expectations on earnings but falling short on sales. In the year ahead, it anticipates that trend to reverse. For fiscal 2025, Foot Locker is expecting profits to be lower than Wall Street estimated, while the high end of its comparable sales guidance is better than analysts had forecast, according to LSEG and StreetAccount.

Financial Results

Here’s how Foot Locker performed in its fiscal fourth quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 86 cents adjusted vs. 72 cents expected
• Revenue: $2.25 billion vs. $2.32 billion expected

The company’s reported net income for the three-month period that ended Feb. 1 was $49 million, or 51 cents per share, compared with a loss of $389 million, or $4.13 per share, a year earlier. Excluding one-time items related to impairment charges and net losses from discontinued operations, Foot Locker reported adjusted earnings per share of $82 million, or 86 cents per share.

Sneaker Industry Trends and Expectations

Foot Locker improved profits by more than 100% compared with the prior quarter, but it’s not expecting that trend to continue in its current fiscal year, thanks to deep promotional activity across the sneaker marketplace. It’s expecting adjusted earnings per share to be between $1.35 and $1.65, well behind Wall Street estimates of $1.77, according to LSEG.

Nike Partnership and Challenges

Foot Locker’s largest brand partner, Nike, is in the midst of a turnaround under its new CEO Elliott Hill, and is relying on markdowns to clear out inventory. The company is aiming to drive full-price sales on its website, but first, it needs to aggressively liquidate old inventory through "less profitable channels," executives said. This presents a challenge for Foot Locker, as it makes it more likely that customers will buy from Nike directly, rather than from Foot Locker.

Diversifying Brand Mix and Store Fleet Refresh

Under CEO Mary Dillon’s direction, Foot Locker has worked to diversify its brand mix and is now doing a lot more business with buzzy companies like On Running and Hoka and legacy stalwarts like Ugg. The company is also doing a better job of keeping brands happy now that it’s working to refresh and remodel its aging store fleet, which is still responsible for more than 80% of sales. It now has eight "reimagined" locations across North America, Europe, and Asia, which are top-to-bottom remodels of the company’s store layout and approach.

Conclusion

Foot Locker is expecting another year of deep discounts in the sneaker industry, driven by its largest brand partner Nike’s reliance on markdowns to clear through stale inventory. While the company is working to diversify its brand mix and refresh its store fleet, it faces challenges in the year ahead, including the impact of Nike’s promotional activities on its business.

FAQs

Q: What is Foot Locker’s guidance for fiscal 2025?
A: The company is expecting adjusted earnings per share to be between $1.35 and $1.65, and comparable sales to rise between 1% and 2.5%.

Q: How is Foot Locker’s relationship with Nike?
A: Foot Locker’s relationship with Nike is "strong and fully reset," according to CEO Mary Dillon, and the company believes in the work Nike is doing to revitalize the brand.

Q: What is Foot Locker’s strategy to deal with Nike’s promotional activities?
A: Foot Locker is aligning closely with Nike to optimize its merchandise mix and inventory levels to support full-price sales and partner with Nike to bring health back to critical consumer franchises like Air Force 1, Dunk, and the AJ1.