(BFM Bourse) – The New York group expects a drop in sales which could reach 10% on a like-for-like basis this year. The dividend is suspended and the action plunged nearly 29% on Wednesday.
The distribution sector in the United States (and consumption in general) is going through a delicate phase, with inflation cutting into household purchasing power. Last week, the famous American brand Target had already indicated that it had experienced weaker than expected sales for its second quarter.
The sporting goods sector is further weighed down by the high level of inventories, which have accumulated due to disruptions in the supply chain, due to the violent “stop and go” since the pandemic.
With all these headwinds, it’s little wonder that sales at New York’s Foot Locker are suffering. But the fall in activity published Wednesday evening by the specialist in the distribution of sporting goods remains dizzying.
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Promotions that eat into the margin
The company’s sales were $1.86 billion, down 10.2% excluding currency effects. A number of comparable stores, they fell by 9.4%. Analysts expected better as the consensus was $1.88 billion in revenue, according to CNBC.
To encourage Americans not to freeze their spending on sporting goods, the group focused on promotions, which was one of the factors explaining the 460 basis point (4.6%) drop in its gross margin. .
The company also posted a net loss of $5 million, compared with a profit of $99 million over the same period of 2022.
“We saw a downturn in trends in July and are adjusting our outlook for 2023 to allow us to better compete with price-sensitive consumers (…) It is important to note that we continue to make progress on our inventory levels and that we are looking to best position the business for the upcoming holiday season and for 2024,” Foot Locker chief executive Mary Dillon said in a statement.
Foot Locker has indeed slashed its forecast for the 2023 financial year, now expecting a drop in its turnover on a like-for-like basis of between 9% and 10%, against a range of -7.5% to -9% previously. .
As for earnings per share, now provides an amount of 1.30 dollars to 1.50 dollars against a figure between 2 and 2.25 dollars previously.
The suspended dividend
The quarterly payment of dividends has also been suspended by the company so as to “provide flexibility to finance strategic investments”, said Mary Dillon.
Nothing very positive for the market. Foot Locker shares thus plunged nearly 29% on Wall Street on Wednesday and fell 0.7% on Thursday in pre-opening trading.
This also seems to have weighed on the entire sporting goods sector since Nike lost 2.7% on Wall Street while Adidas ended Wednesday’s session in Frankfurt down 3.3%. The German group resumed 1.4% this Thursday morning.
Foot Locker, however, has a solid reference shareholder, currently very busy with Casino and Atos. Indeed, as of December 31, 2022, the group’s largest shareholder was Vesa Equity Investment, the holding company of Czech businessman Daniel Kretinsky, with 12.3% of the capital, ahead of BlackRock (11%).
Julien Marion – ©2023 BFM Bourse