Foot Locker CEO Mary Dillon on Monday touted a “renewed” and revitalized relationship with Nike, including an emphasis on what she called “sneaker culture.”
Shares of Foot Locker fell about 6%. The sneaker and athletic-apparel retailer also reported quarterly earnings Monday morning.
Through the holiday quarter, which ended Jan. 28, Foot Locker posted just below $2.34 billion in sales, barely lower than a yr earlier. Its profit for the period got here in at $19 million, or 20 cents a share, compared with $103 million, or $1.02 a share, a yr earlier. Excluding one-time items, earnings per share were 97 cents, down from $1.46.
For the present fiscal yr, which can include an additional week, Foot Locker expects sales and comparable sales to be down 3.5% to five.5%, with adjusted earnings per share of $3.35 to $3.65.
The retailer plans to shut about 400 under-performing mall stores but said it should open around 300 latest format stores.
Since Dillon took over as chief executive of Foot Locker in September, she’s spent a “great deal of time with Nike revitalizing our partnership” after Nike moved away from wholesale channels to give attention to constructing out direct to consumer sales.
“In fact, Nike is our largest brand partner and the leader within the industry. From day one I have been welcomed to the industry by John and Heidi and their team,” Dillon said of Nike CEO John Donahoe and Heidi O’Neill, its president of consumer and marketplace.
Dillon, the previous chief executive of Ulta, said Foot Locker and Nike have “re-established joint planning, in addition to data and insight sharing.”
“The fruits of our renewed commitment to 1 one other will begin to point out up in holiday this yr as we construct increasing momentum to 2024 and the fiftieth anniversary of Foot Locker,” Dillon said.
For the past several years, Nike has been working to grow its direct to consumer business and with it, cut partnerships with quite a few wholesale accounts so it could grow its e-commerce channels and open latest stores.
Nevertheless, like other retailers, Nike was stuck with a glut of inventory brought on by pandemic-related supply chain challenges over the previous few quarters and relied on those wholesale partners to maneuver that product out.
During its fiscal-second quarter that ended Nov. 30, Nike’s wholesale revenue was up 19% for the quarter after it’d been effectively flat over the previous several quarters.
“We have been ravenous the wholesale channel for six to eight quarters due to supply constraints and in order we had supply constraints, we were prioritizing adequate inventory levels inside NIKE Direct and so we’re seeing strong demand as we return into our wholesale partners with available supply,” Matthew Friend, Nike’s chief financial officer, explained to investors during an earnings call in December.
In January, when asked about Nike’s direct to consumer plans during an interview with CNBC, Donahoe spoke in regards to the importance of an omnichannel model.
“Our strategic wholesale partners, partners like Dick’s Sporting Goods or Foot Locker or JD, are very, very necessary because consumers wish to find a way to try on products, they wish to find a way to the touch and feel,” Donahoe said. “And so we have invested in strengthening those strategic relationships.”
While Nike was glad to do away with that extra inventory during its last quarter, Foot Locker is now coping with its own glut of shoes and apparel it’s struggling to get off the shelves. At the top of its fiscal fourth-quarter, inventories stood at $1.6 billion, about 30% higher than the yr ago period, although down barely from the fiscal third quarter.
As a part of its latest strategy under Dillon, Foot Locker is revisiting its store footprint in a bid to drive revenue and acquire latest customers. While it plans to shut about 400 underperforming mall stores in North America, it plans to bolster its latest format stores from about 120 to greater than 400 by 2026.
The brand new formats include Foot Locker’s community stores, power stores and its house of play concept.