Foot Locker suffered its worst stock decline since the depths of the last recession after a bleak outlook renewed concerns that the industry’s growth streak has come to an end.
Shares of the footwear chain fell as much as 28 per cent in the wake of results that were weaker than expected by almost every benchmark: profit, sales and margins. Foot Locker also forecast continued sales declines over the rest of 2017, with chief executive Dick Johnson citing sluggish demand for top brands, including Nike’s Jordan and Adidas’s Stan Smith.
Foot Locker’s same-store sales – a key benchmark – fell for the first time since 2010. That sent ripples across the sporting-goods industry on Friday, dragging down shares of the field’s biggest companies.
“We certainly didn’t see the business dropping off as much as it did,” Johnson said on a call with analysts. In May, when Foot Locker reported disappointing first-quarter results, Johnson said the company had rebounded from a rough February with robust sales gains in March and April.
The results follow disappointing numbers from others in the industry, including Under Armour, Hibbett Sports, Dick’s Sporting Goods and Cabela’s.
“The consumer has moved on to other things,” Quo Vadis Capital analyst John Zolidis said in a research note.
The US sneaker slowdown can be chalked up to a slew of problems, according to Powell. Basketball, once the industry’s stalwart, continues to be weak. And the classic-looking sneakers – led by Adidas lines such as Stan Smith – have peaked, with the overall category falling 8 per cent in July. There’s also a material decline in sneaker sales to Hispanics. The theory is that they’re shopping less – a trend highlighted by Target’s chief executive – amid fears over increased immigration enforcement under President Donald Trump.
In delivering the earnings, Foot Locker’s Johnson said: “Some recent top styles fell well short of expectations and impacted this quarter’s results.” He also cited a lack of “innovative new products” and a compelling narrative that connects with young shoppers. He pointed to Adidas’s partnerships with musicians Kanye West and Pharrell Williams as earlier successes. – (Bloomberg)
