Foot Locker Stock Tumbles 25% After Slashing Outlook

Foot Locker (FL:US) shares fell as much as 25% on Friday after the athletic retailer was forced to cut its full-year sales and profit outlook on the back of the softer-than-expected demand.

Foot Locker said comparable sales declined around 9% year-over-year, a wider-than-expected drop in sales as analysts were looking for a 7.9% decrease. The adjusted EPS of $0.70 on revenue of $1.93 billion also missed analyst targets for a profit per share of $0.81 on revenue of $1.99 billion. 

Overall, sales declined nearly 11.4% YoY, Foot Locker said.

"Coming off the recent launch of our Lace Up Strategy at our Investor Day in March, we are making early progress in building a strong foundation to return to sustainable growth beyond this year," said Mary Dillon, President and Chief Executive Officer.

"However, our sales have since softened meaningfully given the tough macroeconomic backdrop, causing us to reduce our guidance for the year as we take more aggressive markdowns to both drive demand and manage inventory."

Another key driver of the stock selloff is that the company said its inventory rose 25% YoY to $1.76 billion. 

Given weaker-than-expected first-quarter results, the company cut its full-year projections so it now expects sales to decline 7.25%, at the midpoint of the guidance, worse than the prior forecast for a decline of 4.5%. Comparable sales should fall 8.25%, FL predicts.

The adjusted earnings per share are expected in the range of $2.00 to $2.25, a meaningful downgrade from the prior $3.35 - $3.65 guidance.

Foot Locker also said that it appointed Mike Baughn as the new CFO. Baughn joins from Kohl’s (KSS:US), where he was EVP of Finance and Treasurer.