iStock.com/martinrlee
Foot Locker Shares Plummet on Profit Projection Disappointment
March 6, 2024
Foot Locker’s shares plummeted by approximately 27% on Wednesday following the retailer’s announcement of lower-than-expected profit projections for 2024. The significant drop was driven by plans for increased investments across its operations aimed at stimulating demand.
Despite a robust performance during the holiday quarter, Foot Locker disclosed that it would postpone achieving its long-term profit margin target until 2028, which dashed hopes for a swift margin recovery. This setback was primarily attributed to heightened promotional activities, which had been eating into profit margins.
Based in New York, the company, amidst a restructuring effort initiated in March of last year, highlighted progress with its “Lace Up” strategy, credited with enhancing its digital presence and driving more full-price sales, albeit at the expense of markdowns to clear inventory.
Chief Financial Officer Mike Baughn announced that the company would not reinstate dividend payments, foreseeing another year of substantial investments in 2024. This move suggested that reduced discounts would further impact demand in the early part of the year.
Foot Locker projected full-year adjusted earnings ranging between $1.50 and $1.70 per share, falling short of analysts’ average estimate of $1.93 per share. This deviation from expectations prompted market analysts to reevaluate Foot Locker’s position in the retail sector, resulting in a downward revision of its stock rating by CFRA Research analyst Zachary Warring to “strong sell.” Warring cited Foot Locker’s inconsistency in growing revenue and profit within the evolving retail landscape as the primary reason for the downgrade.
Despite the gloomy outlook, the retailer anticipates steady demand for popular sneakers, such as Nike’s Air Force 1’s and Dunks, Adidas AE 1 shoes, and New Balance sneakers. As a result, it forecasts full-year same-store sales growth of 1% to 3%, above market expectations of 0.7%. Investors remain cautious as they await further updates on Foot Locker’s strategies to navigate through challenging market conditions and regain profitability amidst the evolving retail landscape.
Recent News
Godfather of AI Suggests a Universal Basic Income
Renowned computer scientist Professor Geoffrey Hinton is advocating for urgent governmental intervention amidst rising concerns over AI-induced job displacement and widening inequality. His expert opinion is not to be taken lightly since he is often hailed as the “godfather of artificial intelligence.”
Ducati Honors Ayrton Senna with Limited Edition Monster
As Formula 1 drivers gear up for the Imola circuit this weekend, Ducati has unveiled a special limited edition Monster to honor Ayrton Senna, marking 30 years since his tragic passing on this track. This isn’t just a commemorative piece; Senna had a deep connection with Ducati, having been both a fan and a collaborator with the brand.
Elon Musk in Bali to Launch Starlink Satellite Internet Service
Elon Musk, the visionary entrepreneur behind Tesla and SpaceX, touched down in Indonesia’s picturesque island of Bali on Sunday, embarking on a mission to introduce Starlink satellite internet service to the vast archipelago nation.
Blue Origin Relaunches Space Tourism
Blue Origin made a triumphant return to space tourism with the launch of its New Shepard rocket, marking the end of a nearly two-year hiatus. The NS-25 mission, which took off at 9:36 a.m. CT (10:36 a.m. ET) on Sunday, May 19, from Blue Origin’s private facility in West Texas, was the company’s seventh crewed flight and the first since a failed uncrewed test flight in September 2022.