Shares in Foot Locker, the footwear retail chain, experienced a significant drop of almost a third after the company announced lower-than-expected earnings. This news has raised concerns among analysts regarding weakening spending patterns. In addition to this, Foot Locker also made the decision to suspend its dividend.
The company has revised its revenue projections, anticipating a further decline of up to 9%. This adjustment comes after sales softened in July. In May, Foot Locker had already issued a warning that revenue growth had slowed as US consumers reduced their discretionary spending. This decline in sales has been a challenge for the company, prompting them to implement aggressive promotional strategies to increase demand and prevent excessive inventory levels. As a result, stock levels rose by 11% to $1.8 billion (€1.6 billion) in the quarter.
Foot Locker’s CEO, Mary Dillon, acknowledged that their customer base, particularly lower- to middle-income shoppers, remains sensitive to price. She emphasized the need for the company to stay ahead of this pressure in order to meet customer expectations. These latest financial results not only impact Foot Locker, but also raise concerns about the overall strength of consumer spending in the US. Furthermore, Foot Locker revealed that inventory shrinkage, which includes factors such as shoplifting and employee theft, has been increasing over time. However, it was not identified as one of the main contributors to the decline in profit margins. Other US retailers have previously stated that theft has played a significant role in their earnings falling short.
The decline in Foot Locker’s shares was evident in the New York trade session, where they fell by 33% at one point. This drop adds to the already sharp decline experienced by the company’s shares throughout the year.