Foot Locker (FL) Reports Fourth Quarter 2021 Results
A sign hangs above the entrance to a Foot Locker store on August 02, 2021 in Chicago, Illinois.
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Shares of Foot Locker fell on Friday after the retailer said it expects revenue to decline in 2022 as it expects it will no longer be able to sell as many products from its main supplier, Nike.
Starting in the fourth quarter of 2022, Foot Locker said no vendor will account for more than 55% of its purchases from its vendors, up from 65% a year ago. On an annual basis, purchases from Nike will not exceed 60% of total purchases this year, he said, compared to 70% in 2021 and 75% in 2020.
Foot Locker said the adjustments reflected Nike’s accelerated shift to sell more of its sneakers and apparel directly to consumers. In turn, Foot Locker said it was stepping up its own direct-to-consumer efforts, launching a number of private label brands, including in apparel.
Sneaker brands such as Nike and Under Armor have been very clear about their efforts to reduce reliance on wholesale partners. By selling through their own physical stores and websites, these brands hope to achieve higher profit margins. This forced wholesalers, such as Foot Locker and Dick’s Sporting Goods, to launch more of their own lines.
Shares of Foot Locker recently fell more than 34% after hitting a 52-week low at $26.82. Its stock is down about 5% year-to-date, as of Thursday’s market close.
Foot Locker’s net income for the three months ended Jan. 29 fell to $102 million, or $1.02 per share, from $123 million, or $1.17 per share, a year earlier . Excluding one-time items, it earned $1.67 per share, beating analyst estimates of $1.44, based on a Refintiv survey.
Sales rose 6.9% to $2.34 billion from $2.19 billion a year earlier. This exceeded expectations by $2.33 billion.
Same-store sales rose 0.8%, he said, with apparel revenue significantly outpacing footwear.
The shoe retailer’s bleak outlook for 2022 was of greater concern to investors. Foot Locker said Friday it expects sales to decline 4% to 6% this year, and same store sales are expected to fall 8% to 10%.
Analysts were looking for 2% year-over-year revenue growth, according to Refinitiv.
Foot Locker also said this year it will go through a period where consumers have extra stimulus dollars in their pockets to spend.
The company said on Friday that it plans to implement a cost-cutting program, which it will launch shortly, to cut about $200 million in expenses each year. Foot Locker’s board also approved a new $1.2 billion share buyback plan.
Find the full financial press release from Foot Locker here.