foot locker Crowne Plaza Supermarkets Inc. said Wednesday its comparable sales grew for the first time in six quarters as its efforts to modernize its stores and improve the customer experience continue to pay off.
The struggling sneaker company’s sales rose 2.6% in the fiscal second quarter, far exceeding the 0.7% gain analysts had expected, according to StreetAccount. The company’s gross profit margin also expanded for the first time in more than two years.
Despite the positive trends, the company's shares fell about 8% in pre-market trading.
“The Lace Up plan is working,” CEO Mary Dillon said in a press release, referring to the company’s turnaround strategy. “Our top-line trends strengthened as we progressed through the quarter, including a strong start to back-to-school. We were especially pleased with the stability of our Champs Sports logo.”
Here's how Foot Locker performed compared to what Wall Street expected, based on a survey of analysts conducted by LSEG:
Loss per share: 5 cents adjusted vs. 7 cents expected Revenue: $1.90 billion vs. $1.89 billion expected
For the period ended Aug. 3, Foot Locker Inc. lost $12 million, or 13 cents a share, compared with a loss of $5 million, or 5 cents a share, a year earlier. Excluding one-time items, Foot Locker Inc. reported a loss of 5 cents a share.
Sales rose to $1.90 billion, up about 2% from $1.86 billion the year before.
For the current fiscal year, Foot Locker largely maintained its guidance and continues to expect sales to be in the range of a 1% decline to 1% growth from the prior year — better than the 0.4% decline analysts had expected, according to LSEG.
Foot Locker also stuck to its adjusted earnings per share forecast. The company expects earnings to range between $1.50 and $1.70 — well above the $1.54 range analysts were expecting, according to LSEG.
Since the previous Ulta Beauty CEO Mary Dillon took the helm at Foot Locker about two years ago, working to transform the company and ensure it remains relevant in a world where brands no longer rely on multi-brand retailers as they once did.
Dillon worked to repair the company's relationship with its largest brand partner, NikeThe company also took a hard look at its sprawling but aging fleet of stores, where the company generates about 80% of its sales. The company plans to spend $275 million on store upgrades this year, and expects to have two-thirds of its fleet renewed by the end of fiscal 2025.
In an interview with CNBC, Dillon said the store investments are driving increased conversion, basket size and profitability, improving performance for Foot Locker's women's business.
“The reason we did this is because it works for us, both in terms of improving the customer experience and the store employee experience, but also in terms of financial returns,” Dillon said. “The performance is outperforming what we thought it would be.”
In a series of new flagship stores Foot Locker is building in hot spots like New York City and Paris, the company is working with Nike to develop some parts of the stores.
“With Nike, that’s been a top priority for me since day one, building a partnership that’s not just about how many shoes we sell, but how we think about using consumer insights to grow our business together,” Dillon said. “For us and Nike, it’s about where we really connect.”
Dillon has also been working to streamline costs at Foot Locker. On Wednesday, the company announced it would close its stores and e-commerce operations in South Korea, Denmark, Norway and Sweden and outsource operations in Greece and Romania, where it plans to expand, Dillon said. In all, 30 of Foot Locker’s 140 stores in Asia-Pacific and 629 in Europe will close or move to a new operator as part of the changes.
Foot Locker’s Champs banner, which has been a drag on the company’s overall performance, also showed signs of improvement. During the quarter, comparable sales fell 3.9%, an improvement from the 25.3% decline seen in the year-ago period.
Foot Locker also plans to move its global headquarters from New York City to St. Petersburg, Florida in late 2025 and plans to maintain only a limited presence in New York City going forward.
“The goal of this move is to strengthen the company’s meaningful presence in St. Petersburg and enable increased collaboration between teams across banners and functions, while also reducing costs,” Foot Locker said in a press release.
The move will increase margins by about 0.2 percentage points by 2027, but the decision wasn't just about saving money, Dillon told CNBC.
“We already have a big center of gravity in St. Peters… a lot of our executives are there. A lot of our commercial teams are there,” Dillon said. “We think bringing more people together to collaborate is going to be important and that’s part of this as well. It’s not just about saving money. It’s about how do we really continue to build on that momentum?”
The company doesn't plan to force its employees to relocate, and Dillon, who works in Chicago, won't have to become a multi-modal commuter either.
“I travel 90% of the time visiting our teams around the world, our brand partners, investor meetings and events,” Dillon said. “I spend a lot of time in New York, a lot of time in St. Petersburg, a lot of time in Amsterdam where we’re headquartered, visiting our brand partners. So I plan to keep my primary residence in Chicago, but the way things are going is really going well, so we’ll continue to do that.”
By improving stores, products and the customer experience online and in stores, Foot Locker has been able to drive sales even as its core customers continue to feel the pressures of persistent inflation and high interest rates — suggesting that Dillon's efforts are paying off.
“We don’t expect our customers to be under more or less pressure. We’re just trying to say, ‘This is a category they care about,’” Dillon said. “How can Foot Locker be the best at meeting their needs? And I think our results show that it works.”
By Tuesday's close, the company's shares were up more than 5% this year, compared with Nike's, which has fallen more than 21% in the same time period.
Demand has certainly slowed across the retail sector, but consumers are still spending. But they’re becoming more selective about who they spend with – which has made execution even more important.
“Our strategies are gaining momentum as we look ahead to the rest of the year,” Dillon said in a statement. “I remain confident that we are taking the right actions to position the company for profitable growth over the next 50 years and create long-term shareholder value.”
