Stock investment – Why Foot Locker Inc. Stock Fell 25.3% in August — The Motley Fool

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What happened

Shares of Foot Locker (NYSE:FL) plunged 25.3% in August, according to data from S&P Global Market Intelligence, after the company posted painful second-quarter results.

Virtually all of the footwear retailer’s decline last month came on Aug. 18, the first trading day after it announced that quarterly same-store sales fell 6% year over year, which helped translate to a 4.4% decline in revenue to $1.7 billion. Foot locker also saw adjusted net income fall to $81 million, or $0.62 per share, compared with $127 million, or $0.94 per share in the same year-ago period.

Analysts, on average, were looking for significantly higher revenue of $1.8 billion, and adjusted earnings of $0.90 per share.

IMAGE SOURCE: FOOT LOCKER

So what

Foot Locker CEO Richard Johnson noted that while sales of recent top styles were well below expectations, “the limited availability of innovative new products in the market” certainly didn’t do the company any favors, either.


That said, Foot Locker CFO Lauren Peters also insisted that the company maintained its “very strong overall financial position” and “took aggressive action in the second quarter to ensure that [its] inventory levels remained in line with sales.” In addition, Foot Locker is exploring ways it can reduce costs, as well as shift its model toward digital and away from bricks-and-mortar locations.

Now what

Nonetheless, Johnson admitted that Foot Locker expects this weakness to last for the duration of the year, which should leave comparable-store sales down 3% to 4% for the remainder of 2017. So until investors see signs that these headwinds will abate, I suspect Foot Locker stock will remain under pressure.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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