- Two months after CEO Mary Dillon announced her new strategy for Foot Locker, the retailer’s first-quarter sales are down 11.4% as comps tumbled 9.1%. The retailer is turning to higher markdowns to drive demand and clear inventory.
- As a result, Foot Locker reduced its annual guidance for 2023 and now expects sales to be down 6.5% to 8% (compared to a max of -5.5% in previous guidance), and comps to be down by 7.5% to 9% (also compared to a max of -5.5% previously).
- Foot Locker also named a new chief financial officer in Kohl’s veteran Mike Baughn, who was most recently the department store’s executive vice president of finance and treasurer. Baughn, who has 15 years of retail finance experience, joins June 12 and reports to Dillon.
Foot Locker’s transformation is off to a slow start, as consumers pivot away from spending on products and instead move toward services. Dillon said on a call with analysts Friday that sales “slowed significantly” in the last month and a half.
“While 2023 was always going to be a reset year for us, we now expect a sharper decline in both sales and earnings,” Dillon said, later adding that 2023 will be “certainly more challenging than we thought at the time.”
Foot Locker customers “rallied” last year for back-to-school shopping and the holidays, but Dillon said that behavior did not carry through to the first half of this year. The retailer’s customer demographic skews slightly lower income, she added, which makes Foot Locker more vulnerable to inflationary pressures.
“Inflation, while abating, is still high … people are just having to be more choiceful as they think about discretionary spend,” Dillon said.
That macroeconomic pressure comes as Foot Locker has a laundry list of its own priorities to check off. The retailer is rebalancing its assortment to be less reliant on Nike, including bringing in new brands like Crocs-owned HeyDude, and expanding the presence of up-and-coming brands like On and Hoka. Foot Locker is also repositioning its Champs brand, winding down banners like Sidestep and Eastbay, revamping its app and website, and shuttering 400 mall-based stores over the next few years.
Off-mall locations now represent 35% of Foot Locker’s store footprint, on a path to reaching 50% by 2026. The retailer closed 35 stores in Q1, remodeled or relocated 18, and opened 13 new stores.
As Foot Locker shifts its strategy, the retailer’s C-suite is also undergoing a number of changes. After Dillon’s arrival in September, the company named a new chief operations officer, replaced its chief human resources officer, appointed a chief commercial officer, brought on a Nike vet to lead WSS and has now filled its CFO seat.